<PAGE>
As filed with the Securities and Exchange Commission on October 20, 1999
Registration Statement No. 333-83501
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
Amendment No. 4
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
NaviSite, Inc.
(Exact name of registrant as specified in its charter)
-------------------
<TABLE>
<S> <C>
Delaware 7379 52-2137343
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation or
organization)
</TABLE>
NaviSite, Inc.
100 Brickstone Square
Andover, Massachusetts 01810
(978) 552-3300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
Joel B. Rosen
Chief Executive Officer
NaviSite, Inc.
100 Brickstone Square
Andover, Massachusetts 01810
(978) 552-3300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
Copies to:
<TABLE>
<S> <C>
Peter B. Tarr, Esq.
David T. Brewster, Esq. Joseph E. Mullaney III, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Hale and Dorr LLP
One Beacon Street 60 State Street
Boston, Massachusetts 02108 Boston, Massachusetts 02109
(617) 573-4800 (617) 526-6000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED October 20, 1999
[NAVISITE LOGO APPEARS HERE]
5,500,000 Shares
Common Stock
NaviSite, Inc. is offering 5,500,000 shares of its common stock. This is
NaviSite's initial public offering. The common stock has been approved for
quotation on the Nasdaq National Market under the symbol "NAVI." We anticipate
that the initial public offering price will be between $10.00 and $12.00 per
share.
At the request of NaviSite, the underwriters have reserved at the initial
public offering price up to 550,000 shares of common stock for sale to
officers, directors, employees and business associates of NaviSite and up to
825,000 shares of common stock for sale to stockholders of CMGI, Inc.
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 7.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to NaviSite............................................ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
NaviSite has granted the underwriters a 30-day option to purchase up to an
additional 825,000 shares of common stock to cover over-allotments. BancBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 1999.
--------------
BancBoston Robertson Stephens
Hambrecht & Quist
FAC/Equities
The date of this prospectus is October , 1999.
<PAGE>
The inside front cover page also contains the following:
<TABLE>
<S> <C>
We help companies cost- . . . and less worry.
effectively run their Internet [Customer logos
applications with greater superimposed over
speed, reliability and NaviSite logo]
efficiency. . .
Integrated application services
to match customers' process life cycle.
[The following words appear inside an arrow pointing downwards and
arcing towards the left:]
</TABLE>
Rent
Deploy
Advise
Host
Manage
Support
<PAGE>
The inside front cover page contains the following:
[Centered on the lower third of the page, a picture of the control room in
a NaviSite data center. Directly above it, covering the top two-thirds of the
page, is the NaviSite logo with the following text super-imposed on top of it:]
NaviSite, Inc., an Internet application service provider, offers Web site
and Internet application hosting and management services. Our offerings, high
level of customer service and state-of-the-art infrastructure allow us to offer
service levels that we believe are among the most comprehensive in the
industry. With our services, customers can focus on their core competencies,
assured that their Web sites and Internet applications are being managed 24-
hours-a-day, seven-days-a-week.
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus.
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 7
Forward Looking Statements............................................... 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 23
Business................................................................. 34
Management............................................................... 45
Certain Transactions..................................................... 54
Ownership of Principal Stockholders and Management....................... 60
Description of Capital Stock............................................. 62
Shares Eligible For Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 70
Experts.................................................................. 70
Where You Can Find Additional Information................................ 70
Index to Financial Statements............................................ F-1
</TABLE>
---------------------
Industry data included in this prospectus has been obtained from third
parties and has not been independently verified by us.
"NaviSite" and the NaviSite logo are service marks of our company for which
service mark applications are pending. This prospectus also contains
trademarks, trade names and service marks of other companies which are the
property of their respective owners.
3
<PAGE>
SUMMARY
Because this is only a summary, it does not contain all of the information
that may be important to you. You should read this entire prospectus, including
"Risk Factors" and our consolidated financial statements and the accompanying
notes appearing elsewhere in this prospectus, before deciding to invest in our
common stock.
NaviSite, Inc.
NaviSite is an Internet application service provider offering Web site and
application hosting and management services. Our Internet application service
offerings allow businesses to outsource the deployment, configuration, hosting,
management and support of their Web sites and Internet applications in a cost-
effective and rapid manner. Our focus on enhanced management services, beyond
basic co-location services, allows us to meet the expanding needs of businesses
as their Web sites and Internet applications become more complex. We also
provide our customers with access to our state-of-the-art data centers and the
benefit of our direct private transit Internet connections to major Internet
backbone providers. We only use direct private transit Internet connections,
which differentiates our network infrastructure from that of most of our
competitors. These connections increase reliability and download speeds. Our
enhanced, integrated services enable our clients to realize the following key
benefits.
. Cost-Effective Application Services. Our scalable infrastructure,
repeatable Internet application services and hosting and management
expertise enable us to offer our customers application services on a
cost-effective basis.
. Rapid Deployment. We are able to rapidly deploy Internet applications,
allowing our customers to quickly launch Web sites and Internet
applications, often in a matter of weeks.
. High-Performance, World-Class Infrastructure. Our infrastructure has
been designed expressly to meet the more demanding technical
requirements of increasingly sophisticated Web sites and Internet
applications.
The scalability of our infrastructure and cost-effectiveness of our
services allow us to offer a comprehensive suite of services to meet the
current and future hosting and management needs of our customers. Our suite of
service offerings includes:
. Web site and Internet application hosting, enabling access to our
state-of-the-art data centers, bandwidth and basic back-up, storage and
monitoring services;
. Enhanced server management, providing custom reporting, hardware
options, load balancing and mirroring, system security, advanced back-
up options, remote management and the services of our business solution
managers;
. Specialized application management, providing management of e-commerce
and other sophisticated applications and their underlying services,
including ad-serving, streaming, databases and transaction processing;
and
. Application rentals and related consulting and other professional
services.
Since our inception, we have experienced operating losses and negative cash
flows for each quarterly and annual period. We expect to continue to incur
operating losses for at least the next three years. In addition, the market we
serve is highly competitive, and our revenue could be adversely affected by
increased competition. To date, a material portion of our revenue has been
derived from CMGI, Inc. and entities in which CMGI holds an equity interest.
CMGI and these CMGI affiliates accounted for 62% of our revenue for the quarter
ended July 31, 1999 as compared to 90% of our revenue for the quarter ended
July 31, 1998.
4
<PAGE>
The dramatic growth in Internet usage in recent years, combined with the
Internet's enhanced functionality, accessibility and security, has made the
Internet increasingly attractive to businesses as a medium for communication
and commerce. As more businesses have incorporated the Internet into their
business strategy, a growing number of them have chosen to outsource Internet
application development, implementation and support, particularly the hosting
and management of their Web sites and Internet applications. Forrester
Research, Inc., a leading market research firm, has estimated that the market
for managed Web site hosting in the United States will grow from less than $1.0
billion in 1998 to over $14.0 billion in 2003. In January 1998, Forrester
Research estimated that the market for branded application outsourcing services
in the United States will grow to $21.1 billion by 2001.
Our objective is to be the leading Internet application service provider.
We plan to achieve this goal by continuing to enhance and leverage our
expertise, service offerings and infrastructure to provide customers with
integrated, reliable and secure Internet-based business solutions. Key elements
of our strategy are to:
. expand and vary the applications and management services we offer to
our customers;
. offer multiple service levels to customers;
. increase awareness of the NaviSite brand and associate it with the
highest quality solutions and service;
. maintain the competitive advantage that our infrastructure and
expertise provide;
. continue to leverage and develop key industry relationships;
. take advantage of foreign market opportunities; and
. continue to pursue focused, complementary acquisitions.
CMGI will own approximately 72.1% of our outstanding common stock upon
completion of this offering. Accordingly, CMGI will have the power, acting
alone, to elect a majority of our board of directors and will have the ability
to determine the outcome of any corporate actions requiring stockholder
approval, regardless of how our other stockholders may vote. CMGI may exercise
its voting power by written consent, without convening a meeting of the
stockholders, meaning that CMGI will be able to effect a sale or merger of
NaviSite without prior notice to, or the consent of, our other stockholders.
CMGI's ownership may have the effect of delaying, deferring or preventing a
change in control of NaviSite. CMGI's interests could conflict with the
interests of our other stockholders.
--------------------
We were incorporated in Delaware in December 1998. At that time, we
received a contribution of assets from our predecessor, NaviSite Internet
Services Corporation. NaviSite Internet Services Corporation was incorporated
in Delaware in February 1997 under the name CMG Information Technology, Inc.
and changed its name to NaviSite Internet Services Corporation in May 1997. Our
principal investors include CMGI, Dell Computer Corporation and Microsoft
Corporation.
Our principal executive offices are located at 100 Brickstone Square,
Andover, Massachusetts 01810, and our telephone number is (978) 552-3300. Our
Web site address is www.navisite.com. The information on our Web site is not
incorporated by reference into this prospectus and should not be considered as
part of this prospectus.
--------------------
Except as otherwise noted, the number of shares outstanding upon completion
of this offering:
. gives effect to the conversion of approximately $12,257,000 of
indebtedness to CMGI into 111,424 shares of Series B convertible
preferred stock prior to the completion of this offering;
. gives effect to the conversion of all outstanding shares of convertible
preferred stock into an aggregate of 21,861,075 shares of common stock
upon completion of this offering;
. does not reflect the exercise, in October 1999, of options for the
purchase of 22,996 shares of common stock; and
. assumes no exercise of the underwriters' over-allotment option.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by NaviSite..... 5,500,000 shares
Common stock to be outstanding after
this offering...................... 27,430,413 shares
Use of proceeds...................... For enhancement and expansion of our
network infrastructure, expansion of
sales and marketing efforts, enhancement
of application management and technical
expertise, possible acquisitions of
complimentary businesses and
technologies and working capital and
general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol........ NAVI
</TABLE>
Summary Consolidated Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended July 31,
-----------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Statement of Operations Data:
Total revenue........................................ $3,361 $4,029 $10,519
Gross profit (loss).................................. (133) (4,847) (9,819)
Loss from operations................................. (947) (9,076) (24,150)
Net loss............................................. (948) (9,172) (24,532)
Net loss applicable to common stockholders........... (948) (9,172) (24,704)
Net loss per share................................... $(0.24) $(1.14) $ (7.41)
Basic and diluted weighted average number of common
shares outstanding................................. 4,000 8,017 3,332
Unaudited pro forma basic and diluted net loss per
share.............................................. $ (1.51)
Pro forma weighted average number of basic and
diluted shares outstanding......................... 16,407
</TABLE>
The following table is a summary of our balance sheet at July 31, 1999 (i)
on an actual basis, (ii) on a pro forma basis after giving effect to the
conversion of all shares of convertible preferred stock outstanding as of July
31, 1999 into shares of common stock and (iii) on a pro forma as adjusted basis
to give effect to the issuance to CMGI upon completion of this offering of an
aggregate of 1,114,240 additional shares of common stock upon the conversion of
outstanding Series B convertible preferred stock issued to CMGI subsequent to
July 31, 1999 and to reflect the sale of 5,500,000 shares of common stock at an
assumed initial public offering price of $11.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.
<TABLE>
<CAPTION>
July 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and equivalents............................ $ 3,352 $ 3,352 $58,017
Working capital (deficit)....................... (1,355) (1,355) 53,310
Total assets.................................... 21,111 21,111 75,776
Total stockholders' equity (deficit)............ (4,369) 11,052 77,974
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. Our financial condition and operating results could be
materially adversely affected by any of the risks set forth below. The market
price of our common stock could decline due to any of these risks, and you
could lose all or part of your investment. You also should refer to the other
information set forth in this prospectus, including our consolidated financial
statements and the accompanying notes appearing elsewhere in this prospectus.
Risks Related to Our Company and Our Operations
We have a history of operating losses and expect future losses
We cannot assure you that we will ever achieve profitability on a quarterly
or annual basis or, if we achieve profitability, that it will be sustainable.
We were organized in 1996 by CMGI, Inc., formerly known as CMG Information
Services, Inc., to support the networks and host the Web sites of CMGI and a
number of CMGI affiliates. It was not until the Fall of 1997 that we began
providing Web site hosting and Internet application management services to
companies unaffiliated with CMGI. Since our inception in 1996, we have
experienced operating losses and negative cash flows for each quarterly and
annual period. As of July 31, 1999, we had an accumulated deficit of $34.7
million. The income potential of our business is unproven, and our limited
operating history makes it difficult to evaluate our prospects. We anticipate
increased expenses as we continue to expand and improve our infrastructure,
invest in additional applications, enhance our application management
expertise, expand our sales and marketing efforts and pursue additional
industry relationships. As a result, we expect to incur operating losses for at
least the next three years.
Fluctuations in our quarterly operating results may negatively impact our stock
price
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside our control.
These factors include:
. the demand for and market acceptance of our Web site and Internet
application hosting and management services;
. our ability to develop, market and introduce new services on a timely
basis;
. downward price adjustments by our competitors;
. changes in the mix of services provided by our competitors;
. technical difficulties or system downtime affecting the Internet
generally or our hosting operations specifically;
. our ability to meet any increased technological demands of our
customers;
. the amount and timing of costs related to our marketing efforts and
service introductions; and
. economic conditions specific to the Internet application service
provider industry.
Our operating results for any particular quarter may fall short of our
expectations or those of investors or securities analysts. In this event, the
market price of our common stock would be likely to fall.
Our principal stockholder will continue to control us and may have interests
that conflict with those of our other stockholders
As of August 31, 1999, CMGI, through its ownership of NaviSite Internet
Services Corporation, beneficially owned approximately 89.6% of our outstanding
common stock and, upon completion of this offering, will beneficially own
approximately 72.1% of our outstanding common stock. Accordingly, CMGI will
continue to have the power, acting alone, to elect a majority of our board of
directors and will have the ability to determine the outcome of any corporate
actions requiring stockholder approval, regardless of how our other
7
<PAGE>
stockholders may vote. Under Delaware law, CMGI may exercise its voting power
by written consent, without convening a meeting of the stockholders, meaning
that CMGI will be able to effect a sale or merger of NaviSite without prior
notice to, or the consent of, our other stockholders. CMGI's interests could
conflict with the interests of our other stockholders. The possible need of
CMGI to maintain control of NaviSite in order to avoid becoming a registered
investment company could influence future decisions by CMGI as to the
disposition of any or all of its ownership position in NaviSite. CMGI would be
subject to numerous regulatory requirements with which it would have difficulty
complying if it were required to register as an investment company. As a
result, CMGI may be motivated to maintain at least a majority ownership
position in NaviSite, even if other stockholders of NaviSite might consider a
sale of control of NaviSite to be in their best interests. As long as it is a
majority stockholder, CMGI has contractual rights to purchase shares in any
future financing of NaviSite, other than this offering, sufficient to maintain
its majority ownership position. CMGI's ownership may have the effect of
delaying, deferring or preventing a change in control of our company or
discouraging a potential acquiror from attempting to obtain control of us,
which in turn could adversely affect the market price of our common stock.
A significant portion of our revenue is generated by CMGI and companies
affiliated with CMGI, and the loss of this revenue would substantially impair
the growth of our business
A significant portion of our revenue currently is generated by services
provided to CMGI and CMGI affiliates, and we anticipate that we will continue
to receive a significant portion of our revenue in the future from CMGI and
CMGI affiliates. CMGI and CMGI affiliates accounted for 96% of our revenue in
fiscal 1998 and 67% of our revenue in fiscal 1999. We cannot assure you that
revenues generated by CMGI and CMGI affiliates will continue or that we will be
able to secure business from unaffiliated customers to replace these revenues
in the future. The loss of revenue from CMGI and CMGI affiliates, or our
inability to replace this operating revenue, would substantially impair the
growth of our business. A more detailed discussion of our customer
relationships with CMGI and its affiliates is included in this prospectus under
the headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Certain Transactions--Relationship and
Transactions between NaviSite and CMGI, Inc."
Our ability to grow our business would be substantially impaired if we were
unable to obtain, on commercially reasonable terms, certain equipment that is
currently provided under leases executed or guaranteed by CMGI
Certain of the equipment that we use or provide to our customers for their
use in connection with our services is provided under leases executed or
guaranteed by CMGI. If CMGI discontinues this practice, which it could do at
any time, we or our customers would have to obtain this equipment directly, and
we cannot assure you that we or our customers could do so on similar financial
terms. Our ability to grow our business would be substantially impaired if we
or our customers were unable to obtain this equipment on commercially
reasonable terms. A more detailed discussion of our other arrangements with
CMGI and its affiliates is included in this prospectus under the heading
"Certain Transactions--Relationship and Transactions between NaviSite and CMGI,
Inc."
If the growth of the market for Internet commerce and communication does not
continue, there may be insufficient demand for our services, and as a result,
our business strategy may not be successful
The increased use of the Internet for retrieving, sharing and transferring
information among businesses and consumers has developed only recently, and the
market for the purchase of products and services over the Internet is new and
emerging. If acceptance and growth of the Internet as a medium for commerce and
communication does not continue, our business strategy may not be successful
because there may not be a continuing market demand for our Web site and
Internet application hosting and management services. In addition, in order for
the market for our services to grow, consumers who have historically purchased
and communicated through traditional means must elect to purchase products and
services and conduct their communication online. These transitions must
continue to ensure a growing market for our Web site and Internet application
hosting and management services.
8
<PAGE>
Our growth could be substantially limited if the market for Internet
application services fails to develop or if we cannot achieve broad market
acceptance
The market for Internet application services has only developed recently
and is evolving rapidly. There is significant uncertainty as to whether the
Internet application service market will ultimately prove to be viable or, if
it becomes viable, that it will continue to grow. Historically, businesses have
been reluctant to outsource the hosting and management of sophisticated
applications and have considered third-party service vendors to be unequipped
to manage Internet applications critical to their businesses. If the market for
outsourced system and network management of Web sites and Internet applications
fails to develop, or develops more slowly than we expect, or if our Web site
and Internet application hosting and management services do not achieve broad
market acceptance, our growth could be substantially limited.
Our ability to successfully market our services could be substantially impaired
if we are unable to deploy new Internet applications or if new Internet
applications deployed by us prove to be unreliable, defective or incompatible
We cannot assure you that we will not experience difficulties that could
delay or prevent the successful development, introduction or marketing of
Internet application services in the future. If any newly introduced Internet
applications suffer from reliability, quality or compatibility problems, market
acceptance of our services could be greatly hindered and our ability to attract
new customers could be adversely affected. We cannot assure you that new
applications deployed by us will be free from any reliability, quality or
compatibility problems. If we incur increased costs or are unable, for
technical or other reasons, to host and manage new Internet applications or
enhancements of existing applications, our ability to successfully market our
services could be substantially impaired.
The market we serve is highly competitive, and as an early stage company, we
may lack the financial and other resources, expertise or capability needed to
capture increased market share
We compete in the Internet application service market. This market is
rapidly evolving, highly competitive and likely to be characterized by an
increasing number of market entrants and by industry consolidation. We believe
that participants in our market must grow rapidly and achieve a significant
presence to compete effectively. As an early stage company, our business is not
as developed as that of many of our competitors. For example, our facilities
currently have limited growth capacity and we have a significantly smaller
number of customers than many of the companies that compete in our market. We
estimate that the growth capacity of our facilities may be sufficient only for
the next two years. Insufficient growth capacity in our facilities could impair
our ability to achieve rapid growth through an increase in our customer base.
Moreover, many of our competitors have substantially greater financial,
technical and marketing resources, greater name recognition and more
established relationships in the industry than we have. We may lack the
financial and other resources, expertise or capability needed to capture
increased market share in this environment in the future. A more detailed
discussion regarding the competition we face is included in this prospectus
under the heading "Business--Competition."
Any interruptions in, or degradation of, our private transit Internet
connections could result in the loss of customers or hinder our ability to
attract new customers
Our customers rely on our ability to move their digital content as
efficiently as possible to the people accessing their Web sites and Internet
applications. We utilize our direct private transit Internet connections to
major backbone providers as a means of avoiding congestion and resulting
performance degradation at public Internet exchange points. We rely on these
telecommunications network suppliers to maintain the operational integrity of
their backbones so that our private transit Internet connections operate
effectively. Any interruptions in, or degradation of, our private transit
Internet connections could result in the loss of customers or hinder our
ability to attract new customers.
9
<PAGE>
Increased costs associated with our private transit Internet connections could
result in the loss of customers or significant increases in our operating costs
Our private transit Internet connections are already more costly than
alternative arrangements commonly utilized to move Internet traffic. If our
providers increase the pricing associated with utilizing their bandwidth, we
may be required to identify alternative methods to distribute our customers'
digital content. We cannot assure you that our customers will continue to be
willing to pay the higher costs associated with direct private transit or that
we could effectively move to another network approach. If we are unable to
access alternative networks to distribute our customers' digital content on a
cost-effective basis or to pass any additional costs on to our customers, our
operating costs would increase significantly.
If we are unable to maintain existing and develop additional relationships with
Internet application software vendors, the sale, marketing and provision of our
Internet application services may be unsuccessful
We believe that to penetrate the market for our Web site and Internet
application hosting and management services we must maintain existing and
develop additional relationships with industry-leading Internet application
software vendors and other third parties. We license or lease our software
applications from Internet application software vendors. The loss of any of
these applications could materially impair our ability to provide services to
our customers or require us to obtain substitute software applications of lower
quality or performance standards or at greater cost. In addition, because we
generally license applications on a non-exclusive basis, our competitors may
license and utilize the same software applications. In fact, many of the
companies with which we have strategic relationships currently have, or could
enter into, similar license agreements with our competitors or prospective
competitors. We cannot assure you that software applications will continue to
be available to us from Internet application software vendors on commercially
reasonable terms. If we are unable to identify and license software
applications which meet our targeted criteria for new application
introductions, we may have to discontinue or delay introduction of services
relating to these applications.
We purchase key components of our infrastructure from a limited number of
suppliers, and our inability or failure to obtain these components in a timely
manner could result in sustained equipment failure and a loss of revenue
We purchase from a limited number of suppliers key components of our
infrastructure, including networking equipment, that are available only from
limited sources in the quantities and with the quality that we demand. For
example, we purchase most of the routers and switches used in our
infrastructure from Cisco Systems Inc. and most of the intelligent Web
switching technology from ArrowPoint Communications Inc. We cannot assure you
that we will have the necessary hardware or parts on hand or that our suppliers
will be able to provide them in a timely manner in the event of equipment
failure. Our inability or failure to obtain the necessary hardware or parts on
a timely basis could result in sustained equipment failure and a loss of
revenue due to customer loss or claims for service credits under our service
level guarantees.
Our inability to scale our infrastructure or otherwise manage our anticipated
growth and the related expansion of our operations could result in decreased
revenue and continued operating losses
We have experienced rapid growth in our service offerings and our customer
base. As of July 31, 1998, we were a Web site hosting provider with
approximately 51 customers. As of July 31, 1999, we were providing Web site and
Internet application hosting and management services to approximately 126
customers. In order to service our growing customer base, we will need to
continue to improve and expand our network infrastructure, in particular
through the expansion of one of our existing data centers and the construction
of new data centers. The ability of our network to connect and manage a
substantial number of customers at high transmission speeds while maintaining
superior performance is largely unproven. If our network infrastructure is not
scalable, we may not be able to provide our services to additional customers,
which would result in decreased revenue.
10
<PAGE>
In addition, between July 31, 1998 and July 31, 1999, we increased the
number of our employees from 86 to 201. This growth has placed, and likely will
continue to place, a significant strain on our financial, management,
operational and other resources. To effectively manage our anticipated growth,
we will be required to continue to enhance our operating and financial
procedures and controls, to upgrade or replace our operational, financial and
management information systems and to attract, train, motivate, manage and
retain key employees. If we are unable to effectively manage our rapid growth,
we could experience continued operating losses.
You may experience additional dilution because our historical source of funding
is expected to change, and other funding may not be available to us on
favorable terms, if at all
CMGI has historically funded our operations as needed, increasing our
obligations to CMGI and allowing us to maintain a zero-balance cash account. We
expect this source and manner of funding to continue until completion of this
offering. At that time, we expect that our net obligations to CMGI, together
with all convertible preferred stock held by CMGI, will be converted into
common stock at a ratio of ten shares of common stock for each outstanding
share of preferred stock. We do not expect to borrow funds from CMGI after
completion of this offering.
After completion of, and the application of the net proceeds from, this
offering, we may need to raise additional funds. We cannot assure you that
additional financing will be available on terms favorable to us, if at all. If
adequate funds were not available or were not available on acceptable terms,
our ability to respond to competitive pressures would be significantly limited.
Moreover, if additional funds are raised through the issuance of equity or
convertible debt securities, your percentage ownership in us will be reduced,
and you may experience additional dilution.
Our network infrastructure could fail, which would damage our ability to
provide guaranteed levels of service and could result in significant operating
losses
To provide our customers with guaranteed levels of service, we must operate
our network infrastructure on a 24-hour-a-day, seven-day-a-week basis without
interruption. In order to operate in this manner, we must protect our network
infrastructure, equipment and customer files against damage from human error,
natural disasters, unexpected equipment failure, power loss or
telecommunications failures, sabotage or other intentional acts of vandalism.
Even if we take precautions, the occurrence of a natural disaster, equipment
failure or other unanticipated problem at one or more of our data centers could
result in interruptions in the services we provide to our customers. We cannot
assure you that our disaster recovery plan will address all, or even most, of
the problems we may encounter in the event of such a disaster.
We have experienced service interruptions in the past, and any future
service interruptions could:
. require us to spend substantial amounts of money to replace equipment
or facilities;
. entitle customers to claim service credits under our service level
guarantees;
. cause customers to seek damages for losses incurred; or
. make it more difficult for us to attract new customers or enter into
additional strategic relationships.
Any of these occurrences could result in significant operating losses.
The misappropriation of our proprietary rights could result in the loss of our
competitive advantage in the market
We rely on a combination of trademark, service mark, copyright and trade
secret laws and contractual restrictions to establish and protect our
proprietary rights. We do not own any patents that would prevent or inhibit
competitors from using our technology or entering our market. We cannot assure
you that the contractual arrangements or other steps taken by us to protect our
proprietary rights will prove sufficient to
11
<PAGE>
prevent misappropriation of our proprietary rights or to deter independent,
third-party development of similar proprietary assets. In addition, we provide
our services in other countries where the laws may not afford adequate
protection for our proprietary rights. If our proprietary rights are
misappropriated, we may lose our competitive advantage in the market.
Third-party infringement claims against our technology suppliers, our customers
or us could result in disruptions in service, the loss of customers or costly
and time consuming litigation
We license or lease most technologies used in the Internet application
services that we offer. Our technology suppliers may become subject to third-
party infringement claims which could result in their inability or
unwillingness to continue to license their technology to us. We expect that we
and our customers increasingly will be subject to third-party infringement
claims as the number of Web sites and third-party service providers for Web-
based businesses grows. In addition, we have received notices alleging that our
service marks infringe the trademark rights of third parties. We cannot assure
you that third parties will not assert claims against us in the future or that
these claims will not be successful. Any infringement claim as to our
technologies or services, regardless of its merit, could result in delays in
service, installation or upgrades, the loss of customers or costly and time-
consuming litigation, or require us to enter into royalty or licensing
agreements.
The loss of key officers and personnel could impair our ability to successfully
execute our business strategy, because we substantially rely on their
experience and management skills, or could jeopardize our ability to continue
to provide service to our customers
We believe that the continued service of key personnel, including Joel B.
Rosen, our recently elected Chief Executive Officer, and Robert B. Eisenberg,
our founder and President, is a key component of the future success of our
business. None of our key officers or personnel is currently a party to an
employment agreement with us. This means that any officer or employee can
terminate his or her relationship with us at any time. In addition, we do not
carry life insurance for any of our key personnel to insure our business in the
event of their death. The loss of any of our key officers or personnel could
impair our ability to successfully execute our business strategy, because we
substantially rely on their experience and management skills.
In addition, the loss of key members of our sales and marketing teams or
key technical service personnel could jeopardize our positive relations with
our customers. Any loss of key technical personnel would jeopardize the
stability of our infrastructure and our ability to provide the guaranteed
service levels our customers expect.
If we fail to attract and retain additional skilled personnel, our ability to
provide Web site and Internet application management and technical support may
be limited, and as a result, we may be unable to attract customers and grow our
business
We believe that our ability to attract, train, motivate and retain highly
skilled technical, managerial and sales personnel, particularly in the areas of
Web site and Internet application management and technical support, is
essential to our future success. Our business requires individuals with
significant levels of Internet application expertise, in particular to win
consumer confidence in outsourcing the hosting and management of mission-
critical applications. Competition for such personnel is intense, and qualified
technical personnel are likely to remain a limited resource for the foreseeable
future. Locating candidates with the appropriate qualifications, particularly
in the desired geographic location, can be costly and difficult. We may not be
able to hire the necessary personnel to implement our business strategy, or we
may need to provide higher compensation to such personnel than we currently
anticipate. If we fail to attract and retain sufficient numbers of highly
skilled employees, our ability to provide Web site and Internet application
management and technical support may be limited, and as a result, we may be
unable to attract customers and grow our business.
12
<PAGE>
Any future acquisitions we make of companies or technologies may result in
disruptions to our business or distractions of our management due to
difficulties in assimilating acquired personnel and operations
Our business strategy contemplates future acquisitions of complementary
businesses or technologies. If we do pursue additional acquisitions, our risks
may increase because our ongoing business may be disrupted and management's
attention and resources may be diverted from other business concerns. In
addition, through acquisitions, we may enter into markets or market segments in
which we have limited prior experience.
Once we complete an acquisition, we will face additional risks. These risks
include:
. difficulty assimilating acquired operations, technologies and
personnel;
. inability to retain management and other key personnel of the acquired
business; and
. changes in management or other key personnel that may harm
relationships with the acquired business's customers and employees.
In addition, for at least the next two years, our acquisitions must be
accounted for using the purchase method of accounting, which could result in
unfavorable accounting for our acquisitions. We cannot assure you that any
acquisitions will be successfully identified and completed or that, if one or
more acquisitions are completed, the acquired business, assets or technologies
will generate sufficient revenue to offset the associated costs or other
adverse effects.
The international market for our services is unproven, and as a result, the
revenue generated by any current or future international operations may not be
adequate to offset the expense of establishing and maintaining those operations
One component of our long-term strategy is to expand into international
markets. The international market for Web site and Internet application hosting
and management services is unproven, and we cannot assure you that we will be
able to market, sell and provide our services successfully outside the United
States. We could suffer significant operating losses if the revenue generated
by any current or future international data center or other operations is not
adequate to offset the expense of establishing and maintaining those
international operations.
We face risks inherent in doing business in international markets which could
adversely affect the success of our international operations
There are risks inherent in doing business in international markets,
including different regulatory requirements, trade barriers, challenges in
staffing and managing foreign operations, currency risk, different technology
standards, different tax structures which may adversely impact earnings,
different privacy, censorship and service provider liability standards and
regulations and foreign political and economic instability, any of which could
adversely affect the success of our international operations.
Problems relating to the "Year 2000 issue" could disrupt our operations,
resulting in lost revenue and increased operating costs
Because we offer computer-related services and because of the business-
critical nature of many of our customers' applications, our risk of lawsuits
related to Year 2000 issues is likely to be greater than that of companies in
some other industries. Our worst case scenario regarding the Year 2000 issue
involves the complete or partial failure of one or more computer systems or
software products that underlie or comprise our services. A failure of this
kind could cause service interruptions or disruptions for one or more of our
customers. This scenario could arise as a result of a failure by us or our
product or service vendors to identify or effectively address Year 2000
problems in these systems or products. For example, Year 2000 patches provided
to us by key software or hardware vendors for customer servers or network
devices could fail, causing customer outages or degraded network performance.
Alternatively, patches provided by third parties for our desktop computers
could fail, impeding network access or compromising network performance.
13
<PAGE>
We confront the Year 2000 problem in several contexts:
Our Facilities and Services. Because our network infrastructure
incorporates components from multiple hardware and software providers, we may
be unable to determine whether any of these components will cause unexpected
Year 2000 problems or whether different components will interact in a way that
causes malfunctions. In most cases, we do not independently verify through
testing the Year 2000 compliance of vendors' products, and we cannot offer any
assurance that vendors' guarantees, if and when provided, are true or
sufficient or that we will not encounter Year 2000 compliance problems
associated with those products. While we expect that our network infrastructure
and all other material components of our facilities will be Year 2000 compliant
on or before December 1, 1999, we cannot assure you that we will meet this goal
or that we will not discover any compliance problems in the future. Our failure
to adequately address Year 2000 compliance issues in our network infrastructure
could result in claims of mismanagement, misrepresentation or breach of
contract and related litigation, which could be costly and time-consuming for
us to defend.
Our Customers. We also face risks from customer-provided hardware or
software that we host in our data centers. The failure of our customers and
third-party providers to ensure that this hardware and software is Year 2000
compliant could result in unforeseen problems within our network
infrastructure, which could result in lost revenue and increased operating
costs. In addition, we cannot give any assurances that our customers will
upgrade their internal networks which interface with our network infrastructure
or will otherwise provide appropriate remediation for Year 2000 compliance.
Our Suppliers. We cannot assure you that we will be able to provide our
services and maintain our operations if we are unable to obtain products,
services or systems that are Year 2000 compliant when we need them. In
addition, if vendors and service providers cannot deliver their products
because of their own Year 2000 compliance problems, we could experience
increased operating costs and lost revenue.
Information on our state of readiness, costs and contingency plans
regarding the Year 2000 issue is included in this prospectus under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Considerations."
Risks Related to the Internet Industry
The emergence and growth of a market for our Internet application services will
be impaired if third parties do not continue to develop and improve the
Internet infrastructure
The recent growth in the use of the Internet has caused frequent periods of
performance degradation, requiring the upgrade of routers and switches,
telecommunications links and other components forming the infrastructure of the
Internet by Internet service providers and other organizations with links to
the Internet. Any perceived degradation in the performance of the Internet as a
means to transact business and communicate could undermine the benefits and
market acceptance of our Web site and Internet application hosting and
management services. Our services are ultimately limited by, and dependent
upon, the speed and reliability of hardware, communications services and
networks operated by third parties. Consequently, the emergence and growth of
the market for our Internet application services will be impaired if
improvements are not made to the entire Internet infrastructure to alleviate
overloading and congestion.
We could be subject to increased operating costs, as well as claims, litigation
or other potential liability, in connection with risks associated with Internet
security and the security of our systems
A significant barrier to the growth of e-commerce and communications over
the Internet has been the need for secure transmission of confidential
information. Several of our Internet application services utilize encryption
and authentication technology licensed from third parties to provide the
protections necessary to effect secure transmission of confidential
information. We also rely on security systems designed by third parties and the
personnel in our network operations centers to secure our data centers. Any
unauthorized access,
14
<PAGE>
computer viruses, accidental or intentional actions and other disruptions could
result in increased operating costs. For example, we may incur significant
costs to protect against these interruptions and the threat of security
breaches or to alleviate problems caused by such interruptions or breaches, and
we expect to expend significant financial resources in the future to equip our
new and existing data centers with state-of-the-art security measures. If a
third party were able to misappropriate a consumer's personal or proprietary
information, including credit card information, during the use of an
application solution provided by us, we could be subject to claims, litigation
or other potential liability.
We may become subject to burdensome government regulation and legal
uncertainties that could substantially impair the growth of our business or
expose us to unanticipated liabilities
It is likely that laws and regulations directly applicable to the Internet
or to Internet application service providers may be adopted. These laws may
cover a variety of issues, including user privacy and the pricing,
characteristics and quality of products and services. The adoption or
modification of laws or regulations relating to commerce over the Internet
could substantially impair the growth of our business or expose us to
unanticipated liabilities. Moreover, the applicability of existing laws to the
Internet and Internet application service providers is uncertain. These
existing laws could expose us to substantial liability if they are found to be
applicable to our business. For example, we provide services over the Internet
in many states in the United States and in the United Kingdom, and we
facilitate the activities of our customers in these jurisdictions. As a result,
we may be required to qualify to do business, be subject to taxation or be
subject to other laws and regulations in these jurisdictions, even if we do not
have a physical presence, employees or property there.
We may be subject to legal claims in connection with the information
disseminated through our network which could have the effect of diverting
management's attention and require us to expend significant financial resources
As an Internet application service provider, we may face potential direct
and indirect liability for claims of defamation, negligence, copyright, patent
or trademark infringement, violation of securities laws and other claims based
on the nature and content of the materials disseminated through our network.
For example, lawsuits may be brought against us claiming that content
distributed by some of our current or future customers may be regulated or
banned. In these and other instances, we may be required to engage in
protracted and expensive litigation which could have the effect of diverting
management's attention and require us to expend significant financial
resources. Our general liability insurance may not necessarily cover any of
these claims or may not be adequate to protect us against all liability that
may be imposed.
In addition, on a limited number of occasions in the past, businesses,
organizations and individuals have sent unsolicited commercial e-mails from
servers hosted at our facilities to massive numbers of people, typically to
advertise products or services. This practice, known as "spamming," can lead to
complaints against service providers that enable such activities, particularly
where recipients view the materials received as offensive. We have in the past
received, and may in the future receive, letters from recipients of information
transmitted by our customers objecting to such transmission. Although we
prohibit our customers by contract from spamming, we cannot assure you that our
customers will not engage in this practice, which could subject us to claims
for damages.
15
<PAGE>
Risks Related to this Offering
There is no prior public market for our common stock, and you may not be able
to resell shares of our common stock for a profit
Prior to this offering, there has been no public market for our common
stock. We, together with the underwriters, will determine the initial public
offering price, and this price may not be the price at which the common stock
will trade after this offering. The market price of the common stock may
decline below the initial public offering price. Although the common stock
will be quoted on the Nasdaq National Market, an active trading market may not
develop after this offering. We cannot assure you of the extent to which
investor interest in NaviSite will lead to the development of an active
trading market or how liquid that market may become. A more detailed
discussion of factors to be considered in determining the initial public
offering price is included in this prospectus under the heading
"Underwriting."
The market price of our common stock may experience extreme price and volume
fluctuations
The market price of the common stock may fluctuate substantially due to a
variety of factors, including:
. any actual or anticipated fluctuations in our financial condition and
operating results;
. public announcements concerning us or our competitors, or the Internet
industry;
. the introduction or market acceptance of new service offerings by us
or our competitors;
. changes in industry research analysts' earnings estimates;
. changes in accounting principles;
. sales of our common stock by existing stockholders; and
. the loss of any of our key personnel.
In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of technology and Internet-
related companies have been especially volatile. This volatility has often
been unrelated to the operating performance of particular companies. In the
past, securities class action litigation has often been brought against
companies that experience volatility in the market price of their securities.
Whether or not meritorious, litigation brought against us could result in
substantial costs and a diversion of management's attention and resources.
If our existing stockholders sell a substantial number of shares of our common
stock in the public market, the market price of our common stock will likely
fall
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, including shares issuable upon the
exercise of outstanding options, the market price of our common stock will
likely fall. CMGI, Dell and Microsoft will directly own approximately 72.1%,
4.0% and 3.6%, respectively, of the outstanding shares of our common stock
upon completion of this offering and will have registration rights which will
permit them to sell all of these shares in the public market approximately 180
days after completion of this offering. These sales also might make it more
difficult for us to sell equity securities in the future at a time and price
that we deem appropriate. After this offering, we will have outstanding
27,430,413 shares of common stock. Of these shares, the 5,500,000 shares being
offered in this offering will be freely tradeable. Our directors, executive
officers and substantially all of our other stockholders have agreed that they
will not sell, directly or indirectly, any common stock without the prior
written consent of BancBoston Robertson Stephens Inc. for a period of 180 days
after the completion of this offering. However, BancBoston Robertson Stephens
Inc. may, in its sole discretion and at any time or from time to time, without
notice, release all or any portion of the securities subject to the lock-up
agreements. Additional information regarding the market for our common stock
is included in this prospectus under the headings "Shares Eligible for Future
Sale" and "Underwriting."
16
<PAGE>
We may spend a substantial portion of the net proceeds of this offering in ways
with which you may not agree
We plan to use the net proceeds of this offering for investment in the
growth of our business, including enhancement and expansion of our network
infrastructure, expansion of our sales and marketing efforts, including the
hiring of additional personnel, enhancement of our application management and
technical expertise and possible acquisitions of complementary businesses and
technologies, and for working capital and general corporate purposes. Our
management will have broad discretion to allocate the net proceeds from this
offering. As a result, investors in this offering will be relying upon
management's judgment with only limited information about its specific
intentions regarding the use of proceeds. We cannot assure you that the
proceeds will be invested to yield a favorable return. Additional information
regarding the ways in which we intend to spend the proceeds of this offering is
included in this prospectus under the heading "Use of Proceeds."
Investors in this offering will experience immediate and substantial dilution
of their investment
The initial public offering price is expected to be substantially higher
than the book value per share of the outstanding common stock. You will
therefore incur immediate and substantial dilution in the amount of $8.19 per
share based upon an assumed initial public offering price of $11.00 per share.
In addition, to the extent outstanding stock options are exercised, you will
incur further dilution. Additional information regarding the dilution to
investors in our initial public offering is included in this prospectus under
the heading "Dilution."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements are often accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
These statements include, without limitation, statements about the market
opportunity for Web site and Internet application hosting and management
services, our business strategy, competition and expected expense levels. Our
actual results could differ materially from those expressed or implied by these
forward-looking statements as a result of various factors, including the risk
factors described above and elsewhere in this prospectus.
17
<PAGE>
USE OF PROCEEDS
We expect to receive net proceeds from the sale of the 5,500,000 shares of
common stock offered by us of approximately $54.7 million, or $63.1 million if
the over-allotment option granted to the underwriters is exercised in full,
based on an assumed initial public offering price of $11.00 per share, and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
The principal purposes of this offering are:
. to increase our equity capital;
. to facilitate future access by us to public equity markets;
. to provide increased visibility and credibility in the marketplace;
and
. to enhance our ability to use common stock as consideration for
acquisitions and as a means of attracting and retaining key employees.
We currently intend to use the net proceeds of this offering for the
following:
. enhancement and expansion of our network infrastructure;
. expansion of our sales and marketing efforts, including the hiring of
additional personnel;
. enhancement of our application management and technical expertise; and
. working capital and general corporate purposes.
In addition, we may also use a portion of the net proceeds of this offering
for the acquisition of businesses or technologies that are complementary to
those we currently possess. While we evaluate these types of opportunities from
time to time, there are currently no agreements with respect to any specific
acquisitions.
We have not yet determined the actual expected expenditures and therefore
cannot estimate the amounts to be used for each purpose set forth above. The
amounts and timing of these expenditures will vary significantly depending upon
a number of factors, including, but not limited to, the availability of
construction financing, the success and timing of our hiring efforts, the
amount of cash generated by our operations and the market response to our Web
site and Internet application hosting and management services. Accordingly, our
management will retain broad discretion as to the allocation of the proceeds of
this offering.
Pending use of the net proceeds as described above, we intend to invest the
net proceeds of this offering in short-term, interest-bearing, investment-grade
securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock, and
we do not currently intend to pay any cash dividends on the common stock in the
foreseeable future. We expect to retain future earnings, if any, to fund the
development and growth of our business. Future dividends, if any, will be
determined by our board of directors. As a result of not collecting a dividend,
there is a risk that stockholders will not experience a positive return on
their investment unless they sell their shares of common stock at a profit.
18
<PAGE>
CAPITALIZATION
The following table is a summary of our balance sheet at July 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of all
shares of convertible preferred stock outstanding as of July 31, 1999
into shares of common stock; and
. on a pro forma as adjusted basis to give effect to the issuance to CMGI
upon completion of this offering of an aggregate of 1,114,240
additional shares of common stock upon the conversion of outstanding
Series B convertible preferred stock issued to CMGI subsequent to July
31, 1999 and to reflect the sale of 5,500,000 shares of common stock at
an assumed initial public offering price of $11.00 per share, after
deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
This information should be read in conjunction with the section of this
prospectus with the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and the accompanying notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
July 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Series C Convertible Redeemable Preferred Stock,
par value $0.01 per share: 1,095,472 shares
authorized, issued and outstanding (actual);
no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).......... $ 8,088 $ -- $ --
Series D Convertible Redeemable Preferred Stock,
par value $0.01 per share: 993,243 shares
authorized, issued and outstanding (actual);
no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).......... 7,333 -- --
------- ------- -------
Total redeemable preferred stock............... 15,421 -- --
------- ------- -------
Stockholders' equity (deficit):
Series A Convertible Preferred Stock, par value
$0.01 per share: 1,323,953 shares authorized,
issued and outstanding (actual); no shares
authorized, issued or outstanding (pro forma
and pro forma as adjusted)................... 13 -- --
Series B Convertible Preferred Stock, par value
$0.01 per share: 1,000,000 shares authorized;
541,859 issued and outstanding (actual); no
shares authorized, issued or outstanding
(pro forma and pro forma as adjusted)........ 5 -- --
Common stock, par value $0.01 per share:
30,000,000 shares authorized (actual and pro
forma); 150,000,000 shares authorized (pro
forma as adjusted); 69,338 shares issued and
outstanding (actual); 20,816,173 and
27,430,413 shares issued and outstanding (pro
forma and pro forma as
adjusted, respectively)...................... 1 208 274
Additional paid-in capital....................... 30,291 45,523 112,379
Accumulated deficit.............................. (34,679) (34,679) (34,679)
------- ------- -------
Total stockholders' equity (deficit)........... (4,369) 11,052 77,974
------- ------- -------
Total capitalization........................ $11,052 $11,052 $77,974
======= ======= =======
</TABLE>
19
<PAGE>
The number of shares of common stock set forth in the table above as
outstanding after the completion of this offering excludes:
. 2,430,662 shares of common stock issuable upon exercise of stock
options outstanding under the NaviSite, Inc. 1998 Equity Incentive
Plan as of July 31, 1999, with a weighted average exercise price of
$2.54 per share; and
. 50,000 shares of common stock issuable upon exercise of stock options
outstanding under the NaviSite, Inc. 1998 Director Stock Option Plan
as of July 31, 1999, with a weighted average exercise price of $0.34
per share.
20
<PAGE>
DILUTION
Our pro forma net tangible book value as of July 31, 1999 was $22,574,874,
or $1.03 per share of common stock, as adjusted to reflect the issuance to CMGI
of an aggregate of 1,114,240 additional shares of common stock upon the
conversion of outstanding Series B convertible preferred stock issued to CMGI
subsequent to July 31, 1999. Pro forma net tangible book value per share, as
adjusted to reflect the issuance of the additional CMGI shares, represents the
amount of our total tangible assets less total liabilities, divided by
21,930,413, the pro forma number of shares of common stock outstanding as of
July 31, 1999, as adjusted to reflect the issuance of the additional CMGI
shares. Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by new investors purchasing shares
of common stock in this offering and the pro forma net tangible book value per
share of common stock immediately after completion of this offering on a pro
forma basis, as adjusted to reflect the issuance of the additional CMGI shares
and the shares issued to new investors. After giving effect to the conversion
of all outstanding shares of convertible preferred stock into an aggregate of
21,861,075 shares of common stock upon completion of this offering and the sale
of the 5,500,000 shares of common stock offered by us at an assumed initial
public offering price of $11.00 per share of common stock, and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value as of July 31, 1999 would have
been $77,179,874, or $2.81 per share of common stock. This represents an
immediate increase in net tangible book value of $1.78 per share of common
stock to existing stockholders and an immediate dilution in pro forma net
tangible book value of $8.19 per share of common stock to new investors
purchasing shares of common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $11.00
Pro forma net tangible book value per share as of July 31, 1999... $1.03
Increase per share attributable to new investors.................. 1.78
-----
Pro forma net tangible book value per share after this offering... 2.81
------
Dilution per share to new investors............................... $ 8.19
======
</TABLE>
The following table summarizes, on a pro forma basis as of July 31, 1999,
as adjusted to reflect the issuance to CMGI of an aggregate of 1,114,240
additional shares of common stock upon the conversion of outstanding Series B
convertible preferred stock issued to CMGI subsequent to July 31, 1999, the
number of shares of common stock purchased from us, the total cash
consideration paid and the average price per share paid to us by the existing
stockholders and by new investors purchasing shares of common stock in this
offering, before deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 21,930,413 80% $ 57,988,000 49% $ 2.64
New investors............ 5,500,000 20 60,500,000 51 $11.00
---------- ----- ------------ -----
Total.................. 27,430,413 100.0% $118,488,000 100.0%
========== ===== ============ =====
</TABLE>
The foregoing tables and calculations assume no exercise of options
outstanding under our 1998 Equity Incentive Plan or our 1998 Director Stock
Option Plan. As of July 31, 1999, there were 2,480,662 shares of common stock
reserved for issuance upon exercise of outstanding options with a weighted
average exercise price of $2.49 per share. To the extent that any of these
options are exercised, there will be further dilution to new investors.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our consolidated financial statements and the accompanying notes appearing
elsewhere in this prospectus and with the section of this prospectus under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Our statement of operations data for the years ended
July 31, 1997, 1998 and 1999 and our balance sheet data as of July 31, 1998 and
1999 are derived from our consolidated financial statements that have been
audited by KPMG LLP and appear elsewhere in this prospectus. Our statement of
operations data for the period from July 1, 1996 through July 31, 1996 and our
balance sheet data as of July 31, 1996 and 1997 are derived from our audited
consolidated financial statements that are not included herein. The selected
financial data set forth below for the years ended July 31, 1998 and July 31,
1999 reflect the acquisition by NaviSite of Servercast Communications, L.L.C.
in July 1998. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview." Historical results are not necessarily
indicative of the results to be expected in the future and results of interim
periods are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Period from
July 1, 1996 Year ended July 31,
through -------------------------
July 31, 1996 1997 1998 1999
------------- ------ ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Revenue............................. $ -- $ -- $ 158 $ 3,461
Revenue, related parties............ -- 3,361 3,871 7,058
---- ------ ------- --------
Total revenue...................... -- 3,361 4,029 10,519
Cost of revenue...................... 6 3,494 8,876 20,338
---- ------ ------- --------
Gross profit (loss)................ (6) (133) (4,847) (9,819)
---- ------ ------- --------
Operating expenses:
Selling and marketing............... -- 347 2,530 6,888
General and administrative.......... 21 467 1,412 4,823
Product development................. -- -- 287 2,620
---- ------ ------- --------
Total operating expenses........... 21 814 4,229 14,331
---- ------ ------- --------
Loss from operations................. (27) (947) (9,076) (24,150)
Other income (expense):
Interest expense, net............... -- (1) (85) (347)
Other expense, net.................. -- -- (11) (35)
---- ------ ------- --------
Net loss............................. (27) (948) (9,172) $(24,532)
Accretion of dividends on Series C
and D convertible redeemable
preferred stock...................... -- -- -- (172)
---- ------ ------- --------
Net loss applicable to common
stockholders......................... $(27) $ (948) $(9,172) $(24,704)
==== ====== ======= ========
Basic and diluted net loss per common
share................................ $(0.24) $ (1.14) $ (7.41)
====== ======= ========
Basic and diluted weighted average
number of common shares outstanding.. 4,000 8,017 3,332
====== ======= ========
Unaudited pro forma basic and diluted
net loss per share................... $ (1.51)
========
Pro forma weighted average number of
basic and diluted shares
outstanding.......................... 16,407
========
</TABLE>
<TABLE>
<CAPTION>
July 31,
---------------------------------
1996 1997 1998 1999
----- ------- -------- -------
(In thousands)
Balance Sheet Data:
<S> <C> <C> <C> <C>
Cash and equivalents....................... $ -- $ -- $ -- $ 3,352
Working capital (deficit).................. (157) (2,566) (13,522) (1,355)
Total assets............................... 130 2,010 5,479 21,111
Debt to CMGI............................... 156 2,273 11,439 --
Total convertible redeemable preferred
stock.................................... -- -- -- 15,421
Stockholders' equity (deficit)............. (27) (895) (10,066) (4,369)
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in the forward-looking statements as a result of a number of factors,
including those set forth in the section of this prospectus under the heading
"Risk Factors" and elsewhere in this prospectus. The following information
should be read in conjunction with the "Selected Consolidated Financial Data"
and our consolidated financial statements and the accompanying notes, each of
which appears elsewhere in this prospectus.
Overview
We provide enhanced, integrated hosting and management services for
business Web sites and Internet applications. We also provide application
rentals to customers and developers and supply related consulting services. Our
Internet application service offerings allow businesses to outsource the
deployment, configuration, hosting, management and support of their Web sites
and Internet applications in a cost-effective and rapid manner. Our focus on
enhanced management services, beyond basic co-location services, allows us to
meet the expanding needs of businesses as their Web sites and Internet
applications become more complex. The cost for our services varies from
customer to customer based on the number of hosted or managed servers and the
nature and level of services provided.
We were incorporated in Delaware in December 1998 as a wholly owned
subsidiary of NaviSite Internet Services Corporation as part of a corporate
reorganization of NaviSite Internet Services Corporation. At that time, we
received a contribution of assets from NaviSite Internet Services Corporation
in exchange for 60,589 shares of our common stock and 1,323,953 shares of our
Series A convertible preferred stock. At the same time, NaviSite Internet
Services Corporation contributed the remainder of its assets to NaviNet, Inc.,
another newly formed subsidiary of NaviSite Internet Services Corporation.
Effective as of October 1, 1999, NaviSite Internet Services Corporation was
merged with and into CMGI, leaving NaviSite and NaviNet, Inc. as direct
subsidiaries of CMGI.
Our predecessor, NaviSite Internet Services Corporation, was incorporated
in Delaware in February 1997 under the name CMG Information Technology, Inc.
and changed its name to NaviSite Internet Services Corporation in May 1997. We
commenced operations in July 1996, funded by CMGI, to support the networks and
host the Web sites of CMGI and a number of CMGI affiliates. CMGI affiliates
include all entities in which CMGI holds an equity interest. We began providing
Web site hosting and Internet application management services to companies
unaffiliated with CMGI in the Fall of 1997.
All financial information presented here refers only to NaviSite, including
the hosting and Internet application management segments of NaviSite Internet
Services Corporation, and does not include the financial condition or results
of operations of NaviNet, Inc., including the dial-up operations of NaviSite
Internet Services Corporation.
In July 1998, we acquired Servercast Communications, L.L.C., a Delaware
limited liability company and developer and integrator of Internet
applications, for $1.0 million in notes, plus bridge notes receivable of
$25,000 and $20,000 in acquisition costs. We acquired Servercast principally
for its expertise in online advertising, e-commerce, content management and
streaming media. The purchase price plus associated costs of the acquisition
were recorded as goodwill and are being amortized on a straight-line basis over
five years.
We intend to expand domestically and internationally and currently have two
new data centers under construction. In addition, we recently converted 3,200
square feet of office space at our current data center location in Andover,
Massachusetts into data center space. In May 1999, we executed a 12-year lease
for a new 150,000 square foot facility located in Andover, Massachusetts,
currently being constructed to our
23
<PAGE>
specifications, which will include a new data center. We anticipate that work
will be completed on the new Massachusetts facility in the Spring of 2000.
Construction also has started on a new 66,000 square foot facility located in
San Jose, California, which will include a new data center. In May 1999, we
executed a seven-year lease for this facility, which should be available for
occupation in the Fall of 1999. We currently are finalizing the terms of
construction contracts for the new Massachusetts facility and the new
California facility. Additional information on these construction contracts is
included in this prospectus under the heading "Certain Transactions--
Relationship and Transactions Between NaviSite and CMGI, Inc.--Leases,
Construction Contracts and CMGI Guarantees." The procurement, development and
equipping of these facilities will significantly increase our costs and
operating expenses.
Our corporate headquarters are currently shared with CMGI and several other
CMGI affiliates. CMGI allocates rent, facility maintenance and service costs
among these affiliates based upon headcount within each affiliate and within
each department of each affiliate. Services provided by CMGI include support
for enterprise services, rent and facilities, human resources and benefits and
Internet marketing and business development. Actual expenses could have varied
had we been operating on a stand-alone basis. Costs are allocated to us on the
basis of the fair market value for the facilities used and the services
provided. We intend to relocate our executive offices to our new facility, also
located in Andover, Massachusetts, upon completion of that facility, and upon
that relocation, we will no longer share space with CMGI.
We derive our revenue from a variety of services, including: Web site and
Internet application hosting, which includes access to our state-of-the-art
data centers, bandwidth and basic back-up, storage and monitoring services;
enhanced server management, which includes custom reporting, hardware options,
load balancing and mirroring, system security, advanced back-up options, remote
management and the services of our business solution managers; specialized
application management, which includes management of e-commerce and other
sophisticated applications and their underlying services, including ad-serving,
streaming, databases and transaction processing; and application rentals and
related consulting and other professional services. Revenue also includes
income from the rental of equipment to customers and one-time installation
fees. Revenue is recognized in the period in which the services are performed
and installation fees are recognized in the period of installation. Our
contracts generally are a one-year commitment.
Our revenue from sales to related parties principally consists of sales of
services to CMGI and other customers that are CMGI affiliates. In general, in
pricing the services provided to CMGI and its affiliates, we have: negotiated
the services and levels of service to be provided; calculated the price of the
services at those service levels based on our then-current, standard prices;
and, in exchange for customer referrals provided to us by CMGI, discounted
these prices by 10%. Additional information about sales of services to CMGI and
its affiliates is included in this prospectus under the heading "Certain
Transactions--Relationship and Transactions between NaviSite and CMGI, Inc.--
Other Transactions with CMGI and its Affiliates." In fiscal 1999, we sold
services to CMGI and 19 CMGI affiliates totaling approximately $7.1 million, or
67% of revenue. Two of these customers accounted for approximately 22% and 16%
of revenue, respectively. As of July 31, 1999, through its ownership of
NaviSite Internet Services Corporation, CMGI owned approximately 89.6% of our
outstanding common stock, with most of the balance owned by Dell Computer
Corporation and Microsoft Corporation.
Cost of revenue consists primarily of salaries and benefits for operations
personnel, bandwidth fees and related Internet connectivity charges, equipment
costs and related depreciation and costs to run our two data centers, such as
rent and utilities. We expect these costs to increase in dollar terms, but
decline on a percentage of revenue basis, with the growth of our overall
business. We also expect to achieve economies of scale as a result of spreading
more volume over fixed assets, increasing productivity and using new
technological tools.
Selling and marketing expenses consist primarily of salaries and related
benefits, commissions and marketing expenses such as advertising, product
literature, trade shows, marketing and direct mail programs. We expect selling
and marketing expenses to increase significantly in dollar terms, but decline
on a percentage
24
<PAGE>
of revenue basis, as we continue to invest in these areas to promote brand
recognition and to acquire new customers. We intend to accomplish this by
hiring additional sales and marketing personnel, opening additional sales
offices and increasing spending on public relations, advertising and marketing
programs.
General and administrative expenses include the costs of financial, leasing
and administrative personnel, professional services and corporate overhead.
Also included are intercompany charges from CMGI for facilities, human resource
support and business development. We expect the dollar value of these expenses
to increase in future periods, but decline on a percentage of revenue basis, as
we hire additional personnel and incur additional costs related to the growth
of our business and our operations as a public company.
Product development expenses consist mainly of salaries and related costs.
Our product development staff focuses on Internet applications and network
architecture. This group identifies new Internet application software
offerings, incorporates these new offerings into our suite of service offerings
and positions these new offerings for marketing, sale and deployment. Our
product development group also identifies, selects and implements the various
technologies, including network storage and back-up, that provide the basic
infrastructure for both our internal network and the solutions we offer our
customers. As with sales and marketing, we believe that increased investment in
product development is critical to attaining our strategic objectives and
maintaining our competitive edge. We expect the dollar value of product
development expenses to increase significantly in future periods, but decline
on a percentage of revenue basis.
We have incurred significant net losses and negative cash flows from
operations since our inception and, as of July 31, 1999, had an accumulated
deficit of approximately $34.7 million. These losses primarily have been funded
by CMGI through the issuance of convertible preferred stock and convertible
debt and by equipment lease financing. We intend to continue to invest heavily
in sales, marketing, promotion, technology and infrastructure development as we
grow. As a result, we believe that we will continue to incur operating losses
and negative cash flows from operations for at least the next three years and
that the rate at which such losses will be incurred may increase.
Results of Operations
The following table sets forth the consolidated statement of operations
data for the periods indicated as a percentage of revenues:
<TABLE>
<CAPTION>
Year ended July 31,
-----------------------
1997 1998 1999
----- ------ ------
<S> <C> <C> <C>
Revenue:
Revenue.............................................. 0.0% 3.9% 32.9%
Revenue, related parties............................. 100.0 96.1 67.1
----- ------ ------
Total revenue....................................... 100.0 100.0 100.0
Cost of revenue....................................... 104.0 220.3 193.3
----- ------ ------
Gross profit (loss).................................. (4.0) (120.3) (93.3)
----- ------ ------
Operating expenses:
Selling and marketing................................ 10.3 62.8 65.5
General and administrative........................... 13.9 35.0 45.9
Product development.................................. 0.0 7.1 24.9
----- ------ ------
Total operating expenses............................ 24.2 104.9 136.3
----- ------ ------
Loss from operations.................................. (28.2) (225.2) (229.6)
Other income (expense):
Interest expense..................................... 0.0 (2.1) (3.3)
Other expense, net................................... 0.0 (0.3) (0.3)
----- ------ ------
Total other income (expense)........................ 0.0 (2.4) (3.6)
----- ------ ------
Net loss.............................................. (28.2)% (227.6)% (233.2)%
===== ====== ======
</TABLE>
25
<PAGE>
Comparison of Fiscal Years Ended July 31, 1999 and 1998
Revenue
Total revenue increased 161% to approximately $10.5 million in fiscal 1999,
from approximately $4.0 million in fiscal 1998. The increase in revenue is due
to additional business with CMGI and CMGI affiliates and the increase in the
number of non-affiliated customers to 106 as of July 31, 1999 from 37 as of
July 31, 1998 (including customers of Servercast, acquired by us on July 1,
1998). Customers of Servercast accounted for $1,143,000, or 11%, of total
revenue in fiscal 1999.
Cost of Revenue
Cost of revenue increased 129% to approximately $20.3 million in fiscal
1999, from approximately $8.9 million in fiscal 1998. As a percentage of
revenue, cost of revenue decreased to 193% in fiscal 1999, from 220% in fiscal
1998. The dollar-value increase in each period is due primarily to the costs
associated with increased investment in our existing data centers. These costs
principally include labor and headcount expenses, additional equipment and
maintenance costs and increased bandwidth and connectivity charges.
Operating Expenses
Selling and Marketing. Selling and marketing expenses increased 172% to
approximately $6.9 million in fiscal 1999, from approximately $2.5 million in
fiscal 1998. This increase is due primarily to the development of NaviSite's
sales and marketing capability in connection with the commencement of sales to
unaffiliated customers. These costs primarily include salaries and commissions
and expenses for marketing programs, advertising and product literature.
General and Administrative. General and administrative expenses increased
242% to approximately $4.8 million in fiscal 1999, from approximately $1.4
million in fiscal 1998. The dollar-value increase in general and administrative
expenses is due to both an increase in salaries and related costs, to
approximately $1.7 million in fiscal 1999, from approximately $752,000 in
fiscal 1998, resulting from the hiring of additional administrative and finance
personnel to support our growing operations and an increase in intercompany
charges from CMGI to approximately $494,000 in fiscal 1999, from approximately
$161,000 in fiscal 1998, for human resource support, business development and
corporate overhead. Other expenses contributing to the dollar-value increase
include moving and rental costs associated with the occupation of our current
corporate headquarters and legal and professional fees, which increased to
approximately $1.1 million in fiscal 1999, from approximately $221,000 in
fiscal 1998, associated with: Year 2000 consultants and contract labor; legal
review of operating contracts, leases, option plans and the Navisite Internet
Services Corporation corporate reorganization; and accounting and finance
contract labor. General and administrative expenses associated with Servercast
(acquired by us on July 1, 1998) increased to approximately $517,000 in fiscal
1999, from approximately $19,000 in fiscal 1998.
Product Development. Product development expenses increased to $2.6 million
in fiscal 1999, from approximately $287,000 in fiscal 1998. This increase is
due primarily to the costs associated with an increase in product development
personnel by July 31, 1999 to 20, from one person at the inception of our
product development operations in 1998. This growth in product development
personnel reflects our increased service offerings and emphasis on application
services.
Interest Expense, net
Interest expense, net increased to approximately $347,000 in fiscal 1999,
from $85,000 in fiscal 1998. This increase is due primarily to the inclusion in
interest expense, net in fiscal 1999 of approximately $303,000 of interest on
intercompany debt at a rate of seven percent per annum pursuant to an
arrangement entered into between NaviSite and CMGI in the second half of fiscal
1998. Interest expense associated with the issuance of term notes in connection
with our acquisition, in July 1998, of Servercast totaled approximately $55,000
during fiscal 1999. Interest expense on long-term capital lease obligations is
also included in interest expense, net.
26
<PAGE>
Comparison of Fiscal Years Ended July 31, 1998 and 1997
Revenue
Total revenue increased 20% to approximately $4.0 million in fiscal 1998,
from approximately $3.4 million in fiscal 1997. Because NaviSite first sold its
services to unaffiliated customers in the Fall of 1997, almost all of
NaviSite's revenue in fiscal 1998 and fiscal 1997 came from CMGI and CMGI
affiliates. The dollar-value increase in revenue in fiscal 1998 from fiscal
1997 is due to a growth in revenue of approximately $510,000 from services
provided to affiliated customers and the addition of commercial customers with
revenue totaling $158,000. In fiscal 1998, three customers, all affiliates of
CMGI, accounted for 40%, 19% and 11% of revenue, respectively. In fiscal 1997,
these same three customers accounted for 46%, 28% and 14% of revenue,
respectively.
Cost of Revenue
Cost of revenue increased 154% to approximately $8.9 million in fiscal
1998, from approximately $3.5 million in fiscal 1997. As a percentage of
revenue, cost of revenue increased to 220%, from 104%, reflecting costs
associated with the build-out of the Andover data center and the opening of the
Scotts Valley data center in anticipation of future growth.
Operating Expenses
Selling and Marketing. Selling and marketing expenses increased to $2.5
million in fiscal 1998, from $347,000 in fiscal 1997. The increases are the
result of significant growth in our sales force and marketing group during this
period as we commenced sales to unaffiliated customers. Advertising costs and
significant initial costs for product literature also are components of the
increase in fiscal 1998 over fiscal 1997.
General and Administrative. General and administrative expenses increased
202% to approximately $1.4 million in fiscal 1998, from approximately $467,000
in fiscal 1997. These increases are the result of increased payroll and related
costs and professional fees required to support our growing operations.
Product Development. Product development expenses increased to $287,000 in
fiscal 1998 due to initial hiring in our product development group at its
inception in fiscal 1998. Product development expenses were zero in fiscal
1997. The introduction of product development personnel reflects our increased
service offerings and emphasis on application services.
Interest Expense, net
Interest expense, net increased to $85,000 in fiscal 1998, from $1,000 in
fiscal 1997. The increase in fiscal 1998 from fiscal 1997 is due primarily to
the inclusion in interest expense, net in fiscal 1998 of approximately $65,000
of interest on intercompany debt at a rate of seven percent per annum pursuant
to an arrangement entered into between NaviSite and CMGI in the second half of
fiscal 1998. Interest expense on long-term capital lease obligations is also
included in interest expense, net in fiscal 1998 and is the sole component of
interest expense, net in fiscal 1997.
Income Taxes
NaviSite is part of the CMGI consolidated group for tax purposes, and as
such, all benefits of federal tax losses from inception through July 31, 1999
have been used to the benefit of CMGI in its consolidated return. As a result,
NaviSite has no tax loss carryforwards or carrybacks as of July 31, 1999.
27
<PAGE>
Selected Unaudited Quarterly Results of Operations
The following table sets forth unaudited quarterly statements of operations
data for each of the six quarters in the 18-month period ended July 31, 1999.
In the opinion of management, the unaudited financial results include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of our results of operations for those periods. The quarterly
data should be read in conjunction with the audited consolidated financial
statements and the accompanying notes appearing elsewhere in this prospectus.
The results of operations for any quarter are not necessarily indicative of the
results of operations for any future period.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------
April 30, July 31, Oct. 31, Jan. 31, April 30, July 31,
1998 1998 1998 1999 1999 1999
--------- -------- -------- -------- --------- --------
Statement of Operations
Data: (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Revenue................ $ 28 $ 119 $ 490 $ 604 $ 958 $ 1,409
Revenue, related
parties.............. 1,024 1,074 1,178 1,562 2,025 2,293
------- ------- ------- ------- ------- -------
Total revenue......... 1,052 1,193 1,668 2,166 2,983 3,702
Cost of revenue......... 2,584 2,453 3,786 3,935 5,836 6,781
------- ------- ------- ------- ------- -------
Gross profit (loss).... (1,532) (1,260) (2,118) (1,769) (2,853) (3,079)
------- ------- ------- ------- ------- -------
Operating expenses:
Selling and marketing.. 762 1,106 1,429 1,112 1,856 2,491
General and
administrative....... 378 485 543 804 1,208 2,268
Product development.... 104 173 267 439 672 1,242
------- ------- ------- ------- ------- -------
Total operating
expenses............ 1,244 1,764 2,239 2,355 3,736 6,001
------- ------- ------- ------- ------- -------
Loss from operations.... (2,776) (3,024) (4,357) (4,124) (6,589) (9,080)
Other income (expense):
Interest expense, net
..................... (24) (57) (156) (39) (135) (17)
Other expense, net..... -- (11) 4 -- (40) 1
------- ------- ------- ------- ------- -------
Total other income
(expense)........... (24) (68) (152) (39) (175) (16)
------- ------- ------- ------- ------- -------
Net loss................ $(2,800) $(3,092) $(4,509) $(4,163) $(6,764) $(9,096)
======= ======= ======= ======= ======= =======
<CAPTION>
Percentage of Total Revenues
Three Months Ended
---------------------------------------------------------------
April 30, July 31, Oct. 31, Jan. 31, April 30, July 31,
1998 1998 1998 1999 1998 1999
--------- -------- -------- -------- --------- --------
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Revenue................ 2.7 % 10.0 % 29.4 % 27.9 % 32.1 % 38.1 %
Revenue, related
parties.............. 97.3 90.0 70.6 72.1 67.9 61.9
------- ------- ------- ------- ------- -------
Total revenue......... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue......... 245.6 205.6 227.0 181.7 195.6 183.2
------- ------- ------- ------- ------- -------
Gross profit (loss).... (145.6) (105.6) (127.0) (81.7) (95.6) (83.2)
------- ------- ------- ------- ------- -------
Operating expenses:
Selling and marketing.. 72.4 92.7 85.7 51.3 62.2 67.3
General and
administrative....... 35.9 40.7 32.6 37.1 40.5 61.3
Product development.... 9.9 14.5 16.0 20.3 22.5 33.5
------- ------- ------- ------- ------- -------
Total operating
expenses............ 118.2 147.9 134.3 108.7 125.2 162.1
------- ------- ------- ------- ------- -------
Loss from operations ... (263.8) (253.5) (261.3) (190.4) (220.8) (245.3)
Other income (expense):
Interest expense, net
..................... (2.3) (4.8) (9.2) (1.8) (4.5) (0.4)
Other expense, net..... 0.0 (0.9) 0.2 0.0 (1.3) 0.0
------- ------- ------- ------- ------- -------
Total other income
(expense)........... (2.3) (5.7) (9.1) (1.8) (5.8) (0.4)
------- ------- ------- ------- ------- -------
Net loss................ (266.2)% (259.2)% (270.4)% (192.2)% (226.7)% (245.7)%
======= ======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
Liquidity and Capital Resources
Since our inception, our operations have been funded primarily by CMGI
through the issuance of preferred stock and convertible debt.
Net cash used in operating activities amounted to $20.2 million, $7.9
million and $644,000 for fiscal 1999, fiscal 1998 and fiscal 1997,
respectively. The increase in cash used in operations has primarily been caused
by increasing net operating losses, which are partially offset by non-cash
depreciation and amortization charges included in the applicable net loss and
increases in accounts payable and accrued expenses.
Net cash used in investing activities amounted to $9.8 million, $1.2
million and $1.6 million during fiscal 1999, fiscal 1998 and fiscal 1997,
respectively. The net cash used for investing activities was utilized to
acquire property and equipment required to support the growth of the business
and to expand data center infrastructure.
Net cash provided by financing activities amounted to $33.3 million, $9.1
million and $2.2 million for fiscal 1999, fiscal 1998 and fiscal 1997,
respectively. Cash provided for financing activities included funds advanced
from CMGI, totaling $19.0 million, to fund our operations in 1999. In addition,
cash provided by financing activities in fiscal 1999 included $8.0 million in
net proceeds from the issuance of Series C convertible preferred stock to Dell
Computer Corporation and $7.2 million in net proceeds from the issuance of
Series D convertible preferred stock to Microsoft Corporation. Cash provided by
financing activities in fiscal 1998 and fiscal 1997 primarily was related to
funds advanced from CMGI to fund our operations. Our current interest rate for
our financing activities through CMGI is seven percent. Non-cash financing
transactions included capital lease financing for equipment and a software
vendor payable in fiscal 1999 and fiscal 1998.
CMGI has historically funded our operations as needed, increasing our
obligations to CMGI and allowing us to maintain a zero-balance cash account.
Customer and other receipts have been remitted to CMGI and have been applied to
reduce our obligations to CMGI. We have issued a secured convertible demand
note to CMGI in exchange for the cancellation of all outstanding intercompany
debt incurred by us to CMGI prior to April 30, 1999. This note also provides
for additional advances by CMGI to us after April 30, 1999. CMGI may elect to
convert amounts payable under the note into Series B convertible preferred
stock at any time. Additional intercompany debt accrues at a rate of seven
percent per year, compounded monthly until the day CMGI elects to convert the
debt into shares of Series B convertible preferred stock. The amount of each
borrowing represented by the note is convertible from time to time into the
number of shares of Series B convertible preferred stock equal to one-tenth of
the quotient of the aggregate amount of principal and interest to be so
converted, divided by the applicable conversion price for that fiscal quarter.
The conversion price applicable to advances made in any fiscal quarter,
except advances made in the fiscal quarter during which a qualified initial
public offering occurs and advances converted into Series B convertible
preferred stock in the same fiscal quarter in which they were made, is
determined by dividing our total enterprise value as of the fiscal quarter end
(as determined in good faith by our board of directors) by the number of shares
of common stock outstanding on a fully diluted, as-if-converted basis. Our
total enterprise value, and the conversion price applicable to advances made
under the note, has increased significantly since the fiscal quarter ended
January 31, 1999. For the fiscal quarter ended January 31, 1999, our enterprise
value was based on a discounted cash flow analysis. Our enterprise value for
the fiscal quarter ended April 30, 1999, however, was determined through arms'
length negotiations with, and subsequent sales of our Series C convertible
preferred stock and Series D convertible preferred stock to, two unaffiliated
third parties-Dell and Microsoft. While our business experienced certain
positive operating results during our fiscal quarter ended April 30, 1999,
including principally growth in our revenue from customers unaffiliated with
CMGI and growth in the total number of our customers and in our customers
unaffiliated with CMGI, we believe that the significant increase in our total
enterprise value for our fiscal quarter ended April 30, 1999 from that for our
fiscal quarter ended January 31, 1999 results primarily from the fact that our
total enterprise value for our fiscal quarter ended April 30, 1999 was
determined through arms' length negotiations with our two third-party
investors. The conversion prices for the Series B convertible preferred stock
issued upon conversion of advances made under the note in the fiscal quarter
ended April 30, 1999, the Series C convertible preferred stock and the Series D
preferred stock all are based on our enterprise value for the fiscal quarter
ended April 30, 1999.
29
<PAGE>
Under this note, intercompany debt in the aggregate amount of approximately
$10,761,000, representing $5,348,000 advanced during the quarter ended January
31, 1999 and an additional $5,413,000 advanced during the quarter ended April
30, 1999, in each case including interest accrued during the applicable fiscal
quarter, was converted into 490,332 shares of Series B convertible preferred
stock (based upon applicable conversion prices of $12.74 and $76.68,
respectively). Effective June 4, 1999, CMGI elected to convert intercompany
debt in the aggregate amount of approximately $3,952,000, representing funds
advanced subsequent to the quarter ended April 30, 1999, into 51,527 shares of
Series B convertible preferred stock (based upon a conversion price of $76.68).
Under the terms of the note, because CMGI elected to convert these advances
prior to the end of the fiscal quarter in which the advances were made, the
applicable conversion price was the conversion price in effect for the
immediately preceding fiscal quarter. Immediately prior to the completion of
this offering, CMGI will convert intercompany debt in the aggregate amount of
approximately $12,257,000, representing funds advanced subsequent to the
quarter ended July 31, 1999, into 111,424 shares of Series B convertible
preferred stock (based upon a conversion price of $110, assuming an initial
public offering price of $11.00 per share). Upon completion of this offering,
each issued and outstanding share of Series B convertible preferred stock will
convert into ten shares of common stock, or 6,532,830 shares of common stock in
the aggregate. We do not expect to borrow funds from CMGI after completion of
this offering.
In connection with the construction contract for our new Andover,
Massachusetts facility, we will be required to obtain a letter of credit in the
amount of the remaining balance due under the contract, which is currently
estimated to be less than $15 million. See "Certain Transactions--Relationship
and Transactions between NaviSite and CMGI, Inc.--Leases, Construction
Contracts and CMGI Guarantees." We expect to commence negotiations on the terms
of the letter of credit prior to the completion of this offering.
We have experienced a substantial increase in our expenditures since
inception consistent with our growth in operations and staffing. We anticipate
that expenditures will continue to increase for at least three years as we
accelerate the growth of our business. Additionally, we will continue to
evaluate investment opportunities in businesses that management believes will
complement our technologies and market strategies.
We currently anticipate that our available cash resources, together with
the net proceeds from this offering, will be sufficient to meet our anticipated
needs for working capital and capital expenditures for at least the twelve
months following the date of this prospectus. However, we may need to raise
additional funds in order to fund more rapid expansion, to develop new or
enhance existing services or products, to respond to competitive pressures or
to acquire complementary businesses, products or technologies. In addition, on
a long-term basis, NaviSite may require additional external financing for
working capital and capital expenditures through credit facilities, sales of
additional equity or other financing vehicles. If additional funds are raised
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and our stockholders may
experience additional dilution. We cannot assure you that additional financing
will be available on terms favorable to us, if at all. If adequate funds are
not available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of unanticipated opportunities, develop or enhance
services or products or otherwise respond to competitive pressures would be
significantly limited.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risk related to changes in interest rates. We
intend to invest excess cash balances in cash equivalents. We believe that the
effect, if any, of reasonably possible near-term changes in interest rates on
our financial position, results of operations and cash flows will not be
material.
Year 2000 Considerations
Currently, many installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to continue to function properly into the
30
<PAGE>
Year 2000 and beyond. We recognize the need to assure that our operations will
not be adversely impacted by Year 2000 software and computer system failures.
We confront the Year 2000 problem in several contexts:
Our Facilities and Services. We are a hosting and application management
services provider and we rely on our network infrastructure, software and
hardware to provide our services. Because we offer computer-related services
and because of the business-critical nature of many of our customers'
applications, our risk of lawsuits related to Year 2000 issues is likely to be
greater than that of companies in some other industries. We currently have 13
full-time employees and consultants dedicated to completing our internal Year
2000 project plan. As of July 31, 1999, we have spent nearly $950,000 on our
Year 2000 compliance effort and we have budgeted up to an additional $650,000
to complete our internal Year 2000 project plan.
Our Year 2000 project plan consists of five phases:
. awareness, which consists of informing our employees, customers and
suppliers (orally and in writing) of the need to remediate computer
systems and software products relating to our operations;
. inventory, which is comprised of our efforts to identify and record the
computer systems and software products involved in the provision of our
service offerings and elsewhere in our operations;
. assessment, which is the process of isolating Year 2000 issues with the
systems and products identified in the inventory phase of our Year 2000
project plan and identifying necessary upgrades and replacements to
address these Year 2000 issues;
. remediation, which consists of implementing the necessary upgrades and
replacements identified in the assessment phase of our Year 2000
project plan; and
. contingency planning, which involves both the proactive visioning of
failures of computer systems and software products and of other adverse
impacts on our operations caused by the failure or inadequate
completion of one or more of the first four phases of our Year 2000
project plan and the suggestion and documentation of reasonable
solutions to resolve these potential failures.
We have substantially completed the awareness, inventory and assessment phases
of our Year 2000 project plan. We also continue to conduct awareness campaigns
as needed, update our inventory and conduct Year 2000 assessment on an ongoing
basis as new computer systems and software products are introduced to our data
centers or integrated into our operations. We intend to continue this ongoing
inventory and assessment process through at least December 31, 2000. The
awareness, inventory and assessment phases of our Year 2000 project plan
revealed to us a number of potential problems at the operating system and BIOS
levels with: hosted servers owned by both us and our customers; networked and
standalone desktop computers; and our network operations centers. In addition,
these phases of our plan revealed potential problems with hardware devices
utilized as part of our network infrastructure, including, for example,
routers. All of the revealed problems are ordinary and routine in nature, and
all are able to be remedied with standard software or hardware patches. In most
cases, if time permits, we test vendor software patches for Year 2000
compliance.
We anticipate completing the remediation and contingency planning phases by
December 1, 1999. The remediation phase of our Year 2000 project plan is
designed to remediate Year 2000 problems at the operating system and BIOS
levels as to computer systems used by customers for whom we provide management
services. A number of managed servers remain on our inventory for remediation.
The remediation of certain of these servers has been delayed as a result of
customer requests to postpone scheduled remediation based on the internal
business needs of those customers. We believe that remediation will continue
through December 1, 1999 because of these delays with customer server
remediation and the potential release by suppliers of new patches. As new
managed servers are brought on line through at least December 31, 1999, we will
certify Year 2000 compliance before these servers are installed. As described
in further detail below, our co-location customers have full responsibility for
remediating their own servers and applications, and all of our customers are
responsible for remediating their own application software and any desktop
computers used by them in connection with the services we provide. Year 2000
problems isolated to date with respect to our desktop computers, network
operations centers and network infrastructure have been substantially
remediated.
31
<PAGE>
The formal contingency planning phase of our Year 2000 project plan is
complete. We anticipate continuing to update our contingency plans as required,
at least through the end of the remediation phase of our Year 2000 project
plan.
Because our infrastructure incorporates components from different
providers, we may be unable to determine whether any of these components will
cause unexpected Year 2000 problems or whether different components will
interact in a way that causes malfunctions. While we expect that our network
infrastructure and all other material components of our facilities will not
experience any Year 2000-related failures, we cannot assure you that we will
not experience these failures or that we will not discover any compliance
problems in the future. Our failure timely and adequately to address Year 2000
compliance issues in our business could result in lost revenues and claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming for us to defend.
Our Customers. We also face risks from customer-provided computer systems
and application software that we host in our data centers that in many cases
has been customized by outside service providers or customer personnel. While
we inform our co-location customers that they are responsible for the Year 2000
compliance of their hosted computer systems and all customers that they are
responsible for the Year 2000 compliance of their own application software, we
cannot assure you that our customers will take the steps necessary to achieve
Year 2000 compliance. The failure of customers and third-party providers to
ensure that their hosted computer systems and application software is Year 2000
compliant could disrupt our operations, resulting in lost revenue and increased
operating costs. In addition, our customers maintain their internal operations
on networks which may be impacted by Year 2000 complications, which could in
turn affect our internal structure or our ability to provide services to them.
We cannot assure you that our customers will upgrade their internal networks or
otherwise provide appropriate remediation for Year 2000 compliance. In
addition, in the event that a significant number of our customers experience
Year 2000-related problems, whether due to our products or not, demand for
technical support and assistance may increase dramatically. In this case, our
costs for providing technical support may rise and the quality of our service
or our ability to manage incoming requests may be impaired.
Our Suppliers. In addition, we depend on software and hardware supplied by
numerous vendors to provide our application hosting and management services,
rental services and consulting services. We are currently seeking assurances
from our existing vendors that their products are Year 2000 compliant, and we
require that all new software application providers certify that they are Year
2000 compliant before we enter into agreements with them. However, because in
most cases we do not independently verify the Year 2000 compliance of vendors'
products, we cannot assure you that these vendors' guarantees are true or
sufficient or that we will not encounter Year 2000 compliance problems
involving their products.
We cannot assure you that we will be able to provide our services and
maintain our operations if we are unable to obtain products, services or
systems that are Year 2000 compliant when we need them. In addition, if vendors
and service providers cannot deliver their products because of their own Year
2000 compliance problems or as a result of systemic failures such as power
outages relating to the Year 2000, we could experience increased operating
costs and lost revenue.
Inflation
We believe that our revenues and results of operations have not been
significantly impacted by inflation during the past three fiscal years.
32
<PAGE>
Recent Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires the capitalization of certain internal costs
related to the implementation of computer software obtained for internal use.
NaviSite is required to adopt this standard in the first quarter of fiscal year
2000, and expects that the adoption of SOP 98-1 will not have a material impact
on its financial position or its results of operations.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting Costs of Start-Up Activities." Under SOP
98-5, the cost of start-up activities should be expensed as incurred. Start-up
activities are broadly defined as those one-time activities related to opening
a new facility, introducing a new product or service, conducting business in a
new territory, conducting business with a new class of customer, commencing
some new operation or organizing a new entity. SOP 98-5 is effective for the
Company's fiscal 2000 consolidated financial statements. NaviSite does not
expect its adoption to have a material impact on its financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. SFAS 133
requires the recognition of all derivatives as either assets or liabilities in
the statement of financial position and the measurement of those instruments at
fair value. NaviSite is required to adopt this standard in the first quarter of
fiscal year 2001 pursuant to SFAS No. 137 (issued in June 1999), which delays
the adoption of SFAS 133 until that time. NaviSite expects that the adoption of
SFAS 133 will not have a material impact on the its financial position or its
results of operations.
33
<PAGE>
BUSINESS
Company Overview
NaviSite is an Internet application service provider offering Web site and
application hosting and management services. Our Internet application service
offerings allow businesses to outsource the deployment, configuration, hosting,
management and support of their Web sites and Internet applications in a cost-
effective and rapid manner. Our focus on enhanced management services, beyond
basic co-location services, allows us to meet the expanding needs of businesses
as their Web sites and Internet applications become more complex. We also
provide our customers with access to our state-of-the-art data centers and the
benefit of our direct private transit Internet connections to major Internet
backbone providers. We only use direct private transit Internet connections,
which differentiates our network infrastructure from that of most of our
competitors. These connections increase reliability and download speeds.
The scalability of our infrastructure and cost-effectiveness of our
solutions allow us to offer a comprehensive suite of services to meet the
current and future hosting and management needs of our customers. Our suite of
service offerings includes:
. Web site and Internet application hosting, which includes access to
our state-of-the-art data centers, bandwidth and basic back-up,
storage and monitoring services;
. Enhanced server management, which includes custom reporting, hardware
options, load balancing and mirroring, system security, advanced back-
up options, remote management and the services of our business
solution managers;
. Specialized application management, which includes management of e-
commerce and other sophisticated applications and their underlying
services, including ad-serving, streaming, databases and transaction
processing; and
. Application rentals and related consulting and other professional
services.
Industry Background
Growth of Business Use of the Internet. The dramatic growth in Internet
usage in recent years, combined with enhanced functionality, accessibility and
security, has made the Internet increasingly attractive to businesses as a
medium for communication and commerce. Forrester Research, Inc. has estimated
that the number of U.S. enterprise businesses online will increase from
approximately 1.8 million in 1998 to approximately 4.3 million in 2003.
As business use of the Internet grows, we believe those businesses which
are utilizing the Internet are seeking to identify and implement increasingly
sophisticated Internet applications. These new applications permit businesses
to:
. engage in business-to-business and business-to-consumer e-commerce;
. enhance business sales efforts through Web-based technologies such as
ad-serving and streaming;
. build and enhance customer relationships by providing Internet-based
customer service and technical support; and
. communicate and conduct business more rapidly and cost-effectively
with customers, suppliers and employees worldwide.
As a result, the proliferation of business Web sites and Internet
applications has created a strong demand for specialized information technology
support and application expertise.
Movement Toward Outsourcing. A growing number of businesses using the
Internet as part of their business strategy have chosen to outsource Internet
application development, implementation and support, particularly the hosting
and management of their Web sites and Internet applications. This follows an
overall movement toward outsourcing of information technology services.
According to Forrester Research, businesses
34
<PAGE>
in the United States are now spending approximately 25% of their overall
information technology budgets on outsourced services. The growth in outsourced
hosting and management of Web sites and Internet applications is driven by a
number of factors, including:
. the desire of businesses to improve the reliability, availability and
overall performance of their Web sites and Internet applications as
those applications increase in complexity and importance;
. the desire of businesses to reduce time to market;
. the challenges faced by businesses in hiring, training and retaining
application engineers and information technology employees with
Internet expertise;
. the increased costs associated with developing and maintaining
business networks and software applications; and
. deployment risk and the risk of technological obsolescence as they
attempt to capitalize on leading-edge technologies.
Forrester Research has estimated that the market for managed Web site
hosting in the United States will grow from less than $1.0 billion in 1998 to
over $14.0 billion in 2003. In January 1998, Forrester Research estimated that
the market for branded application outsourcing services in the United States
will grow to $21.1 billion by 2001.
Need for Providers of Enhanced, Integrated Hosting and Application
Management Services. Many businesses have outsourced hosting and management of
their Web sites and Internet applications. However, many Web site hosting
providers lack the requisite expertise to implement and manage increasingly
sophisticated Internet applications. Moreover, many of these providers lack the
scalable capacity, high-speed connectivity, monitoring capabilities and level
of reliability and availability which businesses demand. System integrators and
turnkey application developers often have the requisite expertise and resources
to supply businesses with highly customized application solutions, but these
solutions are expensive and time consuming to implement. Some businesses
attempt to reduce cost and shorten time to deployment by utilizing multiple
vendors, each of which provides only a partial solution. This has created
significant opportunity for an application service provider which can offer Web
site and Internet application deployment, configuration, hosting, management
and support.
The NaviSite Solution
We provide a range of integrated, scalable Web site and Internet
application hosting and management services that can be deployed in a cost-
effective and rapid manner. Our Internet application service offerings allow
customers to outsource the deployment, configuration, hosting, management and
support of Web sites and Internet applications. Our focus on enhanced
management services, beyond basic co-location services, allows us to meet the
expanding needs of businesses as their Web sites and Internet applications
become more complex. Key components of our services include:
Cost-Effective Application Services. The scalable nature of our
infrastructure, the repeatability of our Internet application services and our
hosting and management expertise allow us to provide our customers with Web
site and Internet application hosting and management services on a cost-
effective basis. We believe that our customers would otherwise be required to
make significant expenditures to replicate our performance, reliability and
expertise either internally or by using outside vendors.
Rapid Deployment. We offer our customers the ability to rapidly deploy
Internet applications, often in a matter of weeks, instead of months. We
believe that we can deploy sophisticated Internet applications much more
rapidly than businesses can deploy the same applications in-house. Moreover,
our Internet application solutions can be deployed more rapidly than highly
customized applications. This is crucial as our customers develop a Web
presence and need to have their Web sites and Internet applications online as
quickly as possible.
35
<PAGE>
High-Performance, World-Class Infrastructure. Our infrastructure has been
designed expressly to meet the more demanding technical requirements of
sophisticated Web sites and Internet applications and to provide capacity ahead
of customer demand. We believe that this approach to capacity facilitates the
high-speed data transmission, reliability and availability which our customers'
Web sites and Internet applications demand. In addition, our direct private
transit Internet connections to major Internet backbone providers increase
reliability and download speeds and differentiate our network infrastructure
from that of most of our competitors. Our high-performance infrastructure
together with our trained and experienced staff enable us to offer levels of
service which are backed by guarantees which we believe are among the highest
and most comprehensive in the industry.
Strategy
NaviSite's objective is to be the leading Internet application service
provider. We plan to achieve this goal by continuing to enhance and leverage
our expertise, service offerings and infrastructure to provide customers with
integrated, reliable and secure Internet-based business solutions. Key
components of our strategy include:
Expand Our Suite of Internet Applications. We intend to both increase the
number and vary the kind of applications and application management services we
offer and increase revenue from application rentals. We continue to introduce
Internet business applications which enable customers to develop a Web-based
business presence. Currently, we offer our customers e-commerce and other
sophisticated applications and their underlying services, including ad-serving,
streaming, databases and transaction processing. We focus on application
services which are repeatable, meaning services that we can provide to
customers with minimal additional customization and integration. We believe
that this repeatability decreases our time to market, reduces our operating
risks and produces a higher return on our investment.
Offer Multiple Service Levels to Meet the Evolving Needs of Customers. We
offer multiple service levels to customers so that we can meet their needs for
Internet application services at each stage in the development of their Web-
based operations. For example, a customer initially may use our Web site or
Internet application hosting services or enhanced server management. Later, as
its operations grow and the Internet becomes more of an integral part of its
business strategy, the customer may use our specialized application management
services or application rentals. We believe we have created a competitive
advantage by offering multiple service levels to meet the evolving needs of
customers.
Increase Brand Awareness. We intend to increase awareness of the NaviSite
brand in key business markets and associate the NaviSite brand with the highest
quality Web site and Internet application hosting and management services, high
performance, world-class infrastructure and superior customer service. We
believe that this awareness and association is essential to the continued
expansion of our customer base. We plan to aggressively build the NaviSite
brand through our industry relationships and the use of marketing and co-
marketing programs.
Enhance Our Expertise and Technological Capabilities. We have acquired, and
intend to continue to enhance, the expertise and technological capabilities
required to conduct and grow our business ahead of customer demand. This means
hiring and training application experts before introducing a new application to
customers. This also means expanding existing data centers, adding data
centers, keeping current with key technological trends and increasing
bandwidth. We intend to enhance our expertise by training existing personnel
and by hiring and retaining new application service professionals. We believe
the combination of our Web site and Internet application hosting and management
expertise and our scalable infrastructure provide us with a competitive
advantage.
Continue to Develop and Leverage Industry Relationships. We believe our
industry relationships with Internet application software vendors and
developers, application and system integrators, hardware suppliers and others
provide us with enhanced market opportunities. Through these relationships, we
purchase, license or
36
<PAGE>
lease services or products to expand our application service offerings or
infrastructure. We also intend to expand our channel sales capability by
working with an increasing number of system integrators and Internet
application software developers and providers. By leveraging our current and
future industry relationships, we intend to not only increase our market
visibility and credibility but also offer our clients more fully integrated
Web site and Internet application hosting and management services.
Access Foreign Markets. We continually assess the need for foreign
operations based on opportunities in specific geographic locations. We
currently have data center capacity in Europe through a bilateral agreement
for Internet hosting services with Planet Online. This arrangement was
established to meet the overseas demands of existing domestic customers. As
the needs of our existing and prospective customers evolve, we intend to take
advantage of foreign market opportunities as they arise.
Pursue Strategic Acquisitions. As opportunities arise, we intend to
continue to pursue strategic acquisitions that can provide complementary
capabilities, technical personnel, established customer relationships and
geographic presence in domestic and international markets.
Services
We offer a comprehensive suite of services to meet the current and future
hosting and management needs of our customers.
Web Site and Internet Application Hosting. Our Web site and Internet
application hosting services provide customers with access to our state-of-
the-art data centers, bandwidth and basic back-up, storage and monitoring
services. Customers are able to access their servers 24-hours-a-day, seven-
days-a-week. These co-located servers are securely housed in separate,
limited-access rooms in our data centers. In fiscal 1999, approximately 17% of
our revenue was derived from basic co-location customers to which we provide
no enhanced or specialized management services.
Web Site and Application Management. We provide both enhanced server
management and specialized application management. Both types of management
services permit us to provide customers with comprehensive problem-solving
solutions, from identification to resolution to post-resolution analysis. To
provide these services, our trained technical personnel utilize advanced
network monitoring and management tools for Web site and application
troubleshooting, together with internal policies and procedures designed to
ensure rapid, effective solutions to technical problems.
Our enhanced server management services include custom reporting, hardware
options, load balancing and mirroring, system security, advanced back-up
options, remote management and the services of our business solution managers.
We also provide specialized application management services for select
software applications, such as:
. ad-serving, which allows customers to conduct advertising and
profiling over the Internet; and
. e-commerce, which enables customers to implement online stores,
customer ordering, payment and fulfillment.
Application Rentals. We offer Internet application rentals to customers
and application developers who need to access sophisticated Internet
applications or application components which can be customized by developers
as part of a complete software solution. Often, obtaining a full license for
these applications is too expensive for customers or application developers,
especially for short-term or single-project use. In addition, these
applications may require experienced personnel to deploy and configure them.
Applications which we currently offer to customers on a rental basis include
Engage Technologies, Inc.'s ad-serving application and a number of Oracle
Corporation's database applications. Internet application components that we
offer to application developers include streaming, personalization,
statistical reporting and imaging services.
37
<PAGE>
Professional Services. We supply consulting and other professional services
to our customers. These services include network and system configuration and
architecture, project implementation, bandwidth planning and, in limited cases,
basic software development and system integration.
Sales and Marketing
Our sales and marketing objective is to leverage our Web site and Internet
application hosting and management expertise to become the leading provider of
Internet application services. We have developed a sales and marketing strategy
that initially has targeted businesses that have adopted the Internet as an
integral part of their business strategy. We intend to increasingly target more
traditional enterprises as they incorporate the Internet into their business
models.
Our sales efforts focus on direct sales, as well as channel sales through
various industry relationships. We plan to establish a leading position in our
target markets by aggressively expanding our sales force, continuing to
establish and leverage industry relationships to increase channel sales and
expanding our marketing staff.
Direct Sales. Our direct sales professionals include:
. sales representatives, who conduct sales campaigns, identify targeted
prospects, oversee sales territories and manage customer
relationships;
. sales engineers, who discuss with prospective customers their Web site
and Internet application hosting and management needs and technical
requirements; and
. telesales representatives, who qualify customer leads.
Our direct sales teams currently are located in: Andover, Massachusetts;
New York, New York; and San Jose and Los Angeles, California. We plan to expand
our sales force to provide geographic presence in other key markets.
Channel Sales. We have developed important industry relationships to
enhance our channel sales and marketing capabilities. In 1998, we began
pursuing channel sales relationships through our Alliance Partner Program. We
also have generated leads or referrals on an informal basis from application
and system integrators and Internet application software vendors. We intend to
continue to leverage our industry relationships to develop customer referrals,
mutual referral relationships, enhanced service offerings, and in some cases,
co-selling and cross-selling opportunities. Although our industry relationships
have not yet matured into significant sources of new customers, we expect these
relationships to generate more referrals and leads in the future.
Marketing. Our marketing group is responsible for corporate and product
marketing, product management, corporate communications, public relations, lead
generation and marketing communications. As with our sales approach, our
overall marketing strategy focuses on supporting both direct sales and channel
sales. The key goals for our current marketing efforts are to establish a
national and local awareness of the NaviSite brand and our services, position
ourselves as a leading Web site and Internet application hosting and management
partner, develop and enhance channel sales relationships and demonstrate to
potential customers how our services differentiate us from our competition. Our
marketing efforts include:
. comprehensive lead generation through telemarketing, direct marketing,
direct mail programs, electronic and print advertising, seminars and
targeted shows and events;
. interactive, online marketing programs;
. marketing communications and public relations materials to sustain
press coverage in both trade and business publications;
. market development activities targeted to Web site design firms,
Internet application developers and consultants;
38
<PAGE>
. lead generation, referrals, mutual Web site links or co-marketing
through industry relationships with technology vendors such as Cisco
Systems Inc., Oracle Corporation, BMC Software Distribution, Inc., EMC
Corporation and ArrowPoint Communications, Inc.; and
. strategic marketing relationships with Dell and Microsoft, which are
principal stockholders of NaviSite.
We expect to make significant investments in these and other marketing
programs to increase awareness of the NaviSite brand. We also intend to
continue to leverage our advantageous relationship with CMGI as a source of
lead generation and referrals for our services.
Industry Relationships
In our sales and marketing efforts, we are pursuing industry relationships
targeted by our Alliance Partner Program.
Web and Application Developers. We have developed relationships with
multiple small- to medium-sized Web site design firms, Internet application
developers, consultants and other similar companies that have established
relationships with our target customers. These companies generally lack the
infrastructure and expertise needed to offer their customers a complete, cost-
effective solution and, as a result, turn to us to provide hosting and
management services and expertise to enhance their own product and service
offerings. These relationships provide us with greater market reach through
referrals, without the related overhead costs. In return, we offer these
companies discounts on our services, participation in networking events and
trade shows, joint marketing and promotional campaigns and Web site linkage.
Application and System Integrators. We have developed relationships with
several high-end network integration companies and system integrators from whom
we receive assistance with complex development, integration and project
management and for whom we provide application hosting and management
solutions. These relationships enable us to deliver more comprehensive Internet
application solutions to meet the needs of our customers.
Internet Application Software Vendors. We have developed relationships with
some of the leading Internet application software vendors. We target Internet
application software vendors with brand name recognition and established sales
and support channels. These relationships are mutually beneficial, providing us
with additional applications to sell or rent to our customers and the software
vendors with a distribution channel for their applications. We also benefit
from cross-selling and co-marketing opportunities and specialized product
training to enhance our application management expertise.
Customers
We were organized in 1996 by CMGI to support the networks and host the Web
sites of CMGI and a number of CMGI affiliates. In the Fall of 1997, we began
supplying Web site hosting and management services to companies unaffiliated
with CMGI. As of July 31, 1999, we had approximately 126 customers, up from 51
as of July 31, 1998. CMGI and CMGI affiliates accounted for 62% of our revenue
for the quarter ended July 31, 1999 as compared to 90% of our revenue for the
quarter ended July 31, 1998. CMGI and CMGI affiliates accounted for 15% of our
customer base as of July 31, 1999 as compared to 27% of our customer base as of
July 31, 1998.
A representative list of our customers as of July 31, 1999 includes:
AltaVista Company; Ancestry.com, Inc.; Catalog City, Inc.; Engage Technologies,
Inc.; FairMarket, Inc.; Furniture.com, Inc.; Planet Direct Corporation; Raging
Bull, Inc.; Send.com; ThingWorld.com; and TribalVoice.
39
<PAGE>
Product Development
Our product development staff focuses on Internet applications and network
architecture. This group identifies new Internet applications, incorporates
these applications into our suite of service offerings and positions them for
marketing, sale and rapid deployment. We focus on Internet applications that
permit us to offer our customers repeatable, scalable services. Our goal is to
introduce services capable of utilization by a large number of customers,
maximizing revenue production and minimizing the incremental operating cost for
each additional customer utilizing that service. As new applications are
introduced, our personnel integrate the application into our management and
billing systems, provide technical documentation and training and ensure the
security of the offering. This process is critical to our ability to provide
integrated, scalable applications to our customers and is designed to result in
increased operating margins, faster product delivery and improved customer
service.
Our product development group also identifies, selects and implements the
various technologies, including network storage and back-up, that provide the
basic infrastructure for both our internal network and the solutions we offer
our customers.
Customer Service and Support
We believe customer service and support is critical to our future success
and growth. Our customer care staff is focused on direct and indirect customer
service and support. We have developed a customized, life-cycle project
management approach to our operations. For some of our customers, we assign a
single business solutions manager who services the customer from deployment
through the entire customer relationship. This approach is designed to enhance
our responsiveness to customer requests, problem troubleshooting and technology
upgrades. In servicing and supporting our customers, we utilize a number of
state-of-the-art automated systems, including a knowledge-based problem-
resolution and trouble-ticketing system, an enterprise system monitoring
platform, sophisticated data storage, an enterprise tape backup system and a
corporate intranet with a built-in document management and source control
system. We believe that our approach to customer service and support and our
ability to rapidly respond to customer needs provides us with a significant
competitive advantage.
Network Infrastructure, Technology and Operations
NaviSite entered the Internet application service market with the advantage
of a well developed infrastructure established by CMGI to support CMGI and a
number of its affiliates. We have differentiated our infrastructure from
competing application service providers through our direct private transit
Internet connections to five major Internet backbone providers. We designed our
infrastructure specifically to provide superior performance for our Web site
and Internet application hosting and management services, including multi-level
network redundancy to provide the highest levels of network uptime, reliable
and customized network security and fast, guaranteed response time and
availability of customers' content, which we deliver through our private
transit Internet connections. Our infrastructure is also designed to scale to
support continued growth. We believe that our sophisticated and highly
redundant infrastructure provides us with a competitive advantage over other
hosting vendors and most Internet service providers. Key elements of our
infrastructure include:
Data Centers. Our strategy is to build a select number of high performance
data centers in order to provide our customers with a critical mass of
expertise in Internet applications and management services from each data
center, while capturing the benefits of centralized infrastructure and
staffing. We currently have data centers located in Andover, Massachusetts and
Scotts Valley, California. These state-of-the-art data centers incorporate
technically sophisticated components and are designed to be completely fault-
tolerant. The components used in our data centers include Cisco redundant core
routers, Cisco redundant core switching hubs and secure, virtual local area
networks. We obtain the equipment and tools necessary for our data center
operations, including our infrastructure hardware, networking and software
products from industry leaders such as ArrowPoint Communications, Cisco
Systems, Compaq Computer Corporation, Dell, EMC and Oracle.
40
<PAGE>
We are adding new data centers, including an additional data center in
Andover and a new data center in San Jose, California. Construction is
currently underway at both of these new sites.
Private Transit Internet Connectivity. Our use of direct private transit
Internet connections to five major Internet backbone providers differentiates
our network infrastructure from that of our competitors. We have redundant
high-capacity Internet connections to UUNet, CERFnet and MCI on the East Coast
and UUNet, BBN, MCI and SprintLink on the West Coast. We have deployed direct
private transit Internet connections specifically to avoid congestion and data
loss at public Internet exchange points and the resulting degradation of
performance. Our private transit system enables us to provide fast, reliable
access for our customers' Web sites and Internet applications. Because we have
direct private transit links to Internet providers, we can directly monitor the
capacity of all of our connections and guarantee that we will have the
aggregate bandwidth to move large quantities of data at high transmission
speeds. Our private transit Internet connections also enable us to more
effectively launch new applications, such as streaming, which require high
bandwidth availability and run more effectively in a private transit model.
Service Level Guarantees. The combination of our state-of-the-art
infrastructure, our customer-focused operations group and our hosting and
management expertise enable us to offer our customers service levels backed by
guarantees that we believe are among the highest and most comprehensive in the
industry. For example, we offer our customers 99.99% guarantees for network
segments, our facility and facility components. These guarantees translate into
no more than five minutes of consecutive, unscheduled downtime per month.
Network Security. Our network incorporates host-based security with
CheckPoint back-end firewalls and Cisco router access control lists, as well as
SecurID token-based authentication. In addition to these physical security
measures, we have a formal security policy in place, including employee
training, that governs all facets of our business and guidelines governing
internal and external access to information housed in our network system.
Network Operations Centers. Each NaviSite data center has its own network
operations center on site. Each network operations center is fully staffed 24-
hours-a-day, seven-days-a-week with Windows NT, UNIX, application and support
personnel. Our network operations centers perform first-level problem
identification and resolution. The design of our network operations centers
allows network engineers and support personnel to be promptly alerted to
problems, and we have established procedures for rapidly resolving any
technical issues that arise. Network management and monitoring tools
continuously monitor the network and server performance.
Competition
We compete in the Internet application service market. This market is
evolving rapidly, is highly competitive and is likely to be characterized by an
increasing number of market entrants and by industry consolidation. Because
there are no substantial barriers to entry, we expect that we will face
competition from both existing competitors and new market entrants in the
future. We believe that participants in this market must grow rapidly and
achieve a significant presence to compete effectively. We believe that the
primary competitive factors determining success in our market include:
. a state-of-the-art infrastructure providing availability, speed,
scalability and security;
. Web site and Internet application hosting and management expertise;
. fast and reliable Internet connectivity;
. a reputation for high-quality service and superior customer service
and support;
. numerous and diverse service offerings and timely addition of value-
added services;
. brand recognition;
. competitive pricing; and
41
<PAGE>
. adequate capital to permit continued investment in infrastructure,
customer service and support and sales and marketing.
As an early stage company, we may lack the financial and other resources,
expertise or capabilities to capture increased market share in this environment
in the future.
Our current and prospective competitors include:
. other providers of co-location or high-end Web site hosting and
related services, including AboveNet Communications, Inc., Digex
Corporation, Exodus Communications, Inc., Frontier GlobalCenter Inc.,
Globix Corporation, Interliant, Inc. and a large number of local and
regional hosting providers;
. national and regional Internet service providers, including Concentric
Network Corporation, MindSpring Enterprises, Inc., PSINet Inc., UUNet,
WorldCom and Verio Inc.;
. companies that focus on customized Internet application services,
including AppNet Systems, Inc., CORIO, Inc., IBM Global Services,
USinternetworking, Inc. and USWeb/CKS;
. application developers and Internet application software vendors,
including Open Market, Inc., DoubleClick Inc. and broadcast.com inc.;
. large system integrators and information technology outsourcing firms,
including Electronic Data Systems Corporation and International
Business Machines Corporation; and
. global telecommunications companies, including AT&T Corp., MCI
WorldCom, Inc. and Sprint Corporation, and regional and local
telecommunications companies, including MediaOne Group, Inc. and
regional Bell operating companies, such as Bell Atlantic Corporation.
Many of these competitors have substantially greater financial, technical
and marketing resources, larger customer bases, longer operating histories,
greater name recognition and more established relationships in the industry
than we have. As a result, many of these competitors may be able to develop and
expand their network infrastructures and service offerings more rapidly, adapt
to new or emerging technologies and changes in customer requirements more
quickly, take advantage of acquisitions and other opportunities more readily,
devote greater resources to the marketing and sale of their services and adopt
more aggressive pricing policies than we can. Because of these competitive
factors and due to our comparatively small size and our lack of financial
resources, we may be unable to successfully compete in the Internet application
service market.
In addition, we believe that there will be continued consolidation within
the Internet application service market in which we compete. Our competitors
may consolidate with one another, or acquire software application vendors or
technology providers, enabling them to more effectively compete with us. This
consolidation could affect prices and other competitive factors in ways which
would impede our ability to compete successfully in the Internet application
service market.
Proprietary Rights
We rely on a combination of trademark, service mark, copyright and trade
secret laws and contractual restrictions to establish and protect our
proprietary rights and promote our reputation and the growth of our business.
We do not own any patents that would prevent or inhibit competitors from using
our technology or entering our market. While it is our practice to require all
of our employees, consultants and independent contractors to enter into
agreements containing non-disclosure, non-competition and non-solicitation
restrictions and covenants, and while our agreements with some of our customers
and suppliers include provisions prohibiting or restricting the disclosure of
proprietary information, we can not assure you that these contractual
arrangements or the other steps taken by us to protect our proprietary rights
will prove sufficient to prevent misappropriation of our proprietary rights or
to deter independent, third-party development of similar proprietary assets. In
addition, we provide our services in other countries where the laws may not
afford adequate protection for our proprietary rights.
42
<PAGE>
We license or lease most technologies used in our Internet application
services. Our technology suppliers may become subject to third-party
infringement claims which could result in their inability or unwillingness to
continue to license their technology to us. The loss of certain of our
technologies could impair our ability to provide services to our customers or
require us to obtain substitute technologies of lower quality or performance
standards or at greater cost. We expect that we and our customers increasingly
will be subject to third-party infringement claims as the number of Web sites
and third-party service providers for Web-based businesses grows. In addition,
we have received notices alleging that our use of our service marks infringes
the trademark rights of third parties. Although we do not believe that any of
these allegations have merit, or that our technologies or services otherwise
infringe the proprietary rights of any third parties, we cannot assure you that
third parties will not assert claims against us in the future or that these
claims will not be successful. Any infringement claim as to our technologies or
services, regardless of its merit, could be time-consuming, result in costly
litigation, cause delays in service, installation or upgrades, adversely impact
our relationships with suppliers or customers or require us to enter into
royalty or licensing agreements.
Government Regulation
While there currently are few laws or regulations directly applicable to
the Internet or to Internet application service providers, due to the
increasing popularity of the Internet and Web-based applications it is likely
that such laws and regulations may be adopted. These laws may cover a variety
of issues including, for example, user privacy and the pricing, characteristics
and quality of products and services. The adoption or modification of laws or
regulations relating to commerce over the Internet could substantially impair
the future growth of our business or expose us to unanticipated liabilities.
Moreover, the applicability of existing laws to the Internet and Internet
application service providers is uncertain. These existing laws could expose us
to substantial liability if they are found to be applicable to our business.
For example, we provide services over the Internet in many states in the United
States and in the United Kingdom, and we facilitate the activities of our
customers in those jurisdictions. As a result, we may be required to qualify to
do business, be subject to taxation or be subject to other laws and regulations
in these jurisdictions, even if we do not have a physical presence or employees
or property there. The application of existing laws and regulations to the
Internet or our business, or the adoption of any new legislation or regulations
applicable to the Internet or our business, could materially adversely affect
our financial condition and operating results.
Employees
As of August 31, 1999, we had 217 employees. Of these employees, 110 were
principally engaged in operations, 53 were principally engaged in sales and
marketing, 21 were principally engaged in product development and 33 were
principally engaged in finance and administration. None of our employees is
party to a collective bargaining agreement and we believe our relationship with
our employees is good. We also employ consultants and independent contractors
on a regular basis to assist in the completion of projects and we outsource our
direct telemarketing sales force. It is our practice to require all of our
employees, consultants and independent contractors to enter into agreements
containing non-disclosure, non-competition and non-solicitation restrictions or
covenants.
Facilities
Existing Facilities. Our executive offices are located at 100 Brickstone
Square, Andover, Massachusetts and occupy approximately 17,800 square feet of
the space leased by CMGI at that location. We also occupy approximately 22,000
square feet at 300 Federal Street, Andover, Massachusetts, pursuant to an
agreement that expires in 2007. Part of this facility is utilized for our East
Coast data center, which we recently expanded. We believe that this facility
has sufficient growth capacity for approximately the next 10 months.
We also occupy approximately 14,100 square feet at 1700 Greens Hill Road,
Scotts Valley, California, part of which is utilized for our West Coast data
center, pursuant to an agreement that expires in 2002. We believe that this
facility has sufficient growth capacity for approximately the next six months.
We do not have any current intention to expand the Scotts Valley facility.
43
<PAGE>
In addition, we occupy four offices at 304 Park Avenue South, 11th Floor,
New York, New York, pursuant to an agreement that expires in March 2001. This
office space is utilized by sales and marketing personnel.
New Facilities. In May 1999, we executed a 12-year lease for a new 150,000
square foot facility located at 400 Minuteman Road, Andover, Massachusetts,
which is currently being constructed to our specifications. Part of this
facility will be utilized for a new data center. We currently are finalizing
the terms of the construction contract for the new Massachusetts facility and
we anticipate that work will be completed on this facility in the Spring of
2000. We believe that the new Massachusetts facility will have sufficient
growth capacity for at least the next two years. Construction also has started
on a new 66,000 square foot facility located in the Valley Technology Centre,
2720 Zanker Road, San Jose, California, part of which will be utilized for a
new data center. We also currently are finalizing the terms of the construction
contract for the new California facility. This facility should be available for
occupation in the Fall of 1999. In May 1999, we executed a seven-year lease for
this facility.
We believe that upon completion of the two new facilities currently under
construction, our facilities will be adequate for at least the next two years
and that we will be able to obtain additional space as needed on commercially
reasonable terms.
Legal Proceedings
NaviSite is not currently a party to any material legal proceedings.
44
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of NaviSite, and their ages and
positions with NaviSite as of August 31, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Joel B. Rosen............. 41 Chief Executive Officer and Director
Robert B. Eisenberg....... 48 President and Director
Kenneth W. Hale........... 46 Chief Financial Officer, Treasurer and Secretary
Thomas W. Culver.......... 52 Vice President, Operations
Barbara H. Fortier........ 44 Vice President, Facilities
Peter C. Kirwan, Jr....... 35 Chief Technology Officer
Jonathan Rodin............ 41 Vice President, Product Development
Jay S. Seaton............. 45 Vice President, Marketing
J. Andrew Sherman......... 44 Vice President, Sales
David S. Wetherell........ 45 Chairman of the Board of Directors
Craig D. Goldman.......... 55 Director
Andrew J. Hajducky III.... 45 Director
Stephen D.R. Moore........ 48 Director
</TABLE>
Joel B. Rosen has served as our Chief Executive Officer and as one of our
Directors since April 1999. From January 1996 to August 1998, Mr. Rosen served
as Executive Vice President of Aspen Technology, Inc., a publicly traded
enterprise software and services provider, where he was responsible for
managing two of Aspen Technology's three business units. From August 1988 to
January 1996, Mr. Rosen held several management positions within Aspen
Technology, including Director of Marketing, Vice President of Marketing and
Senior Vice President of Marketing and New Businesses. From 1984 to 1988, Mr.
Rosen was a Consultant and Manager at Bain & Company.
Robert B. Eisenberg founded NaviSite in July 1996 while an employee of
CMGI, Inc. He has served as our President and as one of our Directors since our
predecessor was incorporated as a separate entity in February 1997, and also
served as our Chief Executive Officer from February 1997 to April 1999. From
March 1995 to July 1996, Mr. Eisenberg served as Vice President of Information
Technology at MediaOne Group, Inc. (formerly Continental Cablevision), a cable
television provider. From September 1991 to March 1995, Mr. Eisenberg served as
the Director of Information Technology at New England Business Services, Inc.,
a provider of business forms and software for small businesses.
Kenneth W. Hale has served as our Chief Financial Officer since March 1997
and as our Treasurer and Secretary since March 1998. From May 1989 to September
1996, Mr. Hale served as Chief Financial Officer and Treasurer of
Media/Communications Partners, a telecommunications and media venture capital
firm, where he was responsible for overseeing the financial management of
multiple venture capital funds and related entities. From June 1980 to April
1989, Mr. Hale was a Senior Manager, Audit and Tax, at Ernst & Whinney, which
merged with Arthur Young & Co. to form Ernst & Young LLP. Mr. Hale is a
Certified Public Accountant.
Thomas W. Culver has served as our Vice President of Operations since June
1999. From June 1997 to May 1999, Mr. Culver worked as an independent
consultant. From September 1995 to June 1997, Mr. Culver served as Group
Manager of Information Technology at Paymentech, Inc., formerly known as First
USA Paymentech, a national credit card payment processor, where he was
responsible for systems development, database and systems administration and
operations. From October 1986 to September 1995, Mr. Culver was Chief
Information Officer of DMGT Corp., a credit card payment processor, where he
managed the information technology department.
45
<PAGE>
Barbara H. Fortier has served as our Vice President of Facilities since
June 1999 and served as our Vice President of Operations from July 1997 to June
1999. From November 1995 to June 1997, Ms. Fortier served as Senior Manager of
Communications at Staples, Inc., a national retailer of office supplies, where
she was responsible for all telecommunications services, local area networking
and wide area networking services. From January 1993 to November 1995, Ms.
Fortier served as Communications Manager at New England Business Services,
Inc., a provider of business forms and software for small businesses.
Peter C. Kirwan, Jr. has served as our Chief Technology Officer since July
1998. In the five years prior to joining NaviSite, Mr. Kirwan was an
entrepreneur in the commercial Internet field, founding two Internet service
providers. The first, Media Access Systems, Inc., was a New York based Internet
service provider focusing on high-speed business Internet connections and one
of the first companies to provide Web server hosting in the United States. The
second, Servercast Communications, L.L.C., focused exclusively on application
management and hosting and was acquired by NaviSite in July 1998.
Jonathan Rodin has served as our Vice President of Product Development
since February 1999. From October 1997 to July 1998, Mr. Rodin served as Vice
President of Engineering at ADSmart Corporation, a developer and marketer of
online ad sales and ad-serving solutions and a subsidiary of CMGI. From July
1991 to September 1997, Mr. Rodin served as the Vice President of Engineering
at FTP Software, Inc., an independent vendor of software and related
applications for the personal computer market.
Jay S. Seaton has served as our Vice President of Marketing since December
1997. From November 1996 to December 1997, Mr. Seaton served as Vice President
of Sales and Marketing at Radnet, Inc., a provider of application tools. From
June 1991 to November 1996, Mr. Seaton served as Director of Marketing and
Product Management at Banyan Systems Incorporated, a provider of distributed
networking software.
J. Andrew Sherman has served as our Vice President of Sales since August
1997. From March 1996 to August 1997, Mr. Sherman served as Vice President of
U.S. Sales for Fulcrum Technologies Inc., a software firm focused on providing
knowledge management capabilities to large enterprises on intranet platforms.
From September 1994 to March 1996, Mr. Sherman served as Regional Manager at
Sybase, Inc., a database and application development tools company. Prior to
1994, Mr. Sherman also held senior positions at Apple Computer, Inc. and MCI
WorldCom, Inc.
David S. Wetherell has served as a Director and Chairman of the Board of
Directors of NaviSite since February 1997. Mr. Wetherell has served as Chairman
of the Board, President, Chief Executive Officer and Secretary of CMGI, Inc.
since 1986 and as a member of CMG@Ventures I, LLC, a venture capital firm
subsidiary of CMGI, and President of CMG@Ventures, Inc., the managing partner
of CMG@Ventures I, LLC, since January 1995. He is also a managing member of
CMG@Ventures II, LLC, CMG@Ventures III, LLC and @Ventures Management, LLC,
which also are strategic investment and development venture capital
subsidiaries or CMGI affiliates. From 1982 until joining CMGI in 1986, Mr.
Wetherell was a co-founder and President of Softrend, Inc., a microcomputer
software publisher. Mr. Wetherell is also the founder of BookLink Technologies,
Inc., a CMGI subsidiary that was sold to America Online, Inc. in 1994. Mr.
Wetherell also serves as the Chairman of the Board of Directors of Engage
Technologies, Inc., a subsidiary of CMGI.
Craig D. Goldman has served as a Director of NaviSite since March 1998. Mr.
Goldman has served as President and Chief Executive Officer for Cyber
Consulting Services Corp., a technology consulting firm, since March 1996. From
October 1991 to March 1996, Mr. Goldman served with Chase Manhattan Bank as
Senior Vice President and Chief Information Officer. Mr. Goldman served with
Chase Manhattan Bank as Senior Vice President, Technology and Operations from
March 1988 to October 1991, after having started with Chase Manhattan in June
1985. Mr. Goldman also serves as a director of CMGI, Inc., Engage Technologies,
Inc. and PRT Group Inc.
46
<PAGE>
Andrew J. Hajducky III has served as a Director of NaviSite since February
1997. Mr. Hajducky has served as the Chief Financial Officer and Treasurer of
CMGI, Inc. since October 1995 and as a member of CMG@Ventures I, LLC, a venture
capital firm subsidiary of CMGI, since January 1995. He is also a managing
member of CMG@Ventures II, LLC, CMG@Ventures III, LLC and @Ventures Management,
LLC, which are strategic investment and development venture capital
subsidiaries or CMGI affiliates. From 1990 to October 1995, Mr. Hajducky was
the Entrepreneurial Services Partner of the Merger and Acquisition division of
the public accounting firm of Ernst & Young LLP. From 1983 through 1990, he
held various positions with Arthur Young & Co., which merged with Ernst &
Whinney to form Ernst & Young LLP. Previously, Mr. Hajducky was the Chief
Financial Officer of Mountain International Company/AccuTel, Inc., a
telecommunications and software company. Mr. Hajducky is a Certified Public
Accountant. Mr. Hajducky also serves as a director of Engage Technologies, Inc.
Stephen D.R. Moore has served as a Director of NaviSite since August 1999.
Mr. Moore has served as Chairman and Chief Executive Officer of Stream
International Inc., a provider of outsourced technical support services, since
January 1997. From April 1995 to September 1996, Mr. Moore served as President,
and from September 1996 to January 1997, he served as Chief Operating Officer
of Stream Holdings Inc., a software services firm. Prior to that time, Mr.
Moore served as President of Corporate Software, Inc., an outsource technical
support provider, from May 1992 to April 1995, after having served as its Vice
President, European Operations.
Each executive officer of NaviSite is elected by, and serves at the
discretion of, the board of directors. Each executive officer serves for a term
of one year. There are no family relationships among any of the directors or
executive officers of NaviSite.
Board Committees
NaviSite's board of directors has an audit committee and a compensation
committee. The audit committee determines our accounting policies and practices
and financial reporting and internal control structures, recommends to the
board of directors the appointment of independent auditors to audit our
financial statements each year and confers with the auditors and oversees our
officers for purposes of reviewing our system of internal accounting and
financial controls. The audit committee consists of Messrs. Goldman, Moore and
Hajducky.
The compensation committee of the board of directors is responsible for
determining salaries, incentives and other forms of compensation for officers
and other key employees of NaviSite and administers our incentive compensation
and benefit plans. The compensation committee consists of Messrs. Goldman,
Moore and Wetherell.
Director Compensation
We do not currently pay any cash compensation to members of our board for
attending meetings of the board of directors or committee meetings, but we do
reimburse directors for their reasonable travel expenses incurred in connection
with attending these meetings. Any board member who is not also an officer or
employee of NaviSite, any subsidiary of NaviSite or CMGI is entitled to non-
statutory stock options under our 1998 Director Stock Option Plan.
NaviSite has reserved for issuance 125,000 shares of common stock under the
1998 Director Stock Option Plan. As of August 31, 1999, options to purchase
75,000 shares of common stock were outstanding under the Director Stock Option
Plan. Options for 50,000 shares were granted with an exercise price of $0.34
per share, and options for the remaining 25,000 shares were granted at an
exercise price per share equal to the per share public offering price set forth
on the cover page of this prospectus. Effective as of October 8, 1999, no
further options will be granted under this plan. Commencing on December 28,
1998, the date that the Director Stock Option Plan was adopted, each non-
employee director of NaviSite was entitled to receive, upon the date of his or
her election, a non-statutory option to purchase 25,000 shares of common stock,
with the exception of Craig
47
<PAGE>
Goldman, who was granted an option to purchase 50,000 shares of common stock
pursuant to the terms of the Director Stock Option Plan. The exercise price for
each automatic grant is equal to the fair market value of the common stock at
the time of grant, and each option has a maximum term of ten years, subject to
earlier termination following the optionee's cessation of service on the board
of directors. Each automatic option grant vests and becomes exercisable with
respect to 5,000 shares of common stock on the first anniversary of the date of
the grant, with the exception of the grant to Mr. Goldman, whose option vested
and became exercisable as to 10,000 shares on the date of grant. The remaining
option grant will become exercisable with respect to an additional 5,000 shares
(10,000 shares with respect to Mr. Goldman) on the date of each annual
stockholders' meeting at which the option holder is re-elected as a director.
Effective as of October 8, 1999, we terminated the 1998 Director Stock
Option Plan and replaced it with the 1999 Stock Option Plan for Non-Employee
Directors, which was approved and adopted by our board of directors and our
stockholders in October 1999. A total of 250,000 shares of our common stock are
reserved for issuance under the new plan. Our directors who are not NaviSite
employees or otherwise affiliates, employees or designees of an institutional
or corporate investor that owns more than 5% of our outstanding common stock
are eligible to receive non-statutory stock options under the plan. Under the
new plan:
. we will grant an initial option to acquire 25,000 shares of our common
stock to each eligible director who is elected a director for the
first time after the plan is adopted on the date of that election;
. our board may, in its discretion, grant initial options to eligible
directors first elected to our board prior to approval of the new plan
by our stockholders on the date stockholder approval is obtained; and
. we also will grant an initial option to acquire 25,000 shares of our
common stock to each director who
. ceases being an affiliate, employee or designee of an
institutional or corporate investor that owns more than 5% of our
outstanding common stock and
. is not otherwise an employee of us or any of our subsidiaries but
. remains as a member of our board on the date the director's
affiliate, employee or designee status ceases.
We also will grant to eligible directors an additional option for the purchase
of 6,250 shares of our common stock on the first, and each subsequent,
anniversary of the grant of each director's initial option if the director is
still serving as one of our directors on that anniversary date. Our board has
discretion to increase to up to 100,000 shares the number of shares of common
stock subject to any initial option or additional option covering any vesting
period of up to 48 months that may be granted to an eligible director after the
date of the increase.
The per share exercise price of options granted under the new plan will be
equal to the closing price of our common stock on a national securities
exchange or as quoted on the Nasdaq National Market, the average of the closing
bid and asked prices of our common stock in the over-the-counter market or the
fair market value of our common stock as determined by our board. Each initial
option granted under the new plan will vest and become exercisable as to 1/48th
of the number of shares originally subject to the option on each monthly
anniversary date of the date of grant if the optionee is still serving as a
director on that monthly anniversary date. Each additional option granted under
the new plan will vest and become exercisable as to 1/12th of the number of
shares originally subject to the option on each monthly anniversary date of the
date of grant commencing on the 37th monthly anniversary date if the optionee
is still serving as a director on that monthly anniversary date. All
outstanding options granted under the new plan immediately become exercisable
in full upon a change in control of NaviSite.
48
<PAGE>
Executive Compensation
The following table sets forth all compensation earned during the fiscal
year ended July 31, 1999 by our Chief Executive Officer and our other four most
highly compensated executive officers whose total annual salary and bonuses
exceeded $100,000 in fiscal 1999. All numbers below relating to shares of CMGI
common stock underlying options to purchase CMGI common stock give effect to
two two-for-one stock splits of CMGI's common stock, effective January 11, 1999
and May 27, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------- ---------------------------
Securities All Other
Name and Principal Position Salary Bonus Company Underlying Options Compensation
- --------------------------- ---------- --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Joel B. Rosen(1) ....... $ 56,061 $ 25,000 NaviSite 534,166 $ --
Chief Executive CMGI 100,000
Officer
Robert B. Eisenberg(2).. 133,033 35,500 CMGI 32,000 2,563(3)
President
Barbara H. Fortier(4)... 110,000 20,000 CMGI 16,000 2,219(3)
Vice President,
Facilities
Jay S. Seaton........... 130,668 10,000 CMGI 8,000 1,754(3)
Vice President,
Marketing
J. Andrew Sherman....... 137,500 -- CMGI 16,000 140,520(5)
Vice President, Sales
</TABLE>
- --------
(1) Mr. Rosen was appointed Chief Executive Officer in April 1999.
(2) Mr. Eisenberg served as our Chief Executive Officer from February 1997 to
April 1999.
(3) Represents the amount of matching contributions made by NaviSite under the
CMGI 401(k) plan.
(4) Ms. Fortier served as our Vice President, Operations from July 1997 to June
1999.
(5) Includes $137,186 in commission payments and $3,334 of matching
contributions made by NaviSite under the CMGI 401(k) plan.
49
<PAGE>
Stock Option Grants
The following table sets forth information regarding options granted to the
executive officers named in the "Summary Compensation" table appearing above
during the fiscal year ended July 31, 1999. The exercise price per share of
each option is equal to the fair market value of the common stock of NaviSite
or CMGI, as applicable, on the date of grant as determined by the board of
directors. Potential realizable values set forth in the table are net of the
exercise price but before taxes associated with the exercise, are calculated
based on rules of the Securities and Exchange Commission and do not represent
an estimate or projection of future common stock prices. Actual gains, if any,
on stock option exercises are dependent on the future performance of NaviSite's
or CMGI's common stock, as applicable, overall stock market conditions and the
option-holders' continued employment with NaviSite through the vesting period.
The potential realizable values reflected in the table may not necessarily be
achieved. We have never granted any stock appreciation rights.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants (1)
------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Number of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Per Expiration ---------------------
Name Company Granted Fiscal Year Share Date 5% 10%
---- -------- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joel B. Rosen........... NaviSite 534,166 37.24% $ 7.40 4/20/04 $1,092,094 $2,413,241
CMGI 100,000 3.00 123.38 4/21/04 3,408,762 7,532,472
Robert B. Eisenberg..... CMGI 32,000 .97 10.00 9/14/03 88,410 195,363
Barbara H. Fortier...... CMGI 16,000 .48 10.00 9/14/03 44,205 97,682
Jay S. Seaton........... CMGI 8,000 .24 10.00 9/14/03 22,103 48,841
J. Andrew Sherman....... CMGI 16,000 .48 10.00 9/14/03 44,205 97,682
</TABLE>
- --------
(1) The term of each option is five years from the date of grant. With respect
to each option grant, 25% of the option vests and becomes exercisable
after the first year and the remaining 75% of the option vests and becomes
exercisable in equal monthly tranches over the 36 months thereafter. Share
numbers, prices and dollar values relating to CMGI's common stock give
effect to two two-for-one stock splits, effective January 11, 1999 and May
27, 1999.
50
<PAGE>
The following table sets forth information concerning options to purchase
common stock exercised by the executive officers named in the "Summary
Compensation Table" appearing above during the fiscal year ended July 31, 1999
and the number and value of unexercised options held as of July 31, 1999. None
of these executive officers exercised any options in fiscal 1999. Share numbers
and values set forth below relating to CMGI's common stock give effect to two
two-for-one stock splits, effective January 11, 1999 and May 27, 1999.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Options at July 31, 1999 July 31, 1999 (1)
------------------------- -------------------------
Name Company Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Joel B. Rosen........... NaviSite 0 534,166 $ -- $1,922,998
CMGI 0 100,000 -- --
Robert B. Eisenberg..... NaviSite 224,999 75,001 2,472,739 824,261
CMGI 0 32,000 -- 2,630,000
CMGI 6,667 45,001 599,197 4,044,465
NaviNet 174,999 0 286,998 --
Barbara H. Fortier...... NaviSite 37,500 37,500 411,984 411,984
CMGI 0 16,000 -- 1,315,000
NaviNet 23,437 0 38,437 --
Jay S. Seaton........... NaviSite 39,582 60,418 428,594 654,207
CMGI 0 8,000 -- 657,500
J. Andrew Sherman....... NaviSite 49,999 50,001 549,301 549,323
CMGI 0 16,000 -- 1,315,000
NaviNet 31,249 0 51,248 --
</TABLE>
- --------
(1) The value of unexercised in-the-money options is based upon the per share
fair market value of the underlying stock on the date of exercise, minus
the per share exercise price of the option, multiplied by the number of
shares of stock underlying the option. With respect to the NaviSite
options, the value of unexercised in-the-money options is based upon an
assumed initial public offering price of $11.00 per share, minus the
applicable option exercise price, multiplied by the number of shares of
common stock underlying the option. With respect to the CMGI options, the
value of unexercised in-the-money options is based on the difference
between $92.19, which was the closing price of CMGI common stock on July
31, 1999, and the applicable option exercise price. With respect to the
NaviNet options, the value of unexercised in-the-money options is based on
the difference between $1.65, which was the fair market value per share of
the NaviNet common stock on July 31, 1999, as determined by an independent
third-party valuation consultant, and the applicable option exercise
price.
Employment and Non-Competition Agreements
None of our executive officers has an employment agreement, although all of
our executive officers have entered into agreements that contain non-
disclosure, non-competition and non-solicitation restrictions and covenants,
including a provision prohibiting these officers from competing with NaviSite
during their employment with us and for a period of 12 months after termination
of their employment with us.
In addition, each executive officer is party to an offer letter with CMGI
which sets forth his or her annual salary, annual bonus eligibility, option
grants and other benefits. Joel Rosen's offer letter, dated April 14, 1999,
provides that if he is terminated without cause or there is a substantive
change in his job title, responsibilities or location of employment, or a
reduction in his compensation, following a change of control of either NaviSite
or CMGI, then his options to purchase 534,166 shares of NaviSite common stock
and 100,000 shares of CMGI common stock will immediately become fully vested
and exercisable. Upon completion of this offering, NaviSite is assuming the
obligations applicable to NaviSite under these offer letters.
51
<PAGE>
1998 Equity Incentive Plan
NaviSite has reserved 5,562,212 shares of common stock for issuance under
the NaviSite 1998 Equity Incentive Plan, as amended and restated as of October
8, 1999. Under the Equity Incentive Plan, NaviSite is authorized to grant
incentive stock options, non-statutory stock options, stock appreciation rights
and restricted stock awards to employees, directors and consultants of
NaviSite, or any affiliate, who is capable of contributing significantly to our
successful performance. In general, options granted pursuant to the 1998 Equity
Incentive Plan are exercisable within four years of the original grant date.
The board of directors or an appropriate committee of the board has the right,
at its discretion, to accelerate the vesting of any award or provide for cash
payments to the participants in exchange for their awards upon a change of
control of NaviSite. Options are not assignable or transferable except by will
or the laws of descent or distribution. Our board of directors may amend,
suspend or terminate the Equity Incentive Plan at any time, subject to any
required stockholder approval.
As of August 31, 1999, options to purchase an aggregate of 2,564,161 shares
of common stock at a weighted average exercise price of $3.03 per share were
outstanding under the Equity Incentive Plan. As of August 31, 1999, we had not
granted any stock appreciation rights or issued any shares of restricted stock
under the Equity Incentive Plan.
1999 Employee Stock Purchase Plan
The 1999 Employee Stock Purchase Plan was approved and adopted by our board
of directors and our stockholders in October 1999, to be effective upon
completion of this offering. The 1999 Employee Stock Purchase Plan provides for
the issuance of a maximum of 50,000 shares of our common stock.
The 1999 Employee Stock Purchase Plan will be administered by the
compensation committee. All employees of NaviSite who have been employed by us
for at least six months and whose customary employment is for more than 20
hours per week and for more than five months in any calendar year are eligible
to participate in the 1999 Employee Stock Purchase Plan. Employees who would
own five percent or more of the total combined voting power or value of
NaviSite's stock immediately after having subscribed for shares under the 1999
Employee Stock Purchase Plan may not participate in the 1999 Employee Stock
Purchase Plan. To participate in the 1999 Employee Stock Purchase Plan, an
employee must authorize us to deduct an amount (not less than one percent nor
more than 10% of a participant's total cash compensation) from his or her pay
during each three-month payment period, with the exception of the first payment
period, which will commence upon the closing of this offering and end on
February 29, 2000. At the end of each payment period, except for the first
payment period following this offering, the participant's funds are used to
purchase shares of our common stock at a price equal to 85% of the lesser of
the last reported sale price of the common stock on the first or last business
day of the payment period. With respect to the first payment period following
this offering, the price will be equal to 85% of the lesser of the per share
public offering price set forth on the cover page of this prospectus or the
last reported sale price of the common stock on the last business day of the
payment period.
401(k) Plan
NaviSite is a participating employer in the 401(k) defined contribution
profit sharing savings and retirement plan sponsored by CMGI. All NaviSite
employees who are at least 21 years of age and have satisfied the necessary
service eligibility requirements, except for nonresident aliens with no United
States source of income, are eligible to participate in the plan. Under our
401(k) plan, a participant employee may elect to reduce his or her current
compensation by up to the lower of 15% or the statutorily prescribed limit
($10,000 in 1999) and have the amount of the reduction contributed to the plan
on the employee's behalf as salary deferral contributions. The 401(k) plan
permits additional discretionary matching contributions by us with respect to
our employees' pre-tax contributions up to the first six percent of each
employee's salary contributed to the plan. The 401(k) plan also permits us to
make discretionary profit sharing contributions to the plan on behalf of our
employees. All contributions to the 401(k) plan by or on behalf of employees
are subject to aggregate annual limits prescribed by the Internal Revenue
Service.
52
<PAGE>
Deferred Compensation Plan
A Deferred Compensation Plan was approved and adopted by our board of
directors in October 1999, to be effective upon completion of this offering.
Under the terms of the deferred compensation plan, NaviSite employees who are
selected by our board of directors (as well as certain of our employees who
previously participated in a deferred compensation plan sponsored by CMGI) will
be able to elect to defer a portion of their compensation for the following
calendar year. Participants in the plan will be able to defer up to 25% of
their salary and 100% of their bonus compensation, which amounts will be paid
out at a later date at the participant's election. NaviSite also may make
discretionary contributions to a participant's account, to which the
participant generally will become entitled after five years of service with us.
NaviSite will maintain a bookkeeping account to track deferred amounts, which
amounts will be credited with gains or losses based on the performance of
deemed investment alternatives made available to participants under the plan.
Compensation Committee Interlocks and Insider Participation
Prior to this offering, we had no separate compensation committee or other
board committee performing equivalent functions. These functions were performed
by our board of directors, which consisted of Joel B. Rosen and Robert B.
Eisenberg, our Chief Executive Officer and President, respectively, David S.
Wetherell, Chairman of the Board, President, Chief Executive Officer and
Secretary of CMGI, Craig D. Goldman, a director of CMGI, and Andrew J. Hajducky
III, Chief Financial Officer and Treasurer of CMGI.
53
<PAGE>
CERTAIN TRANSACTIONS
Relationship and Transactions between NaviSite and CMGI, Inc.
Our predecessor was incorporated in February 1997 as a wholly owned
subsidiary of CMGI. As of August 31, 1999, CMGI owned approximately 89.6% of
our common stock, including shares of convertible preferred stock held by CMGI
indirectly through our predecessor, which merged with and into CMGI effective
as of October 1, 1999. CMGI will directly own approximately 72.1% of our common
stock upon completion of this offering.
CMGI has the power to elect our entire board of directors and to approve or
disapprove any corporate transactions or other matters submitted to our
stockholders for approval, including the approval of mergers or other
significant corporate transactions. CMGI may exercise its voting power by
written consent, without convening a meeting of the stockholders, meaning that
CMGI will be able to effect a sale or merger of NaviSite without prior notice
to, or the consent of, our other stockholders. CMGI also holds a majority
equity ownership position in many of our customers.
NaviSite and CMGI have entered into or, upon or prior to completion of this
offering, will enter into the present and prospective arrangements and
transactions described below. These agreements were or will be negotiated
between CMGI, as a corporate parent, and NaviSite, its subsidiary, and
therefore are not the result of negotiations between independent parties.
NaviSite and CMGI intend that these agreements and the transactions provided
for in these agreements, taken as a whole, accommodate their respective
interests in a manner that is fair to both NaviSite and CMGI. However, because
of the complex nature of the various relationships among NaviSite, CMGI and
various CMGI affiliates, we cannot assure you that each of the agreements
described below, or the transactions provided for in these agreements, were or
will be effected on terms at least as favorable to NaviSite as NaviSite could
have obtained from unaffiliated third parties.
NaviSite and CMGI or its affiliates may enter into additional or modified
arrangements and transactions in the future. NaviSite, CMGI or its affiliates,
as the case may be, will negotiate the terms of such arrangements and
transactions. Upon or prior to completion of this offering, NaviSite expects to
adopt a policy that all future arrangements between NaviSite and CMGI or its
affiliates, other than routine commercial transactions entered into in the
ordinary course of business, will be on terms that NaviSite believes are no
less favorable to it than the terms NaviSite believes would be available from
unaffiliated parties and must be approved by a majority of NaviSite's directors
who are not employees of CMGI (even though such directors may be less than a
quorum).
The following is a summary of the material arrangements and transactions
between NaviSite and CMGI or its affiliates.
Leases, Construction Contracts and CMGI Guarantees
In connection with our execution of three of our real property leases, CMGI
has provided our landlords with guarantees of all of our obligations under the
leases. In connection with the execution of the lease for our Scotts Valley,
California facility, CMGI guaranteed the full performance of all of our
obligations through the expiration of the lease term. In connection with the
execution of the lease for our new Andover, Massachusetts facility, CMGI
executed an unconditional guaranty of the lease and an accompanying letter of
credit to ensure the full and punctual payment, as well as performance of all
of our obligations, under the lease. CMGI will be released from the Andover
guaranty upon the occurrence of the earlier of the closing of this offering or
the date on which we occupy the premises and begin to pay rent. CMGI also
executed an unconditional and irrevocable guaranty in connection with the
execution of the lease for our new facility in San Jose, California. CMGI will
be released from the San Jose lease guaranty within 15 days of the later of the
closing of this offering and the landlord's receipt of a letter of credit, in
the form specified in the guaranty, in the amount of approximately $2.4
million.
54
<PAGE>
We also currently are finalizing construction contracts in connection with
our new facilities in Andover, Massachusetts and San Jose, California. If we
execute either or both of these contracts prior to the completion of this
offering, CMGI will be required to execute a guarantee on our behalf with
respect to each executed contract. Each contract provides that CMGI will be
released from any related guarantee upon the completion of this offering. In
connection with the construction contract for the new Andover, Massachusetts
facility, we will be required, upon CMGI's release from its guarantee or, if
the contract is executed after the completion of this offering, upon execution
of the contract, to obtain a letter of credit in the amount of the remaining
balance due under the contract, which is currently estimated to be less than
$15 million.
In addition, certain of the equipment that we use or provide to our
customers for their use in connection with our services is provided under
leases executed or guaranteed by CMGI. If CMGI discontinues this practice,
which it could do at any time, we or our customers would have to obtain this
equipment directly, and we cannot assure you that we or our customers could do
so on similar financial terms.
Debt Conversion
We have issued a secured convertible demand note to CMGI in exchange for
the cancellation of all intercompany debt incurred by us to CMGI subsequent to
the conversion of CMGI debt into Series A convertible preferred stock and prior
to April 30, 1999. This note also provides for additional advances by CMGI to
us after April 30, 1999. CMGI may elect to convert amounts payable under the
note into Series B convertible preferred stock at any time. Additional
intercompany debt incurred after April 30, 1999 accrues interest at a rate of
seven percent per year, compounded monthly until the day CMGI elects to convert
the debt into shares of Series B convertible preferred stock. The amount of
each borrowing represented by the note is convertible from time to time into
the number of shares of Series B convertible preferred stock equal to one-tenth
of the quotient of:
. the aggregate amount of principal and interest to be so converted,
divided by
. the applicable conversion price for that fiscal quarter.
The conversion price applicable to advances made in any fiscal quarter,
except advances made in the fiscal quarter during which a qualified initial
public offering occurs and advances converted into Series B convertible
preferred stock in the same fiscal quarter in which they were made, is
determined by dividing our total enterprise value as of the fiscal quarter end,
as determined in good faith by our board of directors, by the number of shares
of common stock outstanding on a fully diluted, as-if-converted basis. Each
share of Series B convertible preferred stock issued and outstanding will
convert into ten shares of common stock upon the completion of this offering.
Under this note, intercompany debt in the aggregate amount of approximately
$10,761,000, representing $5,348,000 advanced during the quarter ended January
31, 1999 and an additional $5,413,000 advanced during the quarter ended April
30, 1999, in each case including interest accrued during the applicable fiscal
quarter, was converted into 490,332 shares of Series B convertible preferred
stock (based upon applicable conversion prices of $12.74 and $76.68,
respectively). Effective June 4, 1999, CMGI elected to convert intercompany
debt in the aggregate amount of approximately $3,952,000, representing funds
advanced subsequent to the quarter ended April 30, 1999, into 51,527 shares of
Series B convertible preferred stock (based upon a conversion price of $76.68).
Under the terms of the note, because CMGI elected to convert these advances
prior to the end of the fiscal quarter in which the advances were made, the
applicable conversion price was the conversion price in effect for the
immediately preceding fiscal quarter. Immediately prior to the completion of
this offering, CMGI will convert intercompany debt in the aggregate amount of
approximately $12,257,000, representing funds advanced subsequent to the
quarter ended July 31, 1999, into 111,424 shares of Series B convertible
preferred stock (based upon a conversion price of $110, assuming an initial
public offering price of $11.00 per share). Upon completion of this offering,
the 653,283 shares of Series B convertible preferred stock issued and
outstanding will convert into 6,532,830 shares of common stock. We do not
expect to borrow funds from CMGI after completion of this offering.
55
<PAGE>
This note is secured by all of our intellectual property and other assets,
whether now owned or hereafter acquired, under the terms of an intellectual
property security agreement and a security agreement between us and CMGI.
Facilities and Administrative Support Agreement
Upon completion of this offering, we will enter into a facilities and
administrative support agreement with CMGI under which CMGI will continue to
make available to us space at its headquarters in Andover, Massachusetts and
will provide various services to us, including: accounting, systems and related
services; rent and facilities; human resources and benefits; and Internet
marketing and business development.
Under this agreement, CMGI also will agree to make available to us at least
17,800 square feet of space at its headquarters until completion of our new
Andover, Massachusetts facility. We intend to relocate our executive offices to
our new facility upon completion of that facility.
The initial term of this agreement will be one year from the date of the
agreement, with automatic renewals at the end of the initial term and each
renewal term for successive one-year periods. Either party will be permitted to
terminate the facilities and administrative support agreement upon prior
written notice. The facilities and administrative support agreement will
automatically terminate upon the date CMGI owns less than 50% of our
outstanding common stock.
The fees payable by us for the availability of space and other services are
typically determined through an allocation of CMGI's costs based upon the
proportion of our employee headcount to the total headcount of CMGI and other
CMGI affiliates located in the same facility or using the same services. Under
the facilities and administrative support agreement, we will pay CMGI a monthly
fee reflecting the cost of the services provided by CMGI based on the total
number of our employees and consultants on the last day of that month.
In fiscal 1997, fiscal 1998 and fiscal 1999, we paid CMGI $48,000, $289,000
and $1,346,000, respectively, for services similar to those to be provided
under the facilities and administrative support agreement.
Tax Allocation Agreement
Upon completion of this offering, we will enter into a tax allocation
agreement with CMGI to allocate responsibilities, liabilities and benefits
relating to taxes. We will be required to pay our share of income taxes shown
as due on any consolidated, combined or unitary tax returns filed by CMGI for
tax periods ending on or before or including the date as of which we will no
longer be a member of CMGI's group for federal, state or local tax purposes, as
the case may be. CMGI will indemnify us against liability for all taxes in
respect of consolidated, combined or unitary tax returns for periods as to
which CMGI is filing group returns which include us. Accordingly, any
redetermined tax liabilities for those periods will be the responsibility of
CMGI, and any refunds or credits of taxes attributable to us or our
subsidiaries in respect of consolidated, combined or unitary tax returns for
those periods will be for the account of CMGI. We will be responsible for
filing any separate tax returns for any taxable period and will be responsible
for any tax liabilities, and entitled to any refunds or credits of taxes, with
respect to separately filed tax returns. We will indemnify CMGI against any tax
liability with respect to separately filed tax returns.
Neither CMGI nor us will have any obligation to make any payment to the
other party for the use of the other party's tax attributes, such as net
operating losses. However, if one party realizes a windfall tax benefit because
of an adjustment to items on the other party's tax return, the party that
realizes the windfall tax benefit will be required to pay to the other party
the actual incremental tax savings it has realized. For example, if an expense
deducted by CMGI for a period prior to the closing date were disallowed and
required to be capitalized by us for a period after the closing date, thereby
generating future depreciation deductions to us, we would be required to pay to
CMGI any incremental tax savings as a result of the depreciation deductions
when those tax savings are actually realized by us.
56
<PAGE>
Each of NaviSite and CMGI has control of any audit, appeal, litigation or
settlement of any issue raised with respect to a tax return for which it has
filing responsibility. Payments of claims under the agreement must be made
within 30 days of the date that a written demand for the claim is delivered.
Interest accrues on payments that are not made within 10 days of the final due
date at the rate applicable to underpayments of the applicable tax. Any dispute
concerning the calculation or basis of determination of any payment provided
under the tax allocation agreement will be resolved by a law firm or "big five"
accounting firm selected and paid for jointly by the parties.
Investor Rights Agreement
Upon completion of this offering, we will enter into an investor rights
agreement with CMGI under which we will grant CMGI registration rights and
rights to purchase shares to maintain its majority ownership. Under this
agreement, CMGI and its assignees will have the right to demand, on up to two
occasions, that NaviSite register the sale of all or part of their shares of
our common stock having an aggregate value of at least $10.0 million under the
Securities Act. In addition, at any time after we become eligible to file a
registration statement on Form S-3 under the Securities Act, CMGI and its
assignees will have the right to request, on up to five occasions, that we
effect a registration of their shares of our common stock having an aggregate
value of at least $2.5 million on Form S-3. CMGI and its assignees also are
entitled to include shares of our common stock in a registered offering by us
of our securities for our own account, subject to the underwriters' right to
reduce the number of included shares. We will pay all costs associated with the
registration of shares by us pursuant to this agreement, other than
underwriting discounts and commissions and various other expenses.
Also under this agreement, until such time as CMGI, or any permitted
transferee, owns less than a majority of voting power of the outstanding shares
of our capital stock, we will permit CMGI, or the transferee, to purchase a
portion of any shares that we may in the future issue so that CMGI or the
transferee will maintain its majority ownership position. Any such purchases
will be at the same price as is paid by third parties for the shares. This
right is transferable by CMGI to any party that acquires directly from CMGI
shares of common stock representing at least a majority of the outstanding
shares of our common stock.
Other Transactions with CMGI and its Affiliates
We have agreements with numerous CMGI affiliates under which we provide
these affiliates with Web site and Internet application hosting services,
together with enhanced server management for both Web sites and Internet
applications and specialized application management services. We also rent
sophisticated software applications to a number of these affiliates and provide
consulting services to each of these affiliates on an as-needed basis.
Our existing service agreements with CMGI affiliates are routine commercial
transactions entered into in the ordinary course of our business. We anticipate
that we will continue to enter into routine commercial transactions with CMGI
and its affiliates in the future. Currently, however, we have no long-term
contracts, right-of-first-refusal arrangements, business opportunity allocation
agreements or other material contractual arrangements or understandings with
CMGI or any of its affiliates regarding the continued sale of our services to
CMGI or its affiliates.
In general, in pricing the services provided to CMGI and its affiliates, we
have: negotiated the services and levels of service to be provided; calculated
the price of the services at those service levels based on our then-current,
standard prices; and discounted these prices by 10%. This pricing policy is not
dictated by or provided for in any contractual arrangement. The discounts we
provide to CMGI and its affiliates, which also are available to industry
partners and other parties engaged in co-marketing or referral arrangements
with us, are afforded to CMGI and, at CMGI's direction, its affiliates because
of CMGI's customer referral relationship with us. Although there are no
agreements to this effect between us and CMGI, we expect both our customer
referral relationship with CMGI and the discounted pricing for services
provided to CMGI and its affiliates to continue after completion of this
offering.
57
<PAGE>
The chart set forth below lists the CMGI affiliates from which we derived
revenue in excess of $60,000 in each of the last three fiscal years and the
revenue derived from these CMGI affiliates for the fiscal years ended July 31,
1997, 1998 and 1999, as applicable. Our total revenue was $3,361,000,
$4,029,000 and $10,519,000, for the fiscal years ended July 31, 1997, 1998 and
1999, respectively.
<TABLE>
<CAPTION>
Name of affiliate Fiscal 1997(1) Fiscal 1998(1) Fiscal 1999(1)
----------------- -------------- -------------- --------------
<S> <C> <C> <C>
Planet Direct Corporation......... $1,545,948 $1,593,618 $2,307,534
Engage Technologies, Inc.......... 949,046 751,714 1,721,736
ADSmart Corporation............... 456,673 430,248 476,787
InfoMation........................ 158,059 350,312 397,658
Ancestry.com, Inc................. -- -- 535,940
ZineZone Corp.(2)................. -- 117,946 231,218
Vicinity Corporation.............. 236,004 137,226 204,535
Raging Bull, Inc.................. -- -- 288,711
ThingWorld.com.................... -- 66,080 178,190
CMG Direct Corporation(3)......... -- 191,300 115,280
Furniture.com, Inc................ -- -- 213,684
Universal Learning Technology..... -- -- 104,316
MotherNature.com, Inc............. -- -- 88,985
PlanetAll.com, Inc.(4)............ -- 182,495 --
NextMonet.com, Inc. .............. -- -- 63,435
</TABLE>
- --------
(1) Dashes indicate periods in which the listed customers were not CMGI
affiliates, but do not indicate that no revenues were derived in those
periods.
(2) Known as Password Internet Publishing Corp. until February 1999.
(3) All of the issued and outstanding capital stock of CMG Direct Corporation
was sold by CMGI to Marketing Services Group, Inc. in May 1999. CMGI holds
approximately 18% of the outstanding common stock of Marketing Services
Group.
(4) Effective as of August 1998, PlanetAll is no longer a CMGI affiliate.
We also have provided services to CMGI and other CMGI affiliates, including
Lycos, Inc., Nascent Technologies, Inc., NaviNet, Inc., On-Demand Solutions,
Inc., SalesLink Corporation and TicketsLive Corporation. Aggregate sales to
CMGI and these affiliates totaled $15,750, $50,560 and $130,218 for fiscal
1997, fiscal 1998 and fiscal 1999, respectively.
In addition, subsequent to the end of fiscal 1999, CMGI acquired a
controlling interest in AltaVista Company, one of our customers. Our aggregate
sales to AltaVista in fiscal 1999 were $336,625.
Servercast Communications, L.L.C. Acquisition
Term Notes
In connection with our acquisition in July 1998 of Servercast, we issued
four term notes to the members of Servercast in the aggregate principal amount
of $1.0 million, payable on or before January 2, 2000, in exchange for all of
the membership interests in Servercast. CMGI has guaranteed the payment of each
of these term notes. CMGI's guarantee will terminate upon the earliest to occur
of (i) the closing of this offering, (ii) the sale of NaviSite to an acquiror
with a net worth of at least $15 million and (iii) the payment by us of all
amounts owed under the term notes.
One of these term notes, in the principal amount of $279,100, was issued to
Peter C. Kirwan, Jr., our Chief Technology Officer, in exchange for his 27.91%
membership interest in Servercast. The note bears interest at the rate of 5.5%
per year (calculated on the basis of a 365-day year and the actual number of
days elapsed). The note provides that accrued interest will be paid in three
equal installments of $7,675.25 each, to be paid on January 2, 1999, July 2,
1999 and January 2, 2000. The first and second scheduled payments of
58
<PAGE>
$7,675.25 each were made in full on January 2, 1999 and July 2, 1999,
respectively. Mr. Kirwan has agreed that payment of accrued interest or
principal may be offset by claims for indemnification that we may have pursuant
to the terms of the related purchase agreement and that 20% of any principal
amount paid prior to July 1, 2000 shall be delivered into an escrow fund for
the purpose of funding Mr. Kirwan's indemnification obligations to us.
Bonus Agreement
In connection with our acquisition of Servercast, we also entered into a
bonus agreement dated as of July 1, 1998 with Mr. Kirwan. The bonus agreement
provides that Mr. Kirwan will receive an incentive bonus payment if established
targets are met relating to the revenues and operating losses of Servercast for
the one-year period ended July 1, 1999. The maximum amount which Mr. Kirwan
could receive pursuant to the bonus agreement is $231,187. Pursuant to the
terms of the bonus agreement and the related purchase agreement, 20% of any
bonus amount due to Mr. Kirwan as of July 1, 1999 shall be delivered into the
escrow fund described above. In order to be eligible for the incentive bonus
and the return of any escrowed amount, Mr. Kirwan must remain an employee of
NaviSite through July 1, 1999 and July 1, 2000, respectively, unless he either
terminates his employment with just cause or is terminated by us without cause,
in which case he remains entitled to any bonus payments or escrowed amounts
due. Mr. Kirwan remains an employee of NaviSite, and we are currently in the
process of comparing actual revenues and operating losses against the targets
established in the bonus agreement to determine any bonus payment due to Mr.
Kirwan as of July 1, 1999.
Pursuant to the bonus agreement, we also granted Mr. Kirwan non-statutory
stock options to purchase 50,000 shares of our common stock, at an exercise
price of $0.93 per share. One fourth, or 12,500, of the options vested and
became fully exercisable on July 1, 1999, and the remainder vest ratably at the
end of each month for 36 months, provided that Mr. Kirwan continues to be
employed by us.
59
<PAGE>
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by the footnotes below,
we believe, based on the information furnished to us, that the persons and
entities named in the tables below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to applicable community property laws. Percentage of outstanding shares
of NaviSite common stock is based on 20,816,173 shares of common stock
outstanding as of August 31, 1999, and 27,430,413 shares of common stock
outstanding upon completion of this offering. Percentage of outstanding shares
of CMGI common stock is based on 114,582,987 shares of common stock outstanding
as of August 26, 1999. In computing the number of shares of common stock
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of August 31, 1999 are
deemed outstanding. These shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
Principal Stockholders
The following table sets forth information with respect to the beneficial
ownership of our common stock by our principal stockholders as of August 31,
1999 and as adjusted to reflect the sale of the shares of common stock offered
in this offering. The outstanding shares of common stock shown as held by CMGI
as of August 31, 1999 include shares issued upon completion of the corporate
reorganization of NaviSite Internet Services Corporation, effective as of
October 1, 1999, and conversion of convertible preferred stock held by CMGI as
of August 31, 1999. The percentage ownership of CMGI after this offering
reflects the issuance to CMGI of an aggregate of 1,114,240 additional shares of
common stock upon the conversion of outstanding Series B convertible preferred
stock.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares
Number of Shares -----------------
of Common Stock Before After
Name and Address of Beneficial Owner Beneficially Owned Offering Offering
- ------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
CMGI, Inc. ............................... 18,658,120 89.6% 72.1%
100 Brickstone Square
Andover, Massachusetts 01810
Dell Computer Corporation ................ 1,095,472(1) 5.3 4.0
One Dell Way
Round Rock, Texas 78682
Microsoft Corporation .................... 993,243 4.8% 3.6%
1 Microsoft Way
Redmond, Washington 98052-8300
</TABLE>
- --------
(1) Consists of shares held of record by Dell USA L.P., a subsidiary of Dell
Computer Corporation.
60
<PAGE>
Management
The tables below set forth information known to us regarding both the
beneficial ownership of our common stock as of August 31, 1999 and as adjusted
to reflect the sale of the shares of common stock in this offering and the
beneficial ownership of common stock of CMGI as of August 31, 1999 by:
. each of our directors;
. each of our executive officers named in the "Summary Compensation
Table" appearing above; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed below
is c/o NaviSite, Inc., 100 Brickstone Square, Andover, Massachusetts 01810. The
columns labeled "Number of Shares Subject to Options" in each of the tables
below reflect the number of shares issuable upon the exercise of options
exercisable within 60 days of August 31, 1999. Asterisks represent beneficial
ownership of less than one percent of the common stock. Percentage of
outstanding shares after offering for NaviSite reflects the issuance to CMGI of
an aggregate of 1,114,240 additional shares of common stock upon the conversion
of outstanding Series B convertible preferred stock. In addition, the CMGI
share numbers reflect two two-for-one stock splits, effective January 11, 1999
and May 27, 1999.
<TABLE>
<CAPTION>
NaviSite Common Stock
----------------------------------------------------
Number of
Shares Percentage of Percentage of
Subject Outstanding Outstanding
Number of to Shares Before Shares After
Name Shares Options Offering Offering
---- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Joel B. Rosen............ 0 0 * *
Robert B. Eisenberg...... 0 243,749 1.1% *
Barbara H. Fortier....... 0 42,187 * *
Jay S. Seaton............ 0 45,833 * *
J. Andrew Sherman........ 0 56,250 * *
David S. Wetherell....... 18,658,120 (1) 0 89.6 72.1%
Craig D. Goldman......... 0 10,000 * *
Andrew J. Hajducky III... 18,658,120 (1) 0 89.6 72.1
Stephen D.R. Moore....... 0 0 * *
All current directors and
executive officers as a
group (13 persons)..... 18,658,120 (1) 474,581 89.9% 72.5%
</TABLE>
<TABLE>
<CAPTION>
CMGI Common Stock
-------------------------------------
Number of
Shares
Subject Percentage of
Number of to Common
Name Shares Options Stock
---- --------- --------- -------------
<S> <C> <C> <C>
Joel B. Rosen........................... 0 0 *
Robert B. Eisenberg..................... 1,142 20,335 *
Barbara H. Fortier...................... 548 4,333 *
Jay S. Seaton........................... 0 2,167 *
J. Andrew Sherman....................... 484 4,333 *
David S. Wetherell...................... 8,466,336 (2) 2,305,888 9.2%
Craig D. Goldman........................ 120,000 75,200 *
Andrew J. Hajducky III.................. 20,752 106,997 *
Stephen D.R. Moore...................... 0 0 *
All current directors and executive
officers as a group (13 persons)...... 8,610,144 (2) 2,526,836 9.5%
</TABLE>
- --------
(1) Consists of shares owned by CMGI on an as-converted basis. Messrs.
Wetherell and Hajducky disclaim beneficial ownership of all 18,658,120
shares owned by CMGI.
(2) Includes 1,701,732 shares held in trust for the benefit of Mr. Wetherell's
minor children and 23,372 shares held by Mr. Wetherell and his wife as
trustees for the David S. Wetherell Charitable Trusts. Mr. Wetherell
disclaims beneficial ownership of the 1,725,104 shares held in trust for
his children and as trustee for the charitable trust.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and various provisions of
our revised certificate of incorporation and our revised by-laws is a summary.
Statements contained in this prospectus relating to such provisions are not
necessarily complete, and reference is made to the revised certificate of
incorporation and the revised by-laws that will become effective upon the
completion of this offering, copies of which have been filed with the
Securities and Exchange Commission as exhibits to our registration statement of
which this prospectus constitutes a part.
Upon completion of this offering, our authorized capital stock will consist
of 150,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share.
Common Stock
As of August 31, 1999, there were 20,816,173 shares of common stock
outstanding, held of record by four stockholders. Upon completion of this
offering, there will be 27,403,413 shares of common stock outstanding. In
addition, as of August 31, 1999, there were outstanding stock options for the
purchase of a total of 2,639,161 shares of common stock. Shares of common stock
have the following rights, preferences and privileges:
Voting Rights. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of NaviSite's stockholders, including
the election of directors. There are no cumulative voting rights, and therefore
the holders of a plurality of the shares of common stock voting for the
election of directors may elect all of NaviSite's directors standing for
election.
Dividends. Holders of common stock are entitled to receive dividends at the
same rate if and when dividends are declared by NaviSite's board of directors
out of assets legally available for the payment of dividends, subject to
preferential rights of any outstanding shares of preferred stock.
Liquidation. In the event of a liquidation, dissolution or winding up of
the affairs of NaviSite, whether voluntary or involuntary, after payment of the
debts and other liabilities of NaviSite and making provision for the holders of
any outstanding shares of preferred stock, the remaining assets of NaviSite
will be distributed ratably among the holders of shares of common stock.
Rights and Preferences. The common stock has no preemptive, redemption,
conversion or subscription rights. The rights, powers, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock that we may designate and issue in the future.
Fully Paid and Nonassessable. All outstanding shares of common stock are,
and the shares of common stock to be issued pursuant to this offering will be,
fully paid and nonassessable.
Preferred Stock
Upon completion of this offering, it is expected that all outstanding
shares of preferred stock will be converted into common stock. Pursuant to the
terms of our revised certificate of incorporation, the board of directors will
be authorized, subject to any limitations prescribed by Delaware law, without
further stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock, in one or more classes or series, and to
fix the voting powers, full or limited, or no voting powers, and the
distinctive designations, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions of
these rights, of the shares of each such class or series. The board of
directors is authorized to issue preferred stock with voting, conversion and
other rights and preferences that could adversely affect the voting power or
other rights of the holders of common stock.
62
<PAGE>
We have no current plans to issue any preferred stock. However, the
issuance of preferred stock or of rights to purchase preferred stock could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of our
outstanding common stock.
Registration Rights
Under the terms of the Series C and the Series D convertible preferred
stock purchase agreements entered into between us and each of the Series C
stockholder and the Series D stockholder, respectively, effective upon
completion of this offering, assuming the conversion of the preferred stock
held by the Series C stockholder and the Series D stockholder into common
stock, these stockholders, together with their permitted assignees,
collectively the holders of an aggregate of 2,088,715 shares of our common
stock, will have the right to register some or all of their shares under the
Securities Act under specified conditions. At any time after the six-month
anniversary of the closing of this offering, the holders of at least 50% of the
Series C shares or at least 50% of the Series D shares, as applicable, are
entitled to demand that we file a registration statement under the Securities
Act covering the registration of some or all of their shares, subject to
specified limitations. Under these demand registration rights, we are only
obligated to effect two registrations for each of the Series C stockholder,
together with its permitted assignees, and the Series D stockholder, together
with its permitted assignees. In addition, pursuant to the terms of the Series
C convertible preferred stock purchase agreement and the Series D convertible
preferred stock purchase agreement, after the completion of this offering, the
Series C and Series D stockholders will have unlimited incidental registration
rights in the event that we propose to register any shares of common stock
under the Securities Act, either for our own account or for the account of
other security holders. The Series C and Series D stockholders having
incidental registration rights are entitled to receive notice of any such
registration and are entitled to include their shares in the registration,
subject to specified limitations.
In addition, at any time after the earlier of the one-year anniversary of
the closing of this offering or such time as we become eligible to file a
registration statement on Form S-3, the holders of at least 50% of the Series C
shares or at least 50% of the Series D shares, as applicable, are entitled to
require us to file a registration statement on Form S-3 covering their shares
of common stock. We will not be obligated to effect more than two Form S-3
registrations on behalf of either the Series C stockholder or the Series D
stockholder. These registration rights are subject to customary conditions and
limitations, including the right of the underwriters of an offering to limit
the number of shares of common stock held by security holders with registration
rights to be included in that registration. We also may defer a request for
registration for a period of not more than 90 days, subject to specified
conditions, if our board of directors determines that the requested
registration would be materially detrimental to us and our stockholders. We
generally are required to bear all of the expenses of all of the registrations
effected under the convertible preferred stock purchase agreements, excluding
underwriting discounts and commissions.
The registration of any of the shares of common stock held by stockholders
with registration rights would result in these shares becoming freely tradeable
without restriction under the Securities Act immediately upon effectiveness of
that registration statement. Information regarding the registration rights of
CMGI is included in this prospectus under the heading "Certain Transactions--
Relationship and Transactions Between NaviSite and CMGI, Inc.--Investor Rights
Agreement."
Participation Rights
Under the terms of the Series C convertible preferred stock purchase
agreement and the Series D convertible preferred stock purchase agreement
entered into between us and each of the Series C stockholder and the Series D
stockholder, respectively, we agreed that, in connection with certain
underwritten public offerings of our common stock, which would include this
offering assuming the conversion of the preferred stock held by the Series C
and the Series D stockholders into common stock, we would use all commercially
reasonable efforts to require that the underwriters offer to each of the Series
C stockholder and the Series D stockholder shares of the common stock to be
sold in the offering. Under these agreements, each of the Series C stockholder
and the Series D stockholder would be permitted to purchase, at the gross price
per share
63
<PAGE>
negotiated by us with the underwriters of the offering as reflected in the
final prospectus, up to an aggregate of 0.5% of the outstanding shares of our
common stock on a fully diluted basis, after giving effect to the sale of
shares of common stock in the offering. In connection with an offering to which
these participation rights are applicable, we agreed to deliver or cause to be
delivered a copy of the preliminary prospectus for the offering to both the
Series C stockholder and the Series D stockholder simultaneously with the
distribution of same to the public at large by the underwriters. The Series C
stockholder and the Series D stockholder each then are entitled to exercise its
respective right of participation by delivering written notice to us not later
than five business days prior to the pricing of the offering. The underwriters
of the offering then are entitled to reduce the number of shares of common
stock to be offered to the Series C stockholder and the Series D stockholder to
the extent deemed necessary in the underwriters' reasonable judgment to ensure
the success of such offering or to comply with applicable rules and
regulations. Because, notwithstanding our commercially reasonable efforts, it
is not possible under applicable law to sell shares to the Series C stockholder
and Series D stockholders in this offering, the Series C stockholder and the
Series D stockholder have waived their respective rights to participate.
Delaware Anti-Takeover Statute
Our revised certificate of incorporation contains a provision expressly
electing not to be governed by Section 203 of the Delaware General Corporation
Law. In general, Section 203 restricts some business combinations involving
interested stockholders or their affiliates. An interested stockholder is
defined as any person or entity that is the beneficial owner of at least 15% of
a corporation's voting stock or is an affiliate or associate of the corporation
or the owner of 15% or more of the outstanding voting stock of the corporation
at any time in the past three years. Because of this election, Section 203 will
not apply to us.
Limitation of Liability and Indemnification
Our revised certificate of incorporation limits the liability of our
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be available
to us or our stockholders, nor does it relieve us or our officers or directors
from compliance with federal or state securities laws.
Our revised certificate of incorporation also generally provides that we
will indemnify, to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law, any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit,
investigation, administrative hearing or any other proceeding by reason of the
fact that he or she is or was a director or officer of ours, or is or was
serving at our request as a director, officer, employee or agent of another
entity, against expenses incurred by him or her in connection with that
proceeding. An officer or director will not be entitled to indemnification by
us if:
. the officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interests;
or
. with respect to any criminal action or proceeding, the officer or
director had reasonable cause to believe his or her conduct was
unlawful.
In addition, we plan to enter into indemnification agreements with our
directors containing provisions which may require us, among other things, to
indemnify our directors against various liabilities that may arise by virtue of
their status or service as directors and to advance their expenses incurred as
a result of any
64
<PAGE>
proceeding against them as to which they could be indemnified. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling NaviSite pursuant to
the foregoing provisions or otherwise, NaviSite has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
NaviSite's revised certificate of incorporation also permits NaviSite to
secure insurance on behalf of any officer or director for any liability arising
out of his or her actions in such capacity, regardless of whether our revised
certificate of incorporation would otherwise permit indemnification for that
liability. Our officers and directors are currently insured under a policy
procured by CMGI that provides coverage against losses arising from claims
against them for any actual or alleged act, omission, misstatement, misleading
statement, neglect, error or breach of duty by them in their capacity as
officers or directors of NaviSite. We also have obtained our own liability
insurance for our officers and directors effective as of September 20, 1999.
At the present time, there is no pending litigation or proceeding involving
any director, officer, employee or agent of NaviSite in which indemnification
will be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is BankBoston, N.A.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Effect of Sales of Shares
Prior to this offering, no public market existed for our common stock, and
we can make no prediction as to the effect, if any, that sales of shares of
common stock or the availability of shares of our common stock for sale will
have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market, or the perception that such sales occur, could adversely affect the
market price of our common stock and could impair our future ability to raise
capital through an offering of our equity securities.
Sale of Restricted Shares
Upon completion of this offering, we will have an aggregate of 27,453,409
shares of common stock outstanding (including 22,996 shares issued in October
1999 upon the exercise of outstanding options). Of these outstanding shares,
the 5,500,000 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by our "affiliates," as that term is defined in Rule 144 under
the Securities Act, generally only may be sold in compliance with the
limitations of Rule 144 described below. All of the remaining 21,953,409 shares
of common stock that will be outstanding after this offering will be
"restricted securities" as that term is defined under Rule 144. Restricted
securities may be sold in the public market only if they qualify for an
exemption from registration under Rule 144, including Rule 144(k), or Rule 701
under the Securities Act.
Lock-Up Agreements
Our directors, executive officers and substantially all of our other
stockholders, holding 21,903,409 shares in the aggregate upon completion of
this offering (including 22,996 shares issued in October 1999 upon the exercise
of outstanding options), have agreed that they will not sell, directly or
indirectly, any shares of common stock without the prior written consent of
BancBoston Robertson Stephens Inc. for a lock-up period of 180 days from the
date of this prospectus. Upon expiration of the lock-up period, 180 days after
the date of this prospectus, 42,334 shares will be available for resale to the
public in accordance with Rule 144, including Rule 144(k), or Rule 701.
Rule 144
In general, under Rule 144 as currently in effect, commencing 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year is entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which is
expected to be approximately 274,534 shares upon completion of this
offering (including 22,996 shares issued in October 1999 upon the
exercise of outstanding options); or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to such sale, subject to the
restrictions specified in Rule 144.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Commencing 90 days after the date of this prospectus, 50,000 shares not subject
to a lock-up agreement will be available for resale to the public in accordance
with Rule 144.
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years is entitled to sell such
shares under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, Rule 144(k) shares may be sold immediately upon
completion of this offering. Immediately upon completion of this offering, no
outstanding shares may be sold under Rule 144(k).
66
<PAGE>
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchase shares from us in
connection with a compensatory stock plan or other written agreement are
eligible to resell such shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with various
restrictions, including the holding period, contained in Rule 144.
Stock Options
As of August 31, 1999, options to purchase a total of 2,639,161 shares of
common stock were outstanding, of which 690,426 were then exercisable. Upon
completion of this offering, we intend to file a registration statement to
register for resale an aggregate of 5,914,216 shares of common stock reserved
or anticipated to be reserved for issuance under our 1998 Equity Incentive
Plan, our 1998 Director Stock Option Plan, our 1999 Stock Option Plan for Non-
Employee Directors and our 1999 Employee Stock Purchase Plan. That registration
statement will become effective immediately upon filing. Accordingly, shares
covered by that registration statement will become eligible for sale in the
public markets, subject to vesting restrictions, Rule 144 volume limitations
applicable to our affiliates or the lock-up agreements with BancBoston
Robertson Stephens Inc. All holders of outstanding options have entered into
lock-up agreements.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue and grant options to purchase shares of common stock under the 1998
Equity Incentive Plan, the 1998 Director Stock Option Plan, the 1999 Stock
Option Plan for Non-Employee Directors and the 1999 Employee Stock Purchase
Plan. In addition, we may issue shares of common stock in connection with an
acquisition of another company if the terms of such issuance provide that the
common stock so issued shall not be resold prior to the expiration of the 180-
day lock-up period.
Registration Rights
Upon completion of this offering, under specified circumstances and subject
to customary conditions, the holders of an aggregate of 21,861,075 shares of
our common stock, including CMGI, which will directly own approximately
19,772,360 shares upon completion of this offering, or their permitted
assignees, will be entitled to rights with respect to the registration under
the Securities Act of some or all of their shares, subject to the 180-day lock-
up period described above. Under the agreements providing for these
registration rights, these stockholders are subject to lock-up periods of not
more than 180 days following the date of this prospectus or any subsequent
prospectus. A more detailed discussion of these registration rights is included
in this prospectus under the headings "Certain Transactions--Relationship and
Transactions Between NaviSite and CMGI, Inc.--Investor Rights Agreement" and
"Description of Capital Stock--Registration Rights."
67
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC and FAC/Equities, a
division of First Albany Corporation, have severally agreed with us, subject to
the terms and conditions of the underwriting agreement, to purchase from us the
number of shares of common stock set forth opposite their names below. The
underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc..................................
Hambrecht & Quist LLC..............................................
FAC/Equities, a division of First Albany Corporation ..............
---
Total...........................................................
===
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price on the
cover page of this prospectus and to some dealers at that price less a
concession of not in excess of $ per share, of which $ may be reallowed
to other dealers. After this offering, the public offering price, concession
and reallowance to dealers may be reduced by the representatives. This
reduction will not change the amount of proceeds to be received by us as stated
on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 825,000 additional shares of common stock at the same price per
share as we will receive for the 5,500,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of the additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the 5,500,000 shares offered in this offering. If purchased,
these additional shares will be sold by the underwriters on the same terms as
those on which the 5,500,000 shares are being sold. We will be obligated,
pursuant to the option, to sell shares to the extent the option is exercised.
The underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the shares of common stock offered hereby. If this
option is exercised in full, the total price to the public, underwriting
discounts and commissions and proceeds to us will be $ , $ and $ ,
respectively. The underwriting discount and commission per share is equal to
the public offering price per share of common stock less the amount paid by the
underwriters to us per share of common stock.
NaviSite estimates total expenses payable by us in connection with this
offering, other than the underwriting discounts and commissions referred to
above, will be approximately $1.6 million.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against various civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each executive officer and director and substantially
all of our stockholders have agreed, during the period of 180 days after the
date of this prospectus, subject to various exceptions, not to offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock or any options or warrants to
purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or thereafter acquired directly by these holders or with respect to which they
have the power of disposition, without the prior written consent of BancBoston
Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its
sole discretion and at any time or from time to time, without notice, release
all or any
68
<PAGE>
portion of securities subject to the lock-up agreements. There are no existing
agreements between the representatives and any of our stockholders who have
executed a lock-up agreement providing consent to the sale of shares prior to
the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of BancBoston Robertson Stephens Inc.,
subject to various exceptions:
. consent to the disposition of any shares held by stockholders subject
to lock-up agreements prior to the expiration of the lock-up period; or
. issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares
of common stock other than our sale of shares in this offering, the
issuance of our common stock upon the exercise of outstanding options,
the issuance of options under existing stock option and incentive plans
provided the options do not vest prior to the expiration of the lock-up
period and the issuance of our common stock in connection with an
acquisition of another company if the terms of such issuance provide
that the common stock so issued shall be subject to the terms of the
lock-up agreement. Please refer to the information in this prospectus
under the heading "Shares Eligible for Future Sale."
The underwriters have advised us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
Public Offering Price. Prior to this offering, there has been no public
market for the common stock. Consequently, the public offering price for the
common stock offered by this prospectus will be determined through negotiations
among the representatives and us. Among the factors to be considered in such
negotiations, the primary factors are prevailing market conditions, some of our
financial information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Directed Share Program. The underwriters have reserved an aggregate of
275,000 shares of common stock to be issued by us and offered for sale in this
offering for purchase from the underwriters through a directed share program by
officers, directors and employees of NaviSite. An additional 275,000 shares of
common stock to be issued by us and offered for sale in this offering have been
reserved for purchase from the underwriters through a directed share program by
vendors, business partners, customers and potential customers of NaviSite. In
addition, the underwriters have reserved an aggregate of 825,000 shares of
common stock to be issued by us and offered for sale in this offering for
purchase from the underwriters through a directed share program by United
States stockholders of CMGI who hold at least 100 shares of CMGI stock as of
August 25, 1999 and who have access to the Internet and a personal e-mail
address. These sales will be at the initial public offering price. We cannot
assure you that any of the reserved shares will be so purchased. The number of
shares of common stock available for sale to the general public in this
offering will be reduced by the number of reserved shares sold. Any reserved
shares not purchased will be offered to the general public on the same basis as
the other shares offered in this offering.
The CMGI directed share program is being administered by Wit Capital
Corporation. Purchases of the reserved shares are to be made through an account
at Wit Capital in accordance with Wit Capital's procedures for opening an
account and transacting in securities. In addition, Wit Capital is an
underwriter of additional shares in the offering. A prospectus in electronic
format is being made available on a Web site maintained by Wit Capital. Other
than the prospectus in electronic format, the information on Wit Capital's Web
site and any information provided on any other Web site maintained by Wit
Capital is not part of this prospectus and has not been approved or endorsed by
NaviSite or any underwriter and should not be relied upon by prospective
investors.
Participation Rights. Assuming the conversion into common stock of our
preferred stock held by Dell and Microsoft, we have agreed to use all
commercially reasonable efforts to require that the underwriters offer to Dell
and Microsoft in this offering up to an aggregate of 0.5% of the outstanding
shares of our common
69
<PAGE>
stock, calculated on a fully diluted basis, after giving effect to the sale of
shares of common stock in this offering. Because, notwithstanding our
commercially reasonable efforts, it is not possible under applicable law to
sell shares to Dell and Microsoft in this offering, Dell and Microsoft have
waived their respective rights to participate.
Listing. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "NAVI."
Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, some persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price
of the common stock. A "syndicate covering transaction" is the bid for or the
purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
these transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, Boston, Massachusetts.
Various legal matters in connection with this offering will be passed upon for
the underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of July 31, 1998
and 1999, and for each of the years in the three-year period ended July 31,
1999, have been included in this prospectus and in the registration statement,
of which this prospectus is a part, in reliance on the reports of KPMG LLP,
independent auditors, appearing elsewhere herein, and upon the authority of
said firm as experts in auditing and accounting.
The financial statements of Servercast Communications, L.L.C., as of
December 31, 1997 and June 30, 1998, and for the period from inception
(February 6, 1997) through December 31, 1997 and for the six months ended June
30, 1998, have been included in this prospectus and in the registration
statement, of which this prospectus is a part, in reliance on the report of
KPMG LLP, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock offered by this prospectus. This prospectus, which is part of the
registration statement, does not contain all of the information set forth in
the registration statement or the exhibits and schedules which are part of the
registration statement; certain parts of the registration statement are omitted
in accordance with the rules and regulations of the Securities and Exchange
Commission. For further information about us and the shares of our common stock
to be sold in this offering, please refer to the registration statement and the
exhibits and schedules which are part of the registration statement. Statements
in this prospectus regarding the contents of any contract or any other document
to which we refer are not necessarily complete, and in each instance where a
copy of the contract or other document has been filed as an exhibit to the
registration statement, we refer to the copy so filed. Each statement in this
prospectus regarding the contents of the referenced contract or other document
is qualified in all respects by our reference to the filed copy.
70
<PAGE>
You may read and copy any contract, agreement or other document referred to
in this prospectus and any portion of our registration statement or any other
information from our Securities and Exchange Commission filings at the
Securities and Exchange Commission's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at 1-800-SEC-
0330 for further information about the public reference rooms. Our Securities
and Exchange Commission filings, including our registration statement, are also
available to you on the Securities and Exchange Commission's Web site
(http://www.sec.gov). As a result of this offering, we will become subject to
the information and reporting requirements of the Securities Exchange Act of
1934, as amended, and will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing
audited financial statements and make available to our stockholders quarterly
reports for the first three quarters of each fiscal year containing unaudited
interim financial information.
71
<PAGE>
NAVISITE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
NaviSite, Inc.
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of July 31, 1998 and 1999.................. F-3
Consolidated Statements of Operations for the years ended July 31, 1997,
1998 and 1999........................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended July 31, 1997, 1998 and 1999...................................... F-5
Consolidated Statements of Cash Flows for the years ended July 31, 1997,
1998 and 1999 .......................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Servercast Communications, L.L.C.
Independent Auditors' Report.............................................. F-23
Balance Sheets as of December 31, 1997 and June 30, 1998.................. F-24
Statements of Operations for the period from inception (February 6, 1997)
through December 31, 1997 and for the six months ended June 30, 1998.... F-25
Statements of Members' Equity (Deficit) for the period from inception
(February 6, 1997) through December 31, 1997 and for the six months
ended June 30, 1998..................................................... F-26
Statements of Cash Flows for the period from inception (February 6, 1997)
through December 31, 1997 and for the six months ended June 30, 1998.... F-27
Notes to Financial Statements............................................. F-28
Unaudited Pro Forma Combined Condensed Financial Data for NaviSite, Inc.
and Servercast Communications, L.L.C.
Unaudited Pro Forma Combined Condensed Statement of Operations for the
year ended July 31, 1998................................................ F-32
Notes To Unaudited Pro Forma Combined Condensed Statement of Operations... F-32
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
NaviSite, Inc.:
We have audited the accompanying consolidated balance sheets of NaviSite,
Inc. as of July 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the
years in the three-year period ended July 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NaviSite, Inc. as of July
31, 1998 and 1999, and the results of its operations and its cash flows for
each of the years in the three-year period ended July 31, 1999, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
August 27, 1999, except
as to Note 14, which is
as of October 8, 1999
Boston, Massachusetts
F-2
<PAGE>
NAVISITE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, Pro Forma
------------------ July 31,
1998 1999 1999
-------- -------- ---------
(In thousands, except
par value)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ -- $ 3,352
Accounts receivable, less allowance for
doubtful accounts of $7 and $262 at July 31,
1998 and 1999, respectively.................. 489 1,881
Due from CMGI................................. -- 77
Prepaid expenses.............................. 444 628
Deferred IPO costs............................ -- 831
-------- --------
Total current assets............................ 933 6,769
-------- --------
Property and equipment, net..................... 3,392 13,159
Deposits........................................ 157 389
Goodwill, net of accumulated amortization of $17
and $220 at July 31, 1998 and 1999,
respectively................................... 997 794
-------- --------
Total assets.................................... $ 5,479 $ 21,111
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Debt to CMGI.................................. $ 11,439 $ --
Accounts payable.............................. 728 2,224
Accrued expenses and deferred revenue......... 1,410 3,963
Capital lease obligations, current portion.... 61 229
Software vendor payable, current portion ..... 817 708
Notes payable, current portion................ -- 1,000
-------- --------
Total current liabilities....................... 14,455 8,124
-------- --------
Capital lease obligations, less current
portion........................................ 90 178
Software vendor payable, less current portion... -- 1,757
Notes payable, less current portion............. 1,000 --
-------- --------
Total liabilities............................... 15,545 10,059
-------- --------
Series C Convertible Redeemable Preferred
Stock, $.01 par value, 1,095 and 0 shares
issued and outstanding at July 31, 1999 and
July 31, 1999 (pro forma), respectively (at
liquidation value)........................... -- 8,088 --
Series D Convertible Redeemable Preferred
Stock, $.01 par value, 993 and 0 shares
issued and outstanding at July 31, 1999 and
July 31, 1999 (pro forma), respectively (at
liquidation value)........................... -- 7,333 --
-------- -------- --------
Total redeemable preferred stock................ -- 15,421 --
-------- -------- --------
Commitments and contingencies
Stockholders' equity (deficit):
Series A Convertible Preferred Stock, $.01 par
value, 1,324 shares authorized; 1,324 and 0
shares issued and outstanding at July 31,
1999 and July 31, 1999 (pro forma),
respectively (liquidating preference of
$16,409)..................................... -- 13 --
Series B Convertible Preferred Stock, $.01 par
value, 1,000 shares authorized; 542 and 0
shares issued and outstanding at July 31,
1999 and July 31, 1999 (pro forma),
respectively (liquidating preference of
$15,039)..................................... -- 5 --
Common Stock, $.01 par value, 30,000 shares
authorized; 8,051, 69 and 20,816 shares
issued and outstanding at July 31, 1998, July
31, 1999, and July 31, 1999 (pro forma),
respectively................................. 81 1 208
Additional paid-in capital.................... -- 30,291 45,523
Accumulated deficit........................... (10,147) (34,679) (34,679)
-------- -------- --------
Total stockholders' equity (deficit)............ (10,066) (4,369) $ 11,052
-------- -------- ========
Total liabilities and stockholders' equity
(deficit)...................................... $ 5,479 $ 21,111
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NAVISITE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended July 31,
----------------------------------------
1997 1998 1999
------------ ------------ -------------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenue:
Revenue........................... $ -- $ 158 $ 3,461
Revenue, related parties.......... 3,361 3,871 7,058
----------- ------------ -------------
Total revenue.................. 3,361 4,029 10,519
Cost of revenue..................... 3,494 8,876 20,338
----------- ------------ -------------
Gross profit (loss)............... (133) (4,847) (9,819)
----------- ------------ -------------
Operating expenses:
Selling and marketing............. 347 2,530 6,888
General and administrative........ 467 1,412 4,823
Product development............... -- 287 2,620
----------- ------------ -------------
Total operating expenses....... 814 4,229 14,331
----------- ------------ -------------
Loss from operations................ (947) (9,076) (24,150)
Other income (expense):
Interest expense, net............. (1) (85) (347)
Other expense, net................ -- (11) (35)
----------- ------------ -------------
Net loss............................ (948) (9,172) (24,532)
Accretion of dividends on Series C
and D Convertible Redeemable
Preferred Stock................... -- -- (172)
----------- ------------ -------------
Net loss applicable to common
stockholders...................... $ (948) $ (9,172) $ (24,704)
=========== ============ =============
Basic and diluted net loss per
common share...................... $ (0.24) $ (1.14) $ (7.41)
=========== ============ =============
Basic and diluted weighted average
number of common shares
outstanding....................... 4,000 8,017 3,332
=========== ============ =============
Unaudited pro forma basic and
diluted net loss per share........ $ (1.51)
=============
Pro forma weighted average number of
basic and diluted shares
outstanding....................... 16,407
=============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NAVISITE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Series B
Series A Convertible
Convertible Preferred
Preferred Stock Stock Common Stock Additional
---------------- ------------- --------------- Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Shares Amount Capital Deficit Equity (Deficit)
-------- ------- ------ ------ ------- ------ ---------- ----------- ----------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at August 1,
1996................... -- $ -- -- $ -- -- $ -- $ -- $ (27) $ (27)
Issuance of common
stock................ -- -- -- -- 8,000 80 -- -- 80
Net loss.............. -- -- -- -- -- -- -- (948) (948)
-------- ------- ---- ----- ------- ----- ------- -------- --------
Balance at July 31,
1997................... -- -- -- -- 8,000 80 -- (975) (895)
Exercise of stock
options.............. -- -- -- -- 51 1 -- -- 1
Net loss.............. -- -- -- -- -- -- -- (9,172) (9,172)
-------- ------- ---- ----- ------- ----- ------- -------- --------
Balance at July 31,
1998................... -- -- -- -- 8,051 81 -- (10,147) (10,066)
Reorganization........ 1,324 13 -- -- (8,000) (80) 15,755 -- 15,688
Conversion of Debt to
CMGI into Series B
Convertible Preferred
Stock................ -- -- 542 5 -- -- 14,708 -- 14,713
Exercise of stock
options.............. -- -- -- -- 18 -- -- -- --
Accretion of dividends
on Series C and D
Convertible
Redeemable Preferred
Stock................ -- -- -- -- -- -- (172) -- (172)
Net loss.............. -- -- -- -- -- -- -- (24,532) (24,532)
-------- ------- ---- ----- ------- ----- ------- -------- --------
Balance at July 31, 1999
....................... 1,324 $ 13 542 $ 5 69 $ 1 $30,291 $(34,679) $ (4,369)
======== ======= ==== ===== ======= ===== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NAVISITE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended July 31,
--------------------------
1997 1998 1999
------- ------- --------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (948) $(9,172) $(24,532)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization.................... 126 574 2,081
Loss on disposal of assets....................... -- 11 39
Provision for bad debts.......................... -- 8 275
Changes in operating assets and liabilities, net
of impact of acquisition in 1998:
Accounts receivable............................. (245) (155) (1,667)
Due from CMGI .................................. -- -- (77)
Prepaid expenses................................ (94) (334) 739
Deferred IPO costs.............................. -- -- (335)
Deposits........................................ (114) (43) (232)
Accounts payable................................ 544 (17) 1,000
Accrued expenses................................ 87 1,271 2,553
------- ------- --------
Net cash used for operating activities........ (644) (7,857) (20,156)
------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment............... (1,553) (1,181) (9,767)
Acquisition of business........................... -- (45) --
------- ------- --------
Net cash used for investing activities........ (1,553) (1,226) (9,767)
------- ------- --------
Cash flows from financing activities:
Proceeds from increase in debt to CMGI, net....... 2,197 9,166 18,962
Proceeds from issuance of Series C and D
Convertible Redeemable Preferred Stock, net of
financing costs of $109 and $99, respectively... -- -- 15,249
Proceeds from exercise of stock options........... -- 1 --
Payments of capital lease obligations............. -- (46) (122)
Payments of software vendor obligations........... -- (38) (814)
------- ------- --------
Net cash provided by financing activities..... 2,197 9,083 33,275
------- ------- --------
Net increase in cash............................... -- -- 3,352
Cash, beginning of period.......................... -- -- --
------- ------- --------
Cash, end of period................................ $ -- $ -- $ 3,352
======= ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest........................................... $ -- $ 15 $ 77
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997, 1998 and 1999
(1) Description of Business
NaviSite, Inc. (the "Company") is a leading provider of business critical
Internet outsourcing solutions, specializing in high-end Web hosting and
application services for companies conducting business on the Internet.
Substantially all revenues are generated from customers in the United States.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The Company is a majority owned subsidiary of CMGI, Inc. ("CMGI" or
"Parent"). The Company commenced operations in July 1996 and was incorporated
on February 3, 1997 as CMG Information Technology, Inc. (subsequently renamed
NaviSite Internet Services Corporation). On December 28, 1998, the assets and
liabilities of the Company were contributed to a newly-formed subsidiary,
NaviSite, Inc. The assets and liabilities were recorded at historical amounts
as the entities were under common control. The accompanying consolidated
financial statements, which have been prepared as if the Company had operated
as a separate stand-alone entity for all periods presented, include only
revenue and expenses attributable to the Company since it commenced operations
in July 1996.
The consolidated financial statements include certain allocations from CMGI
for certain general and administrative expenses such as rent, legal services,
insurance, and employee benefits. Allocations are based primarily on headcount.
Management believes that the method used to allocate the costs and expenses is
reasonable; however, such allocated amounts may or may not necessarily be
indicative of what actual expenses would have been incurred had the Company
operated independently of CMGI.
(b) Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiary, Servercast Communications, L.L.C.
("Servercast") after elimination of all significant intercompany balances and
transactions.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(d) Revenue Recognition
Revenue consists of monthly fees for server hosting, systems
administration, application rentals and Web site management services. Revenue
(other than installation fees) is generally billed and recognized over the term
of the contract, generally one year, based on actual usage. Installation fees
are typically recognized at the time that installation occurs. Payments
received in advance of providing services are deferred until the period such
services are provided.
F-7
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(e) Cash
Under an arrangement with CMGI, the Company maintained a zero balance cash
account. Cash required by the Company for the funding of its operations was
provided as needed with a corresponding increase to the "Debt to CMGI" account.
Customer receipts and other cash receipts of the Company were remitted to CMGI
upon receipt by the Company and serve to reduce the "Debt to CMGI" account.
During fiscal 1998, non-cash investing activities included the acquisition
of Servercast (see note 4) in exchange for term notes totaling $1,000,000.
During fiscal 1999, non-cash financing activities included the issuance of
1,323,953 shares of the Company's Series A Convertible Preferred Stock ("Series
A Preferred Stock") in exchange for 8,000,000 shares of the Company's common
stock and $15,767,600 reduction in debt to CMGI and the issuance of 541,859
shares of the Company's Series B Convertible Preferred Stock ("Series B
Preferred Stock") in exchange for a $14,713,000 reduction in debt to CMGI (see
note 9). Non-cash financing activities also included a software licensing
arrangement, including services and maintenance of $923,000, for an aggregate
of $2.5 million, payable over a three-year period. The Company has recorded
deferred IPO costs of $496,000, which are included in accrued expenses at July
31, 1999.
The Company purchased $195,000 and $378,000 of equipment under capital
lease obligations during the fiscal years ended July 31, 1998 and 1999,
respectively.
(f) Software Development Costs
Software development costs are accounted for under Statement of Financial
Accounting Standard ("SFAS") No. 86, Accounting for Costs of Computer Software
to be Sold, Leased or Otherwise Marketed ("SFAS 86"). Capitalization of
software development costs commences upon the establishment of technological
feasibility. To date, all such amounts have been insignificant, and,
accordingly, the Company has charged all such costs to product development
expense.
(g) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets acquired under capital leases are amortized
using the straight-line method over the shorter of the lease term or estimated
useful life of the asset. Expenditures for maintenance and repairs are charged
to expense as incurred.
(h) Goodwill
Goodwill relates to the Company's purchase of its wholly owned subsidiary,
Servercast, in July 1998 (see note 4). Such costs are being amortized on a
straight-line basis over five years, the period expected to be benefited.
(i) Accounting for Impairment of Long-Lived Assets
The Company assesses the need to record impairment losses on long-lived
assets used in operations when indicators of impairment are present. On an
ongoing basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including goodwill. During this review, the
significant assumptions used in determining the original cost of long-lived
assets are reevaluated. Although the
F-8
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
assumptions may vary from transaction to transaction, they generally include
revenue growth, operating results, cash flows and other indicators of value.
Management then determines whether there has been a permanent impairment of the
value of long-lived assets by comparing future undiscounted cash flows to the
asset's carrying value. If the estimated future undiscounted cash flows exceed
the carrying value of the asset, a loss is recorded as the excess of the
asset's carrying value over fair value.
(j) Income Taxes
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company is currently greater than 80% owned by CMGI, and as
such, CMGI realizes the full benefit of all federal and part of the state net
operating losses that have been incurred by the Company. Therefore, such net
operating losses incurred by the Company will have no future benefit to the
Company. The tax sharing agreement between the Company and CMGI requires the
Company to reimburse CMGI for the amounts it contributes to the consolidated
tax liability of the CMGI group; however, under the policy, CMGI is not
obligated to reimburse the Company for any losses utilized in the consolidated
CMGI group.
(k) Advertising Costs
The Company recognizes advertising costs as incurred. The Company did not
incur any advertising costs during fiscal 1997. Advertising expense was
approximately $266,000 and $417,000 for the fiscal years ended July 31, 1998
and 1999, respectively.
(l) Stock-Based Compensation Plans
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). As permitted by SFAS 123, the Company measures
compensation cost in accordance with Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations. Accordingly, no accounting recognition is given to stock
options granted at fair market value until they are exercised. Upon exercise,
net proceeds, including income tax benefits realized, are credited to equity.
Therefore, the adoption of SFAS 123 was not material to the Company's financial
condition or results of operations; however, the pro forma impact on earnings
has been disclosed in the notes to the Consolidated Financial Statements as
required by SFAS 123 (see note 10).
(m) Historical and Unaudited Pro Forma Basic and Diluted Net Loss per Share
The Company has adopted SFAS No. 128, Earnings Per Share ("SFAS 128"). In
accordance with SFAS No. 128, basic earnings (loss) per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share is computed using the weighted average number
of common and dilutive common equivalent shares outstanding during the period,
using either the "as-if-converted" method for convertible preferred stock or
the treasury stock method for options, unless such amounts are anti-dilutive.
F-9
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
As described in note 9, conversion of all preferred stock and amounts due
to CMGI, if any, outstanding at July 1, 1999, will occur upon the completion of
a qualified public offering of the Company's common stock. The unaudited pro
forma basic and diluted net loss per share information included in the
accompanying consolidated statements of operations for the fiscal year ended
July 31, 1999 reflects the impact on unaudited pro forma basic and diluted net
loss per share of such conversion as of the beginning of each period or date of
issuance, if later, using the "as-if-converted" method.
The reconciliation of the numerators and denominators of the unaudited pro
forma basic and diluted net loss per share computation for the Company's
reported net loss for the year ended July 31, 1999 is as follows (in thousands,
except per share data):
<TABLE>
<S> <C>
Numerator:
Net loss......................................................... $(24,704)
--------
Denominator:
Common shares outstanding...................................... 3,331
Assumed conversion of preferred stock.......................... 13,076
--------
Weighted average number of pro forma basic and diluted
shares outstanding........................................ 16,407
========
Pro forma basic and diluted net loss per share................... $ (1.50)
========
</TABLE>
See also Note 14.
(n) Segment Reporting
The Company has adopted the provisions of SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information ("SFAS 131"), effective
August 1, 1998. SFAS 131 establishes standards for the way that public business
enterprises report selected information about operating segments in annual and
interim financial statements. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 requires the use of the "management approach" in disclosing segment
information, based largely on how senior management generally analyzes the
business operations. The Company currently operates in only one segment, and as
such, no additional disclosures are required.
(o) New Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC") issued Statement of
Position 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires the capitalization
of certain internal costs related to the implementation of computer software
obtained for internal use. The Company is required to adopt this standard in
the first quarter of fiscal year 2000, and expects that the adoption of SOP 98-
1 will not have a material impact on its financial position or its results of
operations.
In April 1998, the AcSEC issued Statement of Position 98-5, "Reporting
Costs of Start-Up Activities" ("SOP 98-5"). Under SOP 98-5, the cost of start-
up activities should be expensed as incurred. Start-up activities are broadly
defined as those one-time activities related to opening a new facility,
introducing a new product or service, conducting business in a new territory,
conducting business with a new class of customer, commencing some new operation
or organizing a new entity. SOP 98-5 is effective for the Company's fiscal 2000
consolidated financial statements. The Company does not expect its adoption to
have a material impact on its financial position or results of operations.
F-10
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as "derivatives") and for hedging activities. SFAS
133 requires the recognition of all derivatives as either assets or liabilities
in the statement of financial position and the measurement of those instruments
at fair value. The Company is required to adopt this standard in the first
quarter of fiscal year 2001 pursuant to SFAS No. 137 (issued in June 1999),
which delays the adoption of SFAS 133 until that time. The Company expects that
the adoption of SFAS 133 will not have a material impact on the its financial
position or its results of operations.
(p) Deferred IPO Costs
The Company has deferred $831,000 of direct and incremental costs
associated with its initial public offering. Upon completion of the offering,
such amounts will be recorded as a reduction of the proceeds raised in the
offering. If the offering is unsuccessful, all deferred IPO costs will be
charged to operations.
(3) Property and Equipment
<TABLE>
<CAPTION>
July 31,
Estimated ---------------
Useful Life 1998 1999
-------------------------- ------ -------
(In thousands)
<S> <C> <C> <C>
Office furniture and equipment.... 5 years $ 232 $ 341
Computer equipment................ 3 years 1,197 2,520
Software licenses................. 3 years or life-of-license 1,390 4,213
Leasehold improvements............ 4 years or life-of-lease 1,256 2,760
Leasehold improvements in progress
................................ -- 5,838
------ -------
4,075 15,672
Less: Accumulated depreciation and
amortization.................... (683) (2,513)
------ -------
$3,392 $13,159
====== =======
</TABLE>
The cost and related accumulated amortization of property and equipment
held under capital leases is as follows:
<TABLE>
<CAPTION>
July 31,
-----------
1998 1999
----- -----
(In
thousands)
<S> <C> <C>
Cost............................................................ $ 195 $ 573
Accumulated amortization........................................ 60 186
----- -----
$ 135 $ 387
===== =====
</TABLE>
F-11
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(4) Acquisition of Servercast Communications, L.L.C.
In July 1998, the Company acquired Servercast Communications, L.L.C.
("Servercast"), a leading provider of high-performance Internet outsourcing
solutions. The Company issued $1,000,000 in term notes with principal payable
on January 2, 2000. CMGI has guaranteed the payment of these term notes.
Interest accrues at the rate of 5.5% and is payable in three equal installments
on January 2, 1999, July 2, 1999 and January 2, 2000. The total purchase price
for Servercast was valued at $1,045,000, including acquisition costs of
$20,000, and bridge notes receivable of $25,000.
Total purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Working capital deficit ............. $ (140)
Property and equipment............... 171
Goodwill............................. 1,014
------
Purchase price....................... $1,045
======
</TABLE>
The acquisition has been accounted for using the purchase method, and,
accordingly, the purchase price has been allocated to the assets purchased and
liabilities assumed based upon their fair values at the dates of acquisition.
The results of operations of Servercast have been included in the Company's
consolidated financial statements from July 1, 1998.
The portion of the purchase price allocated to goodwill is being amortized
on a straight-line basis over five years. Amortization of goodwill resulting
from the acquisition of Servercast was approximately $17,000 for the one month
period in the fiscal year ended July 31, 1998 in which Servercast was owned by
the Company and $203,000 for the year ended July 31, 1999.
The following table represents the unaudited pro forma results of
operations of the Company for the years ended July 31, 1997 and 1998, as if the
Servercast purchase had occurred at the beginning of the respective periods.
These pro forma results include adjustments for the amortization of goodwill
and increased interest expense on debt related to the acquisition. They have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made at the beginning of
the respective periods or of results that may occur in the future.
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1997 July 31, 1998
------------- -------------
(unaudited)
(In thousands)
<S> <C> <C>
Revenues....................................... $ 3,640 $ 4,390
======= =======
Net loss....................................... (1,437) (9,704)
======= =======
Basic and diluted net loss per common share ... $ (0.36) $ (1.21)
======= =======
Basic and diluted weighted average number of
common shares outstanding ................... 4,000 8,017
======= =======
</TABLE>
F-12
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(5) Debt to CMGI
Commencing in February 1998, advances made by CMGI to the Company accrued
interest at the annual rate of 7%. In December 1998, advances of $15,767,600
from CMGI, including accrued interest thereon, were converted into 1,323,953
shares of Series A Preferred Stock. These advances were made by CMGI to the
Company from inception through October 1998. In May 1999, the Company
formalized its borrowing arrangement with CMGI and executed a secured
convertible demand note with CMGI dated as of May 1, 1999 (the "Secured
Convertible Demand Note"). The Secured Convertible Demand Note covers advances
made by CMGI to the Company for periods commencing in November 1998. Under the
Secured Convertible Demand Note, advances and accrued interest may be prepaid
without penalty. Advances outstanding under this note are secured by
substantially all assets and intellectual property of the Company, and
principal and accrued interest may be converted at the option of CMGI into
shares of Series B Preferred Stock. The number of Series B Preferred shares to
be issued upon conversion of each borrowing represented by the note is based on
the estimated fair value of the Company at the end of the quarter in which such
borrowing is made. (The conversion price applicable to advances made and
interest accrued during a fiscal quarter in which an offering triggering
automatic conversion into Company common stock of Series B Preferred Stock
occurs is equal to the public offering price per share, and the conversion
price applicable to advances made and interest accrued during a fiscal quarter
in which CMGI elects to connect those advances or that interest prior to the
end of that fiscal quarter is the conversion price in effect for the
immediately preceding fiscal quarter). Effective June 4, 1999, CMGI elected to
convert advances and accrued interest outstanding at May 31, 1999 in the amount
of $14,713,000 into 541,859 shares of Series B Convertible Preferred Stock. See
also Note 9.
Average balances outstanding in Debt to CMGI for the years ended July 31,
1997, 1998, and 1999 amounted to $965,000, $6,113,000 and $8,107,000,
respectively.
(6) Accrued expenses
Accrued expenses and deferred revenue consist of the following:
<TABLE>
<CAPTION>
July 31,
-------------
1998 1999
------ ------
(In
thousands)
<S> <C> <C>
Accrued payroll, benefits and commissions........................ $ 355 $1,157
Deferred revenue................................................. 1 701
Accrued IPO costs ............................................... 0 496
Other ........................................................... 1,054 1,609
------ ------
$1,410 $3,963
====== ======
</TABLE>
(7) Commitments and Contingencies
(a) Leases
CMGI has entered into noncancelable operating leases on behalf of the
Company covering certain of its office facilities and equipment which expire
through 2012. In addition, the Company pays CMGI for office facilities used as
the Company's headquarters for which it is charged based upon an allocation of
the total costs for the facilities at market rates. Substantially all leases
for real property have been guaranteed by CMGI.
Total rent expense amounted to $1,722,000, $3,567,000 and $5,983,000 for
the years ended July 31, 1997, 1998 and 1999, respectively.
F-13
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
Additionally, CMGI leases certain property and equipment for the benefit of
the Company under capital lease obligations expiring through 2002. CMGI charges
the Company the actual lease fees under these arrangements.
Minimum annual rental commitments are as follows as of July 31, 1999:
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
--------- -------
(In thousands)
<S> <C> <C>
2000....................................................... $11,155 $249
2001....................................................... 9,101 156
2002....................................................... 6,248 43
2003....................................................... 3,929 --
2004 ...................................................... 4,633 --
Thereafter ................................................ 15,245 --
------- ----
$50,311 448
=======
Less amounts representing interest......................... 41
----
Present value of future minimum lease payments............. 407
Less current portion of capital lease obligations.......... 229
----
Long-term portion of capital lease obligations............. $178
====
</TABLE>
In May 1999, the Company agreed to lease an additional 150,000 square feet
in Andover, Massachusetts over an initial lease term of 12 years. Further, the
Company made a cash payment to the developers of $5.7 million to fund
construction of leasehold improvements and provided a letter of credit for $4.0
million as a construction and lease security deposit and is committed to
provide $2.5 million as an additional security deposit. Also, in May 1999, the
Company agreed to lease a 66,000 square foot facility in San Jose, California
for a lease term of seven years. Further, the Company has made a lease deposit
of $252,000 and provided a letter of credit for $2.4 million as a lease
security deposit to be reduced annually based on the remaining term of the
lease. CMGI has guaranteed both of these leases. CMGI will be released from the
Andover guaranty upon the earlier of the completion of an initial public
offering or the date on which the Company occupies the premises and begins to
pay rent. CMGI will be released from the San Jose guaranty within 15 days of
the later of the closing of this offering and the execution by the Company of a
letter of credit in the amount of approximately $2.4 million.
The Company is currently finalizing construction contracts in connection
with its new facilities in San Jose, California and Andover, Massachusetts. If
the Company executes either or both of these contracts prior to the completion
of the initial public offering, CMGI will be required to execute a guarantee on
the Company's behalf with respect to each executed contract. Each contract
provides that CMGI will be released from any related guarantee upon completion
of the initial public offering. In connection with the construction contract
for the new Andover, Massachusetts facility, the Company will be required, upon
CMGI's release from its guarantee or, if the contract is executed after the
completion of the initial public offering, upon execution of the contract, to
obtain a letter of credit in the amount of the remaining balance due under the
contract, which is currently estimated to be less than $15 million.
(b) Litigation
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
consolidated financial position or results from operations of the Company.
F-14
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(8) Income Taxes
No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented. At July 31,
1999, the Company had no federal net operating loss carryforwards available to
offset future taxable income as the Company's parent, CMGI, has utilized
substantially all of the Company's federal net operating losses through July
31, 1999. The Company has recorded a full valuation allowance against its
deferred tax assets since management believes that, after considering all the
available objective evidence, both positive and negative, historical and
prospective, with greater weight given to historical evidence, it is more
likely than not that these assets will not be realized. No income tax benefit
has been recorded for all periods presented because of the valuation allowance.
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
federal deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
July 31,
-----------
1998 1999
----- ----
(In
thousands)
<S> <C> <C>
Deferred tax assets:
Accruals and reserves........................................ $ 247 $300
Depreciation and amortization ............................... 37 182
----- ----
Total deferred tax assets...................................... 284 482
Less: Valuation allowance...................................... (284) (482)
----- ----
Net deferred taxes............................................. $ -- $ --
===== ====
</TABLE>
(9) Stockholders' Equity
In October 1998, the Company's stockholders authorized 5,000,000 shares of
preferred stock of which 1,323,953 shares have been designated as Series A
Preferred Stock. In May 1999, the Company's stockholders authorized 1,000,000
shares to be designated as Series B Preferred Stock, 1,095,472 shares to be
designated as Series C Convertible Preferred Stock ("Series C Preferred Stock")
and 993,243 shares to be designated as Series D Convertible Preferred Stock
("Series D Preferred Stock"). The remaining shares have not been designated.
(a) Series A Preferred Stock
In December 1998, the Board of Directors authorized and issued 1,323,953
shares of Series A Preferred Stock in exchange for 8,000,000 shares of common
stock and $15,767,600 in principal amount of Debt to CMGI. The Series A
Preferred Stock is entitled to receive annual dividends at 7% commencing
November 1, 1998, as and if declared. No dividends have been declared or paid
by the Company. The Series A Preferred Stock is voting and is convertible into
10 shares of common stock subject to certain adjustments. In the event of any
liquidation, dissolution or winding up of the Company, the Series A Preferred
Stock has a liquidation preference of $11.91 per share plus dividends of 7%
compounded annually beginning on November 1, 1998. The Series A Preferred Stock
is convertible into common stock immediately at the option of the holder, and
automatically converts into common stock upon the completion of a qualifying
initial public offering.
At July 31, 1999, 13,239,530 shares of common stock have been reserved for
issuance upon the conversion of the Series A Preferred Stock.
F-15
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(b) Series B Preferred Stock
In May 1999, the Board of Directors approved the designation of 1,000,000
shares of the Company's preferred stock as Series B Preferred Stock. Effective
June 4, 1999, CMGI elected to convert the advances and accrued interest
outstanding under the Secured Convertible Demand Note as of January 31, 1999,
April 30 and May 31, 1999, in the aggregate amount of $14,713,000 into 541,859
shares of Series B Preferred Stock. The conversion of advances and accrued
interest into Series B Preferred Stock was based on the estimated fair value of
the Company as of the end of each of the fiscal quarters in which such advances
were made, except with respect to the advances converted as of June 4, 1999,
prior to the end of the fiscal quarter. Under the terms of the Secured
Convertible Demand Note, advances converted prior to the end of the fiscal
quarter in which they were made are converted based upon the conversion price
in effect for the immediately preceding fiscal quarter. Based on an enterprise
valuation determined through a discounted cash flow analysis for the fiscal
quarter ended January 31, 1999, $5,347,705 of advances and accrued interest
were converted at a per share price of $12.74 into 419,738 shares of Series B
Preferred Stock. Based on an enterprise valuation determined through arms'
length negotiations with, and subsequent sales of Series C Preferred Stock and
Series D Preferred Stock to, two unaffiliated third parties on June 4, 1999, a
per share valuation of $76.68 was utilized to convert $5,413,117 and $3,952,110
of advances and accrued interest into 70,594 and 51,527 shares of Series B
Preferred Stock, respectively.
The Series B Preferred Stock is entitled to received noncumulative annual
dividends at 7%, as and if declared. No dividends have been declared or paid by
the Company. The Series B Preferred Stock is fully participating, voting and
convertible into 10 shares of common stock, subject to certain adjustments. In
the event of any liquidation, dissolution or winding up of the Company, the
Series B Preferred Stock ranks pari passu with the Series A Preferred Stock,
and has a liquidation preference equal to its purchase price plus dividends
computed at 7% per annum. The Series B Preferred Stock is convertible into
common stock immediately at the option of the holder and automatically converts
into common stock upon the completion of a qualifying initial public offering.
At July 31, 1999, 5,418,590 shares of common stock have been reserved for
issuance upon the conversion of the Series B Preferred Stock. See also Note 14.
(c) Series C Preferred Stock
In May 1999, the Board of Directors approved the designation of 1,095,472
shares of the Company's preferred stock as Series C Preferred Stock. The Series
C Preferred Stock is entitled to receive noncumulative annual dividends at 7%,
as and if declared. No dividends have been declared or paid by the Company. The
Series C Preferred Stock is fully participating, voting and convertible at the
option of the holder into shares of common stock at $7.40 per share, subject to
certain adjustments. In the event of any liquidation, dissolution or winding up
of the Company, the Series C Preferred Stock ranks pari passu with the Series A
and B Preferred Stock and has a liquidation preference equal to its purchase
price plus dividends computed at 7% per annum. The Series C Preferred Stock
automatically converts into common stock upon the completion of a qualifying
initial public offering. On or after the fifth anniversary of the purchase
date, the Series C Preferred Stock is redeemable, either at the written
election of a majority of the holders of Series C Preferred Stock or at the
option of the Company, at a price equal to its purchase price plus dividends
computed at 7% per annum. Holders of Series C Preferred Stock may participate
in future issuances of equity instruments, as defined. In June 1999, the
Company sold 1,095,472 Series C preferred shares for $7,997,493, net of
issuance costs of $109,000.
At July 31, 1999, 1,095,472 shares of common stock have been reserved for
issuance upon the conversion of the Series C Preferred Stock.
F-16
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(d) Series D Preferred Stock
In May 1999, the Board of Directors approved the designation of 993,243
shares of the Company's preferred stock as Series D Preferred Stock. The Series
D Preferred Stock is entitled to receive noncumulative annual dividends at 7%,
as and if declared. No dividends have been declared or paid by the Company. The
Series D Preferred Stock is fully participating, voting and convertible at the
option of the holder into shares of common stock at $7.40 per share, subject to
certain adjustments. In the event of any liquidation, dissolution or winding up
of the Company the Series D Preferred Stock ranks pari passu with the Series A,
B and C Preferred Stock and has a liquidation preference equal to its purchase
price plus dividends computed at 7% per annum. The Series D Preferred Stock
automatically converts into common stock upon the completion of a qualifying
initial public offering. On or after the fifth anniversary of the purchase
date, the Series D Preferred Stock is redeemable, either at the written
election of a majority of the holders of Series D Preferred Stock or at the
option of the Company, at a price equal to its purchase price plus dividends
computed at 7% per annum. Holders of Series D Preferred Stock may participate
in future issuances of equity instruments, as defined. In June 1999, the
Company sold 993,243 Series D preferred shares for $7,252,000, net of issuance
costs of $99,000.
At July 31, 1999, 993,243 shares of common stock have been reserved for
issuance upon the conversion of the Series D Preferred Stock.
(e) Unaudited Pro Forma Balance Sheet
Concurrent with the closing of a qualifying initial public offering,
amounts due to CMGI, if any, will convert into Series B Preferred Stock, and
all the outstanding shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock will convert into
shares of the Company's common stock. The assumed conversion of convertible
preferred stock into an aggregate of 20,746,835 shares of Common Stock has been
reflected in the unaudited pro forma balance sheet as of July 31, 1999. See
also note 12.
(10) Stock Option Plans
(a) NaviSite 1998 Equity Incentive Plan
In December 1998, the Company's Board of Directors and Stockholders
approved the 1998 Equity Incentive Plan, as amended (the "1998 Plan"). The 1998
plan replaced NaviSite Internet Services Corporation's 1997 Equity Incentive
Plan (the "1997 Plan"). All options outstanding under the 1997 Plan were
cancelled and replaced with an equivalent amount of options issued in
accordance with the 1998 Plan. Under the 1998 Plan, non-qualified stock options
or incentive stock options may be granted to the Company's or its affiliates'
employees, directors and consultants, as defined, up to a maximum number of
shares of common stock not to exceed 2,500,000 shares. In August 1999, the
Board of Directors approved an increase in the number of shares authorized
under the 1998 Plan to 5,562,212. The Board of Directors administers this plan,
selects the individuals to whom options will be granted and determines the
number of shares and exercise price of each option. Options are granted at
estimated fair market value based on third-party valuations or cash equity
transactions with unrelated parties (when available). Options granted under the
1998 Plan have a five-year maximum term and typically vest over a four year
period, with 25% of options granted becoming exercisable one year from the date
of grant and the remaining 75% vesting monthly for the next thirty-six (36)
months. The following table reflects activity and historical exercise prices of
stock options under the Company's 1998 Plan for the three years ended July 31,
1999.
F-17
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
------------------ ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year..... -- $ -- 1,073,000 $0.01 1,545,750 $0.16
Granted................. 1,073,000 0.01 842,500 0.31 1,434,229 4.30
Exercised............... -- -- (51,019) 0.01 (18,319) 0.01
Cancelled............... -- -- (318,731) 0.05 (530,998) 0.45
--------- ----- --------- ----- --------- -----
Options outstanding, end
of year............... 1,073,000 $0.01 1,545,750 $0.16 2,430,662 $2.54
========= ===== ========= ===== ========= =====
Options exercisable, end
of year............... 96,250 $0.01 296,552 $0.01 640,663 $0.09
========= ===== ========= ===== ========= =====
Options available for
grant, end of year.... 927,000 403,231 --
========= ========= =========
</TABLE>
The following table summarizes information about the Company's stock
options outstanding at July 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- -----------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (years) Price Outstanding Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.01--$0.17 961,392 2.9 $0.06 584,543 $0.04
$0.18--$1.00 362,791 4.0 $0.77 56,120 $0.57
$1.01--$1.28 380,750 4.5 $1.21 -- --
$1.29--$7.40 725,729 4.7 $7.40 -- --
--------- ------- -----
2,430,662 3.9 $2.54 640,663 $0.09
========= ======= =====
</TABLE>
(b) Director Stock Option Plan
In December 1998, the Company's Board of Directors and Stockholders
approved the 1998 Director Stock Option Plan (the "1998 Director Plan"). Under
the 1998 Director Plan, each NaviSite director (who is not also an employee of
NaviSite, any subsidiary of NaviSite or of CMGI) is entitled to receive, upon
the date of his or her election, a non-statutory option to purchase common
stock as defined. A maximum number of 125,000 shares of common stock are
authorized for issuance under the 1998 Director Plan. Each automatic grant will
have an exercise price equal to the current fair market value of the common
stock at the time of grant and will have a maximum term of ten years, subject
to earlier termination following the optionee's cessation of service on the
board of directors. Each automatic option grant shall vest and become
exercisable with respect to 20% of the options granted on the first anniversary
of the date of the grant, and shall become exercisable with respect to an
additional 20% on the date of each annual stockholders' meeting at which the
option-holder is re-elected as director.
As of July 31, 1999, 50,000 options were granted and outstanding under the
1998 Director Plan with a weighted average exercise price of $0.34. See also
Note 14.
F-18
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(c) CMGI 1986 Stock Option Plan
Certain NaviSite employees have been granted options for the purchase of
CMGI common stock under the CMGI 1986 Stock Option Plan (the "1986 Plan").
Options under the 1986 Plan are granted at fair market value on the date of the
grant and are generally exercisable in equal cumulative installments over a
four-to-ten year period beginning one year after the date of grant. Outstanding
options under the 1986 Plan expire through 2007. Under the 1986 Plan, non-
qualified stock options or incentive stock options may be granted to CMGI's or
its subsidiaries' employees, as defined. The Board of Directors of CMGI
administers this plan, selects the individuals to whom options will be granted
and determines the number of shares and exercise price of each option. The
following table reflects activity and historical exercise prices of stock
options granted to Company employees under the 1986 Plan for the three years
ended July 31, 1999:
<TABLE>
<CAPTION>
1997 1998 1999
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year..... 36,080 $0.51 20,880 $1.41 88,840 $ 2.26
Granted................. 8,000 1.95 80,000 2.31 331,600 44.19
Exercised............... (23,200) 0.19 (12,040) 1.10 (33,671) 2.23
------- ------- -------
Options outstanding, end
of year............... 20,880 $1.41 88,840 $2.26 386,769 $38.21
======= ===== ======= ===== ======= ======
Options exercisable, end
of year............... 6,426 $0.96 1,670 $1.78 7,000 $ 2.29
======= ===== ======= ===== ======= ======
</TABLE>
The following table summarizes information about stock options granted to
Company employees under the 1986 Plan outstanding at July 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Prices Outstanding (years) Price Outstanding Price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.61--$1.95 3,501 2.1 $ 1.88 333 $1.78
$1.96--$2.50 51,668 3.2 $ 2.31 6,667 2.31
$2.51--$10.00 231,600 4.1 $ 10.00 -- --
$10.01--$125.00 100,000 4.7 $123.38 -- --
------- -----
386,769 4.1 $ 38.21 7,000 $2.29
======= =====
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), sets
forth a fair-value based method of recognizing stock-based compensation
expense. As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for the stock-based compensation plans in which the
Company's employees participate. Had compensation cost for awards in fiscal
1997, 1998 and 1999 under the three stock-based compensation plans in which the
Company's employees participate been determined based on the fair value method
set forth under SFAS 123, the pro forma effect on the Company's net loss would
have been as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
July 31, 1997 July 31, 1998 July 31, 1999
-------------- ----------------- ------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- ----- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net loss applicable to
common stockholders
(in thousands)........ $(948) $(955) $(9,172) $(9,273) $(24,704) $(26,161)
===== ===== ======= ======= ======== ========
Net loss per share...... $(.24) $(.24) $(1.14) $(1.16) $(7.41) $(7.85)
===== ===== ======= ======= ======== ========
</TABLE>
F-19
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
The pro forma per share net loss reflects the fair-value compensation cost
associated with option grants to the Company's employees under the 1986 Plan.
The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions for fiscal 1997, 1998 and 1999, respectively: volatility of
59.00%, 75.50% and 100%; risk-free interest rate of 6.19%, 5.48% and 5.16%;
4-year expected life of options for all years; and 0% dividend yield for all
years. The weighted average fair value per share of options granted during
fiscal 1997, 1998 and 1999 was $0.01, $0.21 and $3.08, respectively.
The fair value of each stock option granted under the 1986 Plan has been
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions for fiscal 1997, 1998 and 1999,
respectively: volatility of 66.69%, 90.07% and 100%; risk-free interest rate of
6.19%, 5.50% and 5.16%; expected life of options of 6.2, 4.2 years and 4.3
years; and 0% dividend yield for all years. The weighted average fair value per
share of options granted during fiscal 1997, 1998 and 1999 was $1.30, $1.58 and
$31.58, respectively.
(11) Comprehensive Income
The Company adopted SFAS No. 130, Reporting Comprehensive Income (SFAS
130). This statement requires that all components of comprehensive income be
reported in the financial statements in the period in which they are
recognized. For each year reported, comprehensive loss under SFAS 130 was
equivalent to the Company's net loss reported in the accompanying consolidated
statements of operations.
(12) Related Party Transactions
CMGI has provided the Company with accounting, systems and related services
("enterprise services") at amounts that approximated the fair value of services
received in each of the periods presented in these financial statements. The
Company also occupies facilities that are leased by CMGI, whereby CMGI charges
the Company for its share of rent and related facility costs for CMGI's
corporate headquarters through an allocation based upon the company's headcount
located on the premises in relation to total headcount for all CMGI companies
located in the premises. The Company has also purchased certain employee
benefits (including 401(k) plan participation by employees of the Company) and
insurance (including property and casualty insurance) through CMGI. CMGI also
has provided the Company with Internet marketing and business development
services. Amounts due CMGI are included in "Debt to CMGI" on the consolidated
balance sheets. The following table summarizes the expenses allocated to the
Company by CMGI for enterprise services, rent and facilities, human resources
and benefits and Internet marketing and business development:
<TABLE>
<CAPTION>
Year Ended
July 31,
--------------
1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Enterprise Services.......................................... $48 $157 $240
Rent and Facilities.......................................... -- $ 15 $251
Human Resources and Benefits................................. -- $ 46 $530
Internet Marketing and Business Development. ................ -- $ 71 $325
</TABLE>
F-20
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
The Company sells its products and services to companies in which CMGI has
an investment interest or a significant ownership interest. Total revenue
realized from services to related parties was $3,361,000, $3,871,000 and
$7,058,000 for the fiscal years ended July 31, 1997, 1998 and 1999,
respectively. These related parties typically receive a 10% discount for
services provided by the Company. The related cost of revenue is consistent
with the costs incurred on similar transactions with unrelated parties.
The Company provides administrative services related to the leasing of
equipment on behalf of CMGI and related entities. These services include the
negotiation of lease terms and conditions and payment of lessors' monthly lease
charges. CMGI or the related entity is then charged the actual lease fees.
Under this arrangement, CMGI bears all liability for payment, and NaviSite is
not financially obligated under the leases.
(13) Concentration of Credit Risk
Amounts included in the consolidated balance sheets for accounts
receivable, debt to CMGI, accounts payable, accrued expenses and notes payable
approximate their fair value due to their short maturities. Financial
instruments that potentially subject the Company to concentration of credit
risk consist primarily of trade receivables. The Company performs periodic
credit evaluations of its customers' financial condition and generally does not
require collateral or other security against trade receivable balances;
however, it does maintain an allowance for potential credit losses and such
losses have been within management's expectations.
For the year ended July 31, 1997, all of the Company's revenue was earned
from related parties. Three of these related parties accounted for 46%, 28% and
14% of revenue earned during the year ended July 31, 1997. For the fiscal year
ended July 31, 1998, 96% ($3,871,000) of the Company's revenue was earned from
related parties. Three of these related parties accounted for 40%, 19% and 11%
of revenue earned for the fiscal year ended July 31, 1998. For the fiscal year
ended July 31, 1999, 67% ($7,058,000) of the Company's revenue was earned from
related parties. Two of these related parties accounted for 22% and 16% of
revenue earned during the fiscal year ended July 31, 1999.
Accounts receivable at July 31, 1998 included 63% due from related parties,
with two related entities comprising 37% and 15%. Accounts receivable at July
31, 1999 included 30% due from related parties, with one related entity
comprising 13%.
(14) Subsequent Events
(a) 1999 Employee Stock Purchase Plan
The 1999 Employee Stock Purchase Plan (the "Stock Purchase Plan") was
adopted by the Company's Board of Directors and Stockholders in October 1999.
The Stock Purchase Plan provides for the issuance of a maximum of 50,000 shares
of the Company's common stock.
(b) Deferred Compensation Plan
A Deferred Compensation Plan (the "Deferred Compensation Plan") was adopted
by the Company's Board of Directors in October 1999. Under the terms of the
Deferred Compensation Plan, the Company's employees who are selected by the
Board of Directors (as well as certain of the Company's employees who
previously participated in a deferred compensation plan sponsored by CMGI) will
be able to elect to defer a portion of their compensation for the following
calendar year. The Company also may make discretionary contributions to a
participant's account, to which the participant generally will become entitled
after five years of service with the Company.
F-21
<PAGE>
NAVISITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, 1997, 1998 and 1999
(c) 1999 Director Stock Option Plan
In October 1999, the Company terminated the 1998 Director Plan and the
Board of Directors and the Stockholders approved and adopted the 1999 Stock
Option Plan for Non-Employee Directors (the "1999 Director Plan"). A total of
250,000 shares of common stock are reserved for issuance under the 1999
Director Plan. Directors who are not NaviSite employees or otherwise
affiliates, employees or designees of an institutional or corporate investor
that owns more than 5% of outstanding common stock will be eligible to receive
non-statutory stock options under the 1999 Director Plan. Under the 1999
Director Plan, the Company will grant an initial option to acquire 25,000
shares of common stock to each eligible director who is elected a director for
the first time.
The Company also will grant to eligible directors an additional option for
the purchase of 6,250 shares of common stock on the first, and each subsequent,
anniversary of the grant of each director's initial option if the director is
still serving as one of the Company's directors on that anniversary date. The
Board of Directors has discretion to increase to up to 100,000 shares the
number of shares of common stock subject to any initial option or additional
option covering any vesting period of up to 48 months that may be granted to an
eligible director after the date of the increase.
(d) Series B Preferred Stock
Immediately prior to the completion of the initial public offering, CMGI
will convert intercompany debt in the aggregate amount of approximately
$12,257,000, representing funds advanced subsequent to the quarter ended July
31, 1999, into 111,424 shares of Series B Preferred Stock (based upon a
conversion price of $110, assuming an initial public offering price of $11.00
per share). The Company does not expect to borrow funds from CMGI after the
completion of the initial public offering.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
Servercast Communications, L.L.C.:
We have audited the accompanying balance sheets of Servercast
Communications, L.L.C. as of December 31, 1997 and June 30, 1998, and the
related statements of operations, members' equity (deficit), and cash flows for
the period from inception (February 6, 1997) through December 31, 1997 and for
the six months ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Servercast Communications,
L.L.C. as of December 31, 1997 and June 30, 1998, and the results of its
operations and its cash flows for the period from inception (February 6, 1997)
through December 31, 1997 and for the six months ended June 30, 1998, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
May 28, 1999
Boston, Massachusetts
F-23
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
BALANCE SHEETS
December 31, 1997 and June 30, 1998
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ --------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................. $ 13,354 $ --
Accounts receivable, net of allowance for doubtful
accounts of $0 and $1,650, respectively............. 28,432 82,777
Prepaid expenses and other current assets............... 2,598 1,299
Members contributions receivable........................ 3,500 3,500
-------- --------
Total current assets............................... 47,884 87,576
-------- --------
Property and equipment:
Servers and related equipment......................... 135,559 152,864
Software licenses..................................... 6,387 12,308
Office computer equipment............................. 2,667 3,437
Furniture............................................. 1,581 1,581
-------- --------
146,194 170,190
Less accumulated depreciation and amortization.......... 12,762 35,300
-------- --------
133,432 134,890
-------- --------
Other assets............................................ 1,079 1,004
-------- --------
Total assets............................................ $182,395 $223,470
======== ========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Cash overdraft........................................ $ -- $ 7,621
Note payable to NaviSite.............................. -- 25,000
Accounts payable...................................... 87,334 188,162
Accrued expenses...................................... 50,700 42,360
-------- --------
Total current liabilities............................... 138,034 263,143
Commitments and contingencies
Members' equity (deficit)............................... 44,361 (39,673)
-------- --------
Total liabilities and members' equity (deficit)......... $182,395 $223,470
======== ========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
STATEMENTS OF OPERATIONS
For the period from inception (February 6, 1997) through December 31, 1997
and for the six months ended June 30, 1998
<TABLE>
<CAPTION>
Period from
inception
(February 6,
1997) through Six months
December 31, ended June 30,
1997 1998
------------- --------------
<S> <C> <C>
Net revenue....................................... $ 255,622 $ 224,674
Cost of revenue................................... 171,923 154,773
--------- ---------
Gross profit.................................... 83,699 69,901
--------- ---------
Selling, general and administrative expenses...... 295,794 203,852
--------- ---------
Loss from operations............................ (212,095) (133,951)
Interest expense.................................. -- 83
--------- ---------
Net loss........................................ $(212,095) $(134,034)
========= =========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
For the period from inception (February 6, 1997) through December 31, 1997
and for the six months ended June 30, 1998
<TABLE>
<CAPTION>
Members'
Equity (Deficit)
----------------
<S> <C>
Members' contributions..................................... $ 256,456
Net loss for the period from inception (February 6, 1997)
through December 31, 1997................................ (212,095)
---------
Balance at December 31, 1997................................. 44,361
Members' contributions..................................... 50,000
Net loss for the six months ended June 30, 1998............ (134,034)
---------
Balance at June 30, 1998..................................... $ (39,673)
=========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
STATEMENTS OF CASH FLOWS
For the period from inception (February 6, 1997) through December 31, 1997
and for the six months ended June 30, 1998
<TABLE>
<CAPTION>
Period from
inception
(February 6,
1997) through Six months
December 31, ended June 30,
1997 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(212,095) $(134,034)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization................... 13,512 22,613
Provision for doubtful accounts................. -- 1,650
Changes in operating assets and liabilities:
Accounts receivable............................ (28,432) (55,995)
Prepaid expenses and other current assets...... (2,598) 1,299
Deposits....................................... (1,079) --
Accounts payable............................... 87,334 100,828
Accrued expenses............................... 50,700 (8,340)
--------- ---------
Net cash used by operating activities........ (92,658) (71,979)
--------- ---------
Cash flows from investing activities:
Acquisitions of property and equipment........... (146,194) (23,996)
Other assets..................................... (750) --
--------- ---------
Net cash used by investing activities........ (146,944) (23,996)
--------- ---------
Cash flows from financing activities:
Cash overdraft................................... -- 7,621
Proceeds from note payable to NaviSite........... -- 25,000
Members' contributions........................... 252,956 50,000
--------- ---------
Net cash provided by financing activities.... 252,956 82,621
--------- ---------
Change in cash.................................... 13,354 (13,354)
Cash at beginning of period....................... -- 13,354
--------- ---------
Cash at end of period............................. $ 13,354 $ --
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest........................... $ -- $ 83
========= =========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During the period from inception (February 6, 1997) through December 31,
1997, the Company issued $3,500 in membership interests to an individual,
in exchange for a subscription to contribute the same amount. Such amount
was received in cash subsequent to June 30, 1998.
See accompanying notes to financial statements.
F-27
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and June 30, 1998
(1) Organization
Servercast Communications, L.L.C., ("Servercast" or the "Company") was
organized on February 6, 1997 as a Delaware limited liability company. The
Company's operating agreement indicates that Servercast will cease to operate
no later than December 1, 2050. Profits and losses are allocated to members in
accordance with the proportionate percentage interest as determined by the fair
market value of their original capital contribution. As a limited liability
company, the members' liability is limited to the amounts of their investment
in the Company.
The Company provides Web site hosting and maintenance for a variety of
companies engaging in electronic commerce. Servercast also develops Web sites.
Servercast's customers are located throughout the United States.
(2) Summary of Significant Accounting Policies
(a) Revenue Recognition
Revenue for hosting and maintaining Web sites is recognized ratably over
the life of the contract, typically one year. Revenue from the development of
Web sites is recognized as the services are performed.
(b) Cash Equivalents
For purposes of the statement of cash flows, Servercast considers all
highly liquid debt instruments with an original maturity of three months or
less to be cash equivalents.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided for on the straight-line basis over the estimated useful lives of
the related assets. The depreciation period is generally three to seven years.
(d) Income Taxes
The Company is treated as a partnership for federal and state tax purposes
and thus is not subject to income taxes. The members of the Company must
include their proportionate share of the Company's profits and losses in their
respective personal tax returns. Accordingly, no provision has been made for
income taxes.
For income tax purposes, the Company has elected to report under the
accrual basis of accounting. At December 31, 1997 and June 30, 1998, the tax
bases of the Company's assets and liabilities are $8,167 and $9,092 less,
respectively, than the financial reporting bases of these assets and
liabilities. The difference results from the use of different methods related
to reporting depreciation, and the Company's allowance for doubtful accounts
which is not deductible until the accounts are written-off.
(e) Long-Lived Asset Impairment
The Company adopted Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of ("SFAS No.
121"). SFAS No. 121 addresses the accounting for the impairment of long-lived
assets, certain identifiable intangible assets and goodwill when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company adoption of SFAS No. 121 had no material impact on
its results of operations or financial condition.
F-28
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and June 30, 1998
(f) Fair Value of Financial Instruments
The Company adopted Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Statements" ("SFAS No. 107"), which
requires that the Company estimate and disclose the fair value of each material
class of financial instrument for which it is practicable to estimate that
value. In accordance with SFAS No. 107, the Company has identified its material
financial instruments as cash, trade receivables and payables and notes
payable. The carrying amount of cash, trade receivables, trade payables and
notes payable approximate fair value because of the short-term nature of these
financial instruments.
(g) Concentration of Credit Risk
Financial instruments which subject the Company to credit risk consist
principally of trade receivables. The Company's policy with respect to the
credit risk of trade receivables is to evaluate, prior to the extension of
credit, each customer's financial condition and to determine the amount of open
credit to be extended.
(h) Management's Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(i) Comprehensive Income
On January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 131, "Reporting Comprehensive Income" ("SFAS
No. 131"). SFAS No. 131 requires that the components of comprehensive income be
reported in the financial statements. For the period from inception (February
6, 1997) through December 31, 1997 and for the six months ended June 30, 1998,
the Company's net loss was equal to its total comprehensive loss.
(3) Commitments
The Company leases certain office facilities under operating leases with an
initial term of less than one year. Additionally, the Company leases certain
floor space at facilities that house its equipment used for Web site hosting.
The lessors of these locations provide the Company with Web hosting and
maintenance services for the benefit of the Company's customers. These
agreements also have initial terms of one year or less.
For the period from inception (February 6, 1997) through December 31, 1997
and for the six months ended June 30, 1998, rent and Web hosting expenses under
these agreements amounted to $102,117 and $68,901, respectively. Of these
amounts, $64,352 and $47,769 were included in cost of revenues in the
accompanying statements of operations, respectively. For the period from
inception (February 6, 1997) through December 31, 1997 and for the six months
ended June 30, 1998, $33,305 and $12,175 of the rents included in selling,
general and administrative expenses were paid to a related party who is a
member of the Company. Subsequent to the sale of the Company on July 1, 1998
(see note 6), the Company relocated its Web hosting equipment to sites
maintained by the purchaser, and, accordingly, the Company no longer leases
these Web hosting sites from unrelated third parties.
F-29
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and June 30, 1998
(4) Note Payable
At June 30, 1998, note payable represented a $25,000 note payable, due upon
demand, to NaviSite Internet Services, Inc. ("NaviSite") (see note 6). The note
is secured by substantially all assets of the Company and bears interest at a
rate of 5.50% per annum.
(5) Major Customers
At December 31, 1997, three customers accounted for 31%, 34% and 26% of
accounts receivable, respectively. Revenue earned from these customers for the
period from inception (February 6, 1997) through December 31, 1997 amounted to
36%, 22% and 12%, respectively, of total revenue during the period.
At June 30, 1998, three customers accounted for 30%, 20% and 18% of
accounts receivable, respectively. Revenue earned from these customers for the
six months ended June 30, 1998 amounted to 28%, 5% and 6% of total revenue
during the period.
(6) Subsequent Event
Effective July 1, 1998, NaviSite purchased the outstanding membership
interests of all members in exchange for a $1,000,000 note payable. The
acquisition will be recorded using the purchase method of accounting.
F-30
<PAGE>
SERVERCAST COMMUNICATIONS, L.L.C.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The unaudited pro forma combined condensed statement of operations of the
Company for the year ended July 31, 1998 gives pro forma effect to the July 1,
1998 acquisition of Servercast Communications, L.L.C. ("Servercast") as if it
had occurred on August 1, 1997. The results of operations of the Company for
the fiscal year ended July 31, 1998 have been combined with the results of
operations of Servercast for the period from August 1, 1997 through June 30,
1998 (the results of operations of Servercast for the period July 1, 1998
through July 31, 1998 are included in the consolidated statement of operations
of the Company).
The Company has accounted for the acquisition under the purchase method of
accounting. The total cost of the acquired business of $1,045,000, including
direct acquisition costs, has been allocated to the underlying tangible and
intangible assets acquired and liabilities assumed based on their respective
fair values, resulting in goodwill of $1,014,000.
The unaudited pro forma financial data are not necessarily indicative of
the results of operations of the Company had the transaction occurred on August
1, 1997, nor are they necessarily indicative of the results of operations which
may be expected to occur in the future. Furthermore, the unaudited pro forma
financial data should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this prospectus.
F-31
<PAGE>
NAVISITE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the year ended July 31, 1998
<TABLE>
<CAPTION>
Year ended July 31, 1998
--------------------------------
Pro Forma
NaviSite Servercast Adjustments Total
-------- ---------- ----------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Revenue........................ $ 158 $ 361 $ -- $ 519
Revenue, related parties....... 3,871 -- -- 3,871
-------- ------ ------ --------
Total revenue............... 4,029 361 -- 4,390
Cost of revenue.................. 8,876 310 -- 9,186
-------- ------ ------ --------
Gross loss..................... (4,847) 51 -- (4,796)
-------- ------ ------ --------
Operating expenses:
Selling and marketing.......... 2,530 93 -- 2,623
General and Administrative..... 1,412 254 186 (a) 1,852
Product development............ 287 -- -- 287
-------- ------ ------ --------
Total operating expenses.... 4,229 347 186 4,762
-------- ------ ------ --------
Loss from operations............. (9,076) (296) (186) (9,558)
Other income (expense):
Interest expense, net.......... (85) -- (50)(b) (135)
Other expense, net............. (11) -- -- (11)
-------- ------ ------ --------
Net loss......................... $ (9,172) $ (296) $ (236) $ (9,704)
======== ====== ====== ========
Pro forma basic and diluted net
loss per share................. $ (1.14) $ (1.21)
======== ========
Pro forma weighted average number
of basic and diluted shares
outstanding.................... 8,017 8,017
======== ========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Year ended July 31, 1998
(a) Reflects goodwill amortization recorded by NaviSite for the eleven-month
period ending June 30, 1998 prior to the acquisition of Servercast.
Goodwill is being amortized over five years, using the straight-line
method.
(b) Reflects interest expense related to 5.5% notes payable in the amount of
one million dollars for the eleven-month period ending June 30, 1998 prior
to the acquisition of Servercast.
F-32
<PAGE>
The inside back cover page contains the following:
[In the top fourth of the page, flush left, is the following text:]
NaviSite's State-of-the-Art Data Center Infrastructure
NaviSite has invested in world-class infrastructure that combines state-of-
the-art facilities and the latest Internet and network technologies, creating a
solid foundation for all our customer's Internet outsourcing needs.
[In the middle of the page, flush left, one on top of the other, two
pictures of NaviSite data center hardware. To the right of the pictures,
centered vertically, is the following text:]
The Data Center
NaviSite's data centers are built to carrier-class standards and include
fully redundant network, fiber and facility components in an effort to ensure
no single points of failure and to help keep our customers' Web sites and key
applications up and running.
[In the lower fourth of the page, flush left, is a picture of the control
room in a NaviSite data center. To the right of it is the following text:]
The Network Operations Center
Each NaviSite data center has a Network Operations Center with expert staff
on hand to monitor customers' Web, database and application servers, as well as
network connectivity, 24-hours-a-day, seven-days-a-week.
<PAGE>
[The outside back cover page contains the
following:]
[LOGO]
NaviSite Corporate
Headquarters:
300 Federal Street
Andover, MA 01810
888.298.8222 p
978.552.3500 f
[email protected]
www.navisite.com
West Coast Location:
1700 Green Hills Road
Scotts Valley, CA 95066
888.755.5525 p
831.439.6789 f
A CMGi company
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses, other than underwriting discounts and commissions, expected
to be incurred by us in connection with the issuance and distribution of the
securities being registered under this registration statement are estimated to
be as follows:
<TABLE>
<S> <C>
SEC registration fee......................................... $ 19,460
NASD filing fees............................................. 7,500
Nasdaq National Market listing fee........................... 95,000
Printing and engraving expenses.............................. 185,000
Legal fees and expenses...................................... 750,000
Accounting fees and expenses................................. 450,000
Blue Sky fees and expenses (including legal fees)............ 12,500
Transfer agent fees.......................................... 5,000
Miscellaneous................................................ 75,540
-----------
Total...................................................... $ 1,600,000
===========
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Delaware General Corporation Law and our revised certificate of
incorporation provide for indemnification of our officers and directors for
liabilities and expenses that they may incur in such capacities.
Our revised certificate of incorporation generally provides that we shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding by reason of the fact that he or
she is or was a director or officer of ours, or is or was serving at our
request as a director, officer, employee or agent of another entity, against
expenses incurred by him or her in connection with such proceeding. An officer
or director shall not be entitled to indemnification by us if:
. the officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interests;
or
. with respect to any criminal action or proceeding, the officer or
director had reasonable cause to believe his conduct was unlawful.
Our revised certificate of incorporation limits the liability of our
directors to the maximum extent permitted by Delaware law. Section 145 of the
Delaware General Corporation Law provides that directors will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
II-1
<PAGE>
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of NaviSite against some liabilities, including liabilities under the
Securities Act. Reference is made to the form of underwriting agreement filed
as Exhibit 1.1 hereto.
Our officers and directors are currently insured under a policy procured by
CMGI that provides coverage against losses arising from claims against them for
any actual or alleged act, omission, misstatement, misleading statement,
neglect, error or breach of duty by them in their capacity as officers or
directors of NaviSite. We also have obtained our own liability insurance for
our officers and directors effective as of September 20, 1999. At the present
time, there is no pending litigation or proceeding involving any director,
officer, employee or agent of NaviSite in which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
Item 15. Recent Sales of Unregistered Securities.
In the three fiscal years preceding the filing of this registration
statement, NaviSite has issued the following securities that were not
registered under the Securities Act:
(a) Issuance of Capital Stock.
In December 1998, NaviSite issued 60,589 shares of common stock and
1,323,953 shares of Series A convertible preferred stock to NaviSite Internet
Services Corporation, our predecessor and a wholly owned subsidiary of CMGI,
Inc., in exchange for a contribution of assets from NaviSite Internet Services
Corporation. In April 1999, NaviSite issued an additional 8,749 shares of
common stock to NaviSite Internet Services Corporation. Upon the merger of
NaviSite Internet Services Corporation with and into CMGI, which was effective
as of October 1, 1999, the 69,338 shares of common stock held of record by
NaviSite Internet Services Corporation were exchanged for outstanding shares of
NaviSite Internet Services Corporation which were issued to NaviSite employees
pursuant to option exercises under the 1997 NaviSite Internet Services
Corporation Equity Incentive Plan. The 1998 NaviSite, Inc. Equity Incentive
Plan replaces the 1997 NaviSite Internet Services Corporation Equity Incentive
Plan. Upon the merger of NaviSite Internet Services Corporation with and into
CMGI, all of the outstanding options granted under the 1997 Equity Incentive
Plan were cancelled and replaced with an equivalent amount of options issued in
accordance with our 1998 Equity Incentive Plan.
The 1,323,953 shares of Series A convertible preferred stock were
distributed to CMGI upon consummation of the merger. Every one share of Series
A convertible preferred stock will convert into 10 shares of common stock upon
completion of this offering.
In June 1999, NaviSite issued 541,859 shares of its Series B convertible
preferred stock to CMGI in exchange for cancellation of an aggregate of
$14,712,932 of intercompany debt pursuant to a secured convertible demand note
to CMGI dated May 1, 1999. It is expected that every one share of Series B
convertible preferred stock will convert into 10 shares of common stock upon
completion of this offering.
In June 1999, pursuant to the Series C Preferred Stock Purchase Agreement
between NaviSite and Dell USA L.P., NaviSite issued 1,095,472 shares of Series
C convertible preferred stock to Dell at a purchase price of $7.40 per share or
$8,106,493, in the aggregate. It is expected that upon completion of this
offering, the 1,095,472 shares of Series C convertible preferred stock will
convert into 1,095,472 shares of common stock.
In June 1999, pursuant to the Series D Convertible Preferred Stock Purchase
Agreement between NaviSite and Microsoft Corporation, NaviSite issued 993,243
shares of its Series D convertible preferred stock to Microsoft, at a purchase
price of $7.40 per share or $7,350,000, in the aggregate. It is expected that
upon completion of this offering, the 993,243 shares of Series D convertible
preferred stock will convert into 993,243 shares of common stock.
In October 1999, options were exercised for an aggregate of 22,996 shares
of common stock, for an aggregate consideration of $14,651.50.
II-2
<PAGE>
(b) Grants of Stock Options.
In December 1998, the NaviSite, Inc. 1998 Equity Incentive Plan replaced
the 1997 NaviSite Internet Services Corporation Equity Incentive Plan. As noted
in Item 15(a) above, as part of the corporate reorganization of NaviSite
Internet Services Corporation, all options outstanding under the 1997 NaviSite
Internet Services Corporation Equity Incentive Plan were cancelled and replaced
with an equivalent amount of options issued in accordance with our 1998 Equity
Incentive Plan upon the merger of NaviSite Internet Services Corporation with
and into CMGI. As of September 30, 1999, we had granted options to purchase an
aggregate of 2,564,161 shares of common stock under the 1998 Equity Incentive
Plan (which number includes options granted in replacement of options granted
by NaviSite Internet Services Corporation under the 1997 NaviSite Internet
Services Corporation Equity Incentive Plan), exercisable at a weighted average
exercise price of $3.03 per share.
On December 28, 1998, we granted options to purchase 50,000 shares of
common stock under our 1998 Director Stock Option Plan exercisable at $0.34 per
share.
On August 18, 1999, we granted options to purchase 25,000 shares of common
stock under our 1998 Director Stock Option Plan at an exercise price per share
equal to the per share public offering price set forth on the cover page of
this prospectus.
No underwriters were involved in the foregoing sales of securities. These
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder or, in the case of options to purchase common stock, Rule 701 under
the Securities Act. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
1.1** Form of Underwriting Agreement
2.1** Asset Assignment Agreement dated December 28, 1998 among NaviSite
Internet Services Corporation and NaviSite, Inc.
2.2** Purchase Agreement dated as of July 1, 1998 among NaviSite Internet
Services Corporation, Neil Black, in his capacity as Managing Member
of Servercast Communications, L.L.C. and all of the other members of
Servercast Communications, L.L.C. individually, as named therein
(Exhibits and schedules have been omitted. The Registrant hereby
undertakes to furnish supplementally copies of the exhibits and
schedules to the Commission upon request.)
3.1** Certificate of Incorporation, as amended
3.2** Form of Amended and Restated Certificate of Incorporation (to become
effective upon the closing of this offering)
3.3** By-Laws, as amended
3.4** Form of Amended and Restated By-Laws (to become effective upon the
closing of this offering)
4.1** Specimen certificate representing shares of common stock
4.2** Series C Convertible Preferred Stock Purchase Agreement dated as of
June 3, 1999 by and between NaviSite, Inc. and Dell USA L.P.
4.3** Series D Convertible Preferred Stock Purchase Agreement dated as of
June 3, 1999 by and between NaviSite, Inc. and Microsoft Corporation
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1** Form of Amended and Restated 1998 Equity Incentive Plan
10.2** Form of Amended and Restated 1998 Director Stock Option Plan
10.3** Form of 1999 Employee Stock Purchase Plan
10.4** Net Lease Agreement dated as of March 20, 1997 by and between CMG
Information Technologies, Inc. and Borland International, Inc., as
amended by First Amendment dated June 1, 1998
10.5** Lease dated as of March, 1997 by and between William J. Callahan and
William J. Callahan, Jr., as trustees of Andover Park Realty Trust,
and CMG Information Services, Inc.
10.6** Lease dated as of May 14, 1999 by and between 400 River Limited
Partnership and NaviSite, Inc.
10.7** Lease made as of April 30, 1999 by and between CarrAmerica Realty
Corporation and NaviSite, Inc.
10.8** Term Note in favor of Peter C. Kirwan, Jr. dated July 1, 1998,
executed by NaviSite Internet Services Corporation
10.9** Bonus Agreement dated as of July 1, 1998 by and between NaviSite
Internet Services Corporation and Peter C. Kirwan, Jr.
10.10** Form of Director Indemnification Agreement
10.11** Form of Facilities and Administrative Support Agreement between
NaviSite, Inc. and CMGI, Inc.
10.12** Form of Investor Rights Agreement by and among NaviSite, Inc. and
CMGI, Inc.
10.13** Form of Tax Allocation Agreement between NaviSite, Inc. and CMGI,
Inc.
10.14** Secured Convertible Demand Note issued by NaviSite, Inc. to CMGI,
Inc. dated as of May 1, 1999
10.15** Intellectual Property Security Agreement between NaviSite, Inc. and
CMGI, Inc. dated as of May 1, 1999
10.16** Security Agreement between NaviSite, Inc. and CMGI, Inc. dated as of
May 1, 1999
10.17** Form of 1999 Stock Option Plan for Non-Employee Directors
10.18** Form of Deferred Compensation Plan
10.19 Form of Standard Form of Agreements between NaviSite, Inc., as Owner,
and XL Construction, as Design/Builder, for NaviSite, Inc. Zanker
Road Data Center, San Jose, California
10.20 Form of Cost Plus Fee Standard Form of Agreement between NaviSite,
Inc., as Tenant, and Gilbane Building Company, as Construction
Manager
21.1** Subsidiaries
23.1** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
23.2 KPMG LLP Consent and Report on Schedule
23.3 Consent of KPMG LLP (Servercast Communications, L.L.C.)
24.1** Power of Attorney (included on the signature page of this
registration statement)
24.2** Power of Attorney for Stephen D.R. Moore
27** Financial Data Schedule
</TABLE>
- --------
** Previously filed.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts
II-4
<PAGE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) that for the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) that for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
Amendment No. 4 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Andover, Massachusetts, on October
20, 1999.
NaviSite, Inc.
/s/ Kenneth W. Hale
By
-----------------------------------
Kenneth W. Hale
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the registration statement has been signed by the following persons in
the capacities indicated on October 20, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Executive Officer and Director
___________________________________________ (Principal Executive Officer)
Joel B. Rosen
/s/ Kenneth W. Hale Chief Financial Officer, Treasurer and
___________________________________________ Secretary (Principal Financial and
Kenneth W. Hale Accounting Officer)
* President and Director
___________________________________________
Robert B. Eisenberg
* Chairman of the Board of Directors
___________________________________________
David S. Wetherell
* Director
___________________________________________
Craig D. Goldman
* Director
___________________________________________
Andrew J. Hajducky III
* Director
___________________________________________
</TABLE> Stephen D.R. Moore
* By /s/ Kenneth W. Hale
-----------------------------------
Kenneth W. Hale
Chief Financial Officer
<PAGE>
Schedule II
NAVISITE, INC.
VALUATION AND QUALIFYING ACCOUNTS
for the years ended July 31, 1997, 1998 and 1999
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
Beginning Charged to from at End
of Year Expense Reserves of Year
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Description
Year ended July 31, 1997:
Allowance for doubtful accounts..... $ -- $-- $ -- $ --
Year ended July 31, 1998:
Allowance for doubtful accounts..... $ -- $ 8 $ (1) $ 7
Year ended July 31, 1999:
Allowance for doubtful accounts..... $ 7 $275 $(20) $ 262
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
1.1** Form of Underwriting Agreement
2.1** Asset Assignment Agreement dated December 28, 1998 among NaviSite
Internet Services Corporation and NaviSite, Inc.
2.2** Purchase Agreement dated as of July 1, 1998 among NaviSite Internet
Services Corporation, Neil Black, in his capacity as Managing Member
of Servercast Communications, L.L.C. and all of the other members of
Servercast Communications, L.L.C. individually, as named therein
(Exhibits and schedules have been omitted. The registrant hereby
undertakes to furnish supplementally copies of the exhibits and
schedules to the Commission upon request.)
3.1** Certificate of Incorporation, as amended
3.2** Form of Amended and Restated Certificate of Incorporation (to become
effective upon the closing of this offering)
3.3** By-Laws, as amended
3.4** Form of Amended and Restated By-Laws (to become effective upon the
closing of this offering)
4.1** Specimen certificate representing shares of common stock
4.2** Series C Convertible Preferred Stock Purchase Agreement dated as of
June 3, 1999 by and between NaviSite, Inc. and Dell USA L.P.
4.3** Series D Convertible Preferred Stock Purchase Agreement dated as of
June 3, 1999 by and between NaviSite, Inc. and Microsoft Corporation
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1** Form of Amended and Restated 1998 Equity Incentive Plan
10.2** Form of Amended and Restated 1998 Director Stock Option Plan
10.3** Form of 1999 Employee Stock Purchase Plan
10.4** Net Lease Agreement dated as of March 20, 1997 by and between CMG
Information Technologies, Inc. and Borland International, Inc., as
amended by First Amendment dated June 1, 1998
10.5** Lease dated as of March, 1997 by and between William J. Callahan and
William J. Callahan, Jr., as trustees of Andover Park Realty Trust,
and CMG Information Services, Inc.
10.6** Lease dated as of May 14, 1999 by and between 400 River Limited
Partnership and NaviSite, Inc.
10.7** Lease made as of April 30, 1999 by and between CarrAmerica Realty
Corporation and NaviSite, Inc.
10.8** Term Note in favor of Peter C. Kirwan, Jr. dated July 1, 1998,
executed by NaviSite Internet Services Corporation
10.9** Bonus Agreement dated as of July 1, 1998 by and between NaviSite
Internet Services Corporation and Peter C. Kirwan, Jr.
10.10** Form of Director Indemnification Agreement
10.11** Form of Facilities and Administrative Support Agreement between
NaviSite, Inc. and CMGI, Inc.
10.12** Form of Investor Rights Agreement by and among NaviSite, Inc. and
CMGI, Inc.
10.13** Form of Tax Allocation Agreement between NaviSite, Inc. and CMGI,
Inc.
10.14** Secured Convertible Demand Note issued by NaviSite, Inc. to CMGI,
Inc. dated as of May 1, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
10.15** Intellectual Property Security Agreement between NaviSite, Inc. and
CMGI, Inc. dated as of May 1, 1999
10.16** Security Agreement between NaviSite, Inc. and CMGI, Inc. dated as of
May 1, 1999
10.17** Form of 1999 Stock Option Plan for Non-Employee Directors
10.18** Form of Deferred Compensation Plan
10.19 Form of Standard Form of Agreement between NaviSite, Inc., as Owner,
and XL Construction, as Design/Builder, for NaviSite, Inc. Zanker
Road Data Center, San Jose, California
10.20 Form of Cost Plus Fee Standard Form of Agreement between NaviSite,
Inc., as Tenant, and Gilbane Construction Company, as Construction
Manager
21.1** Subsidiaries
23.1** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
23.2 KPMG LLP Consent and Report on Schedule
23.3 Consent of KPMG LLP (Servercast Communications, L.L.C.)
24.1** Power of Attorney (included on the signature page of this
Registration Statement)
24.2** Power of Attorney for Stephen D.R. Moore
27** Financial Data Schedule
</TABLE>
- --------
** Previously filed.
<PAGE>
EXHIBIT 10.19
GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
AIA Document A201-1997
1997 Edition - Electronic Format
This document has important legal consequences. Consultation with an attorney
is encouraged with respect to its completion or modification. AUTHENTICATION OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.
This document has been approved and endorsed by The Associated General
Contractors of America.
Copyright 1911, 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1966, 1967,
1970, 1976, 1987, 1997 by The American Institute of Architects. Fifteenth
Edition. Reproduction of the material herein or substantial quotation of its
provisions without written permission of the AIA violates the copyright laws of
the United States and will subject the violator to legal prosecution.
TABLE OF ARTICLES
1. GENERAL PROVISIONS
2. OWNER
3. CONTRACTOR
4. ADMINISTRATION OF THE CONTRACT
5. SUBCONTRACTORS
6. CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
7. CHANGES IN THE WORK
8. TIME
9. PAYMENTS AND COMPLETION
AIA DOCUMENT A201-GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION - 1997
EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW
YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicenced photocopying
violates U.S. copyright laws and will subject the violator to legal prosecution.
This document was electronically produced with permission of the AIA and can be
reproduced without violation until the date of expiration as noted below.
Electronic Format A201-1997
User Document: 2031A201.DOC -- 6/6/1999.
AIA License Number 109286, which expires
on 6/30/1999
<PAGE>
10. PROTECTION OF PERSONS AND PROPERTY
11. INSURANCE AND BONDS
12. UNCOVERING AND CORRECTION OF WORK
13. MISCELLANEOUS PROVISIONS
14. TERMINATION OR SUSPENSION OF THE CONTRACT
<PAGE>
INDEX
Acceptance of Nonconforming Work
9.6.6, 9.9.3, 12.3
Acceptance of Work
9.6.6, 9.8.2, 9.9.3, 9.10.1, 9.10.3, 12.3
Access to Work
3.16, 6.2.1, 12.1
Accident Prevention
4.2.3, 10
Acts and Omissions
3.2, 3.3.2, 3.12.8, 3.18, 4.2.3, 4.3.8, 4.4.1, 8.3.1, 9.5.1, 10.2.5,
13.4.2, 13.7, 14.1
Addenda
1.1.1, 3.11
Additional Cost, Claims for
4.3.4, 4.3.5, 4.3.6, 6.1.1, 10.3
Additional Inspections and Testing
9.8.3, 12.2.1, 13.5
Additional time, Claims for
4.3.4, 4.3.7, 8.3.2
ADMINISTRATION OF THE CONTRACT
3.1.3, 4, 9.4, 9.5
Advertisement or Invitation to Bid
1.1.1
Aesthetic Effect
4.2.13, 4.5.1
Allowances
3.8
All-risk Insurance
11.4.1.1
Applications for Payment
4.2.5, 7.3.8, 9.2, 9.3, 9.4, 9.5.1, 9.6.3, 9.7.1, 9.8.5, 9.10, 11.3,
14.2.4, 14.4.3
Approvals
2.4, 3.1.3, 3.5, 3.10.2, 3.12, 4.2.7, 9.3.2, 13.4.2, 13.5
<PAGE>
Arbitration
4.3.3, 4.4, 4.5.1, 4.5.2, 4.6, 8.3.1, 9.7.1, 11.4.9, 11.4.10
Architect
4.1
Architect, Definition of
4.1.1
Architect, Extent of Authority
2.4, 3.12.7, 4.2, 4.3.6, 4.4, 5.2, 6.3, 7.1.2, 7.3.6, 7.4, 9.2, 9.3.1, 9.4,
9.5, 9.8.3, 9.10.12, 9.10.3, 12.1, 12.2.1, 13.5.1, 13.5.2, 14.2.2, 14.2.4
Architect, Limitations of Authority and Responsibility
2.1.1, 3.3.3, 3.12.4, 3.12.8, 3.12.10, 4.1.2, 4.2.1, 4.2.2, 4.2.3, 4.2.6,
4.2.7, 4.2.10, 4.2.12, 4.2.13, 4.4, 5.2.1, 7.4, 9.4.2, 9.6.4, 9.6.6
Architect's Additional Services and Expenses
2.4, 11.4.101, 12.2.1, 13.5.2, 13.5.3, 14.2.4
Architect's Administration of the Contract
3.1.3, 4.2, 4.3.4, 4.4, 9.4, 9.5
Architect's Approvals
2.4, 3.1.3, 3.5.1, 3.10.2, 4.2.7
Architect's Authority to Reject Work
3.5.1, 4.2.6, 12.1.2, 12.2.1
Architect's Copyright
1.6
Architect's Decisions
4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.4, 4.4.1, 4.4.5, 4.4.6, 4.5, 6.3,
7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.4, 9.9.1, 13.5.2, 14.2.2,
14.2.4
Architect's Inspections
4.2.2, 4.2.9, 4.3.4, 9.4.2, 9.8.3, 9.9.2, 9.10.1, 13.5
Architect's Instructions
3.2.3, 3.3.1, 4.2.6, 4.2.7, 4.2.8, 7.4.1, 12.1, 13.5.2
Architect's Interpretations
4.2.11, 4.2.12, 4.3.6
Architect's Project Representative
4.2.10
<PAGE>
Architect's Relationship with Contractor
1.1.2, 1.6, 3.1.3, 3.2.1, 3.2.2, 3.2.3, 3.3.1, 3.4.2, 3.5.1, 3.7.3, 3.10,
3.11, 3.12, 3.16, 3.18, 4.1.2, 4.1.3, 4.2, 4.3.4, 4.4.1, 4.4.7, 5.2, 6.2.2,
7, 8.3.1, 9.2, 9.3, 9.4, 9.5, 9.7, 9.8, 9.9, 10.2.6, 10.3, 11.3, 11.4.7,
12, 13.4.2, 13.5
Architect's Relationship with Subcontractors
1.1.2, 4.2.3, 4.2.4, 4.2.6, 9.6.3, 9.6.4, 11.4.7
Architect's Representations
9.4.2, 9.5.1, 9.10.1
Architect's Site Visits
4.2.2, 4.2.5, 4.2.9, 4.3.4, 9.4.2, 9.5.1, 9.9.2, 9.10.1, 13.5
Asbestos
10.3.1
Attorneys' Fees
3.18.1, 9.10.2, 10.3.3
Award of Separate Contracts
6.1.1, 6.1.2
Award of Subcontracts and Other Contracts for Portions of the Work
5.2
Basic Definitions
1.1
Bidding Requirements
1.1.1, 1.1.7, 5.2.1, 11.5.1
Boiler and Machinery Insurance
11.4.2
Bonds, Liens
9.10.2
Bonds, Performance, and Payment
7.3.6.4, 9.6.7, 9.10.3, 11.4.9, 11.5
Building Permit
3.7.1
Capitalization
1.3
Certificate of Substantial Completion
9.8.3, 9.8.4, 9.8.5
<PAGE>
Certificates for Payment
4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1, 9.6.6, 9.7.1, 9.10.1, 9.10.3, 13.7,
14.1.1.3, 14.2.4
Certificates of Inspection, Testing or Approval
13.5.4
Certificates of Insurance
9.10.2, 11.1.3
Change Orders
1.1.1, 2.4.1, 3.4.2, 3.8.2.3, 3.11.1, 3.12.8, 4.2.8, 4.3.4, 4.3.9, 5.2.3,
7.1, 7.2, 7.3, 8.3.1, 9.3.1.1, 9.10.3, 11.4.1.2, 11.4.4, 11.4.9, 12.1.2
Change Orders, Definition of
7.2.1
CHANGES IN THE WORK
3.11, 4.2.8, 7, 8.3.1, 9.3.1.1, 11.4.9
Claim, Definition of
4.3.1
Claims and Disputes
3.2.3, 4.3, 4.4, 4.5, 4.6, 6.1.1, 6.3, 7.3.8, 9.3.3, 9.10.4, 10.3.3
Claims and Timely Assertion of Claims
4.6.5
Claims for Additional Cost
3.2.3, 4.3.4, 4.3.5, 4.3.6, 6.1.1, 7.3.8, 10.3.2
Claims for Additional Time
3.2.3, 4.3.4, 4.3.7, 6.1.1, 7.3.8, 10.3.2
Claims for Concealed or Unknown Conditions
4.3.4
Claims for Damages
3.2.3, 3.18, 4.3.10, 6.1.1, 8.3.3, 9.5.1, 9.6.7, 10.3.3, 11.1.1, 11.4.5,
11.4.7, 14.1.3, 14.2.4
Claims Subject to Arbitration
4.4.1, 4.5.1, 4.6.1
Cleaning Up
3.15, 6.3
Commencement of Statutory Limitation Period
13.7
<PAGE>
Commencement of the Work, Conditions Relating to
2.2.1, 3.2.1, 3.4.1, 3.7.1, 3.12.6, 4.3.5, 5.2.1, 5.2.3, 6.2.2, 8.1.2,
8.2.2, 8.3.1, 11.1, 11.41, or 11.46, 11.5.1
Commencement of the Work definition of
8.1.2
Communications of the Facilitating Contract Administration
3.9, 4.2.4
Completion, Conditions Relating to
1.6.1, 3.4.1, 3.11, 3.15, 4.2.2, 4.2.9, 8.2, 9.4.2, 9.8, 9.9.1, 9.10, 12.2,
13.7, 14.12
COMPLETION, PAYMENTS AND
9
Completion, Substantial
4.2.9, 8.1.1, 813., 8.2.3, 9.4.2, 9.8, 9.9.1, 9.10.3, 9.10.4.2, 12.2, 13.7
Compliance With Laws
1.6.1, 3.2.2, 3.6, 3.7, 3.12.10, 3.13, 4.1.1, 4.4.8, 4.6.4, 4.6.6, 9.6.4,
10.2.2, 11.1, 11.4, 13.1, 13.4, 13.5.1, 13.5.2, 13.6, 14.1.1, 14.2.1.3
Concealed or Unknown Conditions
4.3.4, 8.3.1, 10.3
Conditions of the Contract
1.1.1, 1.1.7, 6.1.1, 6.1.4
Consent, Written
1.6, 3.4.2, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.6.4, 9.3.2, 9.8.5, 9.9.1,
9.10.2, 9.10.3, 11.4.1, 13.2, 13.4.2
CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
1.1.4, 6
Construction change Directive, Definition of
7.3.1
Construction change Directives
1.1.1, 3.12.8, 4.2.8, 4.3.9, 7.1, 7.3, 9.3.1.1
Construction Schedules, Contractor's
1.4.1.2, 3.10, 3.12.1, 3.12.2, 4.3.7.2, 6.1.3
Contingent Assignment of Subcontracts
5.4, 14.2.2.2
<PAGE>
Continuing Contract Performance
4.3.3
Contract, Definition of
1.1.2
CONTRACT, TERMINATION OR SUSPENSION OF THE
5.4.1.1, 11.4.9, 14
Contract Administration
3.1.3, 4, 9.4, 9.5
Contract Award and Execution, Conditions Relating to
3.7.1, 3.10, 5.2, 6.1, 11.1.3, 11.4.6, 11.5.1
Contract Documents, The
1.1, 1.2
Contract Documents, Copies Furnished and Use of
1.6, 2.2.5, 5.3
Contract Documents, Definition of
1.1.1
Contract Sum
3.8, 4.3.4, 4.3.5, 4.4.5, 5.2.3, 7.2, 7.3, 7.4, 9.1, 9.4.2, 9.5.1.4, 9.6.7,
9.7, 10.3.2, 11.4.1, 14.2.4, 14.3.2
Contract Sum, Definition of
9.1
Contract Time
4.3.4, 4.3.7, 4.4.5, 5.2.3, 7.2.1.3, 7.3, 7.4, 8.1.1, 8.2, 8.3.1, 9.5.1,
9.7, 10.3.2, 12.1.1, 14.3.2
Contract Time, Definition of
8.1.1
CONTRACTOR
3
Contractor, Definition of
3.1., 6.1.2
Contractor's Construction Schedules
1.4.1.2, 3.10, 3.12.1, 3.12.2, 4.3.7.2, 6.1.3
Contractor's Employees
3.2.2, 3.4.3, 3.8.1, 3.9, 3.18.2, 4.2.3, 4.2.6, 10.2, 10.3, 11.1.1, 11.4.7,
14.1, 14.2.1.1,
<PAGE>
Contractor's Liability Insurance
11.1
Contractor's Relationship with Separate Contractors and Owners
Forces
3.12.5, 3.14.2, 4.2.4, 6, 11.4.7, 12.1.2, 12.2.4
Contractor's Relationship with Subcontractors
1.2.2, 3.3.2, 3.18.1, 3.18.2, 5, 9.6.2, 9.6.7, 9.10.2, 11.4.1.2, 11.4.7,
11.4.8
Contractor's Relationship with the Architect
1.1.2, 1.6, 3.1.3, 3.2.1, 3.2.2, 3.2.3, 3.3.1, 3.4.2, 3.5.1, 3.7.3, 3.10,
3.11, 3.12, 3.16, 3.18, 4.1.2, 4.1.3, 4.2, 4.3.4, 4.4.1, 4.4.7, 5.2, 6.2.2,
7, 8.3.1, 9.2, 9.3, 9.4, 5, 9.7, 9.8, 9.9, 10.2.6, 10.3, 11.3, 11.4.7, 12,
13.4.2, 13.5
Contractor's Representations
1.5.2, 3.5.1, 3.12.6, 6.2.2, 8.2.1, 9.3.3, 9.8.2
Contractor's Responsibility for Those Performing the Work
3.3.2, 3.18, 4.2.3, 4.3.8, 5.3.1, 6.1.3, 6.2, 6.3, 9.5.1, 10
Contractor's Review of Contract Documents
1.5.2, 3.2, 3.7.3
Contractor's Right to Stop the Work
9.7
Contractor's Right to Terminate the Contract
4.3.10, 14.1
Contractor's Submittals
3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3, 7.3.6, 9.2, 9.3, 9.8.2, 9.8.3,
9.9.1, 9.10.2, 9.10.3, 11.1.3, 11.5.2
Contractor's Superintendent
3.9, 10.2.6
Contractor's Supervision and Construction Procedures
1.2.2, 3.3, 3.4, 3.12.10, 4.2.2, 4.2.7, 4.3.3, 6.1.3, 6.2.4, 7.1.3, 7.3.4,
7.3.6, 8.2, 10, 12, 14
Contractual Liability Insurance
11.1.1.8, 11.2, 11.3
Coordination and Correlation
1.2, 1.5.2, 3.3.1, 3.10, 3.12.6, 6.1.3, 6.2.1
Copies Furnished of Drawings and Specifications
1.6, 2.2.5, 3.11
<PAGE>
Copyrights
1.6, 3.17
Correction of Work
2.3, 2.4, 3.7.4, 4.2.1, 9.4.2, 9.8.2, 9.8.3, 9.9.1, 12.1.2, 12.2, 13.7.1.3
Correlation and Intent of the Contract Documents
1.2
Cost, Definition of
7.3.6
Costs
2.4, 3.2.3, 3.7.4, 3.8.2, 3.15.2, 4.3, 5.4.2, 6.1.1, 6.2.3, 7.3.3.3, 7.3.6,
7.3.7, 7.3.8, 9.10.2, 10.3.2, 10.5, 11.3, 11.4, 12.1, 12.2.1, 12.2.4, 13.5,
14
Cutting and Patching
[Numbers are cut off]
Damage to Construction of Owner or Separate Contractors
3.14.2, 6.2.4, 9.2.1.5, 10.2.1.2, 10.2.5, 10.6, 11.1, 11.4, 12.2.4
Damage to the Work
3.14.2, 9.9.1, 10.2.1.2, 10.2.5, 10.6, 11.4, 12.2.4
Damages, Claims for
3.2.3, 3.18, 4.3.10, 6.1.1, 8.3.3, 9.5.1, 9.6.7, 10.3.3, 11.1.1, 11.4.5,
11.4.7, 14.1.3, 14.2.4
Damages for Delay
6.1.1, 8.3.3, 9.5.1.6, 9.7, 10.3.2
Date of Commencement of the Work, Definition of
8.1.2
Date of Substantial Completion, Definition of
8.1.3
Day, Definition of
3.1.4
Decisions of the Architect
4.2.6, 4.2.7, 4.2.11, 4.2.12, 4.2.13, 4.3.4, 4.4.1, 4.4.5, 4.4.6, 4.5, 6.3,
7.3.6, 7.3.8, 8.1.3, 8.3.1, 9.2, 9.4, 9.5.1, 9.8.4, 9.9.1, 13.5.2, 14.2.2,
14.2.4
Decisions to Withhold Certification
9.4.1, 9.5, 9.7, 14.1.1.3
<PAGE>
Defective or Nonconforming Work, Acceptance, Rejection and Correction of
2.3, 2.4, 3.5.1, 4.2.6, 6.2.5, 9.5.1, 9.5.2, 9.6.6, 9.8.2, 9.9.3, 9.10.4,
12.2.1, 13.7.1.3
Defective Work, Definition of
3.5.1
Definitions
1.1, 2.1.1, 3.1, 3.5.1, 3.12.1, 3.12.2, 3.12.3, 4.1.1, 4.3.1, 5.1, 6.1.2,
7.2.1, 7.3.1, 7.3.6, 8.1, 9.1, 9.81
Delays and Extensions of Time
3.2.3, 4.3.1, 4.3.4, 4.3.7, 4.4.5, 5.2.3, 7.2.1, 7.3.1, 7.4.1, 7.5.1, 8.3,
9.5.1, 9.7.1, 10.3.2, 10.6.1, 14.3.2
Disputes
4.1.4, 4.3, 4.4, 4.5, 4.6, 6.3, 7.3.8
Documents and Samples at the Site
3.11
Drawings, Definition of
1.1.5
Drawings and Specifications, Use and Ownership of
1.1.1, 1.3, 2.2.5, 3.11, 5.3
Effective Date of Insurance
8.2.2, 11.1.2
Emergencies
4.3.5, 10.6, 14.1.1.2
Employees, Contractor's
3.3.2, 3.4.3, 3.8.1, 3.9, 3.18.2, 4.2.3, 4.2.6, 10.2, 10.3, 11.1.1, 11.4.7,
14.1, 14.2.1.1
Equipment, Labor, Materials and
1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.8.3, 3.12, 3.13, 3.15.1, 4.2.6, 4.2.7,
5.2.1, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 9.5.1.3, 9.10.2, 10.2.1, 10.2.4,
14.2.1.2
Execution and Progress of the Work
1.1.3, 1.2.1, 1.2.2, 2.2.3, 2.2.5, 3.1, 3.3, 3.4, 3.5, 3.7, 3.10, 3.12,
3.14, 4.2.2, 4.2.3, 4.3.3, 6.2.2, 7.1.3, 7.3.4, 8.2, 9.5, 9.9.1, 10.2,
10.3, 12.2, 14.2, 14.3
Extensions of Time
3.2.3, 4.3.1, 4.3.4, 4.3.7, 4.4.5, 5.2.3, 7.2.1, 7.3, 7.4.1, 9.5.1, 9.7.1,
10.3.2, 10.6.1, 14.3.2
<PAGE>
Failure of Payment
4.3.6, 9.5.1.3, 9.7, 9.10.2, 14.1.1.3, 14.2.1.2, 13.6
Faulty Work
(See Defective or Nonconforming Work)
Final Completion and final Payment
4.2.1, 4.2.9, 4.3.2, 9.8.2, 9.10, 11.1.2, 11.13, 11.4.1, 11.4.5, 12.3.1,
13.7, 14.2.4, 14.4.3
Financial Arrangements, Owner's
2.2.1, 13.2.2, 14.1.1.5
Fire and Extended coverage Insurance
11.4
GENERAL PROVISIONS
1
Governing Law
13.1
Guarantees (See Warranty)
Hazardous Materials
10.2.4, 10.3, 10.5
Identification of Contract Documents
1.5.1
Identification of Subcontractors and Suppliers
5.2.1
Indemnification
3.17, 3.18, 9.10.2, 10.3.3, 10.5, 11.4.1.2, 11.4.7
Information and Services Required of the Owner
2.1.2, 2.2, 3.2.1, 3.12.4, 3.12.10, 4.2.7, 4.3.3, 6.1.3, 6.1.4, 6.2.5,
9.3.2, 9.6.1, 9.6.4, 9.9.2, 9.10.3, 10.3.3, 11.2, 11.4, 13.5.1, 13.5.2,
14.1.1.4, 14.1.4
Injury or Damage to Person or Property
4.3.8, 10.2, 10.6
Inspections
3.1.3, 3.3.3, 3.7.1, 4.2.2, 4.2.6, 4.2.9, 9.4.2, 9.8.2, 9.8.3, 9.9.2,
9.10.1, 12.2.1, 13.5
Instructions to bidders
1.1.1
<PAGE>
Instructions to the Contractor
3.2.3, 3.3.1, 3.8.1, 4.2.8, 5.2.1, 7, 12, 8.2.2, 13.5.2
Insurance
3.18.1, 6.1.1, 7.3.6, 8.2.1, 9.3.2, 9.8.4, 9.9.1, 9.10.2, 9.10.5, 11
Insurance, Boiler and Machinery
11.4.2
Insurance, Contractor's Liability
11.1
Insurance, Effective Date of
8.2.2, 11.1.2
Insurance, Loss of Use
11.4.3
Insurance, Owner's Liability
11.2
Insurance, Project Management Protective Liability
11.3
Insurance, Property
10.2.5., 11.4
Insurance, Store Materials
9.3.2, 11.4.1.4
INSURANCE AND BONDS
11
Insurance Companies, Consent to Partial Occupancy
9.9.1, 11.4.1.5
Insurance Companies, Settlement with
11.4.10
Intent of the Contract documents
1.2.1, 4.2.7, 4.2.12, 4.2.13, 7.4
Interest
13.6
Interpretation
1.2.3, 1.4, 4.1.1, 4.3.1, 5.1, 6.1.2, 8.1.4
Interpretations, Written
4.2.11, 4.2.12, 4.3.6
<PAGE>
Joinder and Consolidation of Claims Required
4.6.4
Judgment on Final Award
4.6.6
Labor and Materials, Equipment
1.1.3, 1.1.6, 3.4, 3.5.1, 3.8.2, 3.8.3, 3.12, 3.13, 3.15.1, 42.6, 4.2.7,
5.2.1, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 9.5.1.3, 9.10.2, 10.2.1, 10.2.4,
14.2.1.2
Labor Disputes
8.3.1
Laws and Regulations
1.6, 3.2.2, 3.6, 3.7, 3.12.10, 3.13, 4.1.1, 4.4.8, 4.6, 9.6.4, 9.9.1,
10.2.2, 11.1, 11.4, 13.1, 13.4, 13.5.1, 13.5.2, 13.6, 14
Liens
2.1.2, 4.4.8, 8.2.2, 9.3.3, 9.10
Limitation on consolidation or Joinder
4.6.4
Limitations, Statutes of
4.6.3., 12.2.6, 13.7
Limitations of Liability
2.3, 3.2.1, 3.5.1, 3.7.3, 3.12.8, 3.12.10, 3.17, 3.18, 4.2.6, 4.2.7,
4.2.12, 6.2.2, 9.4.2, 9.6.4, 9.6.7, 9.10.4, 10.3.3, 10.2.5, 11.1.2, 11.2.1,
11.4.7, 12.2.5, 13.4.2
Limitations of Time
2.1.2, 2.2, 2.4, 3.2.1, 3.7.3, 3.10, 3.11, 3.12.5, 3.15.1, 4.2.7, 4.3, 4.4,
4.5, 4.6, 5.2, 5.3, 5.4, 6.2.4, 7.3, 7.4, 8.2, 9.2, 9.3.1, 9.3.3, 9.4.1,
9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 11.1.3, 11.4.1.5, 11.4.6, 11.4.10, 12.2,
13.5, 13.7, 14
Loss of Use Insurance
11.4.3
Material Suppliers
1.6, 3.12.1, 4.2.4, 4.2.6, 5.2.1, 9.3, 9.4.2, 9.6, 9.10.5
Materials Hazardous
10.2.4, 10.3, 10.5
Materials, Labor, Equipment and
1.1.3, 1.1.6, 1.6.1, 3.4, 3.5.1, 3.8.2, 3.8.23, 3.12, 3.13, 3.15.1, 4.2.6,
4.2.7, 5.2.1, 6.2.1, 7.3.6, 9.3.2, 9.3.3, 9.5.1.3, 9.10.2, 10.2.1., 10.2.4,
14.2.1.2
<PAGE>
Means, Methods, Techniques, Sequences and Procedures of Construction
3.3.1, 3.12.10, 4.2.2, 4.2.7, 9.4.2
Mechanic's Lien
4.4.8
Mediation
4.4.1, 4.4.5, 4.4.6, 4.4.8, 4.5, 4.6.1, 4.6.2, 8.3.1, 10.5
Minor Changes in the Work
1.1.1, 3.12.8, 4.2.8, 4.3.6, 7.1, 7.4
MISCELLANEOUS PROVISIONS
13
Modifications, Definition of
1.1.1
Modifications to the Contract
1.1.1, 1.1.2, 3.7.3, 3.11, 4.1.2, 4.2.1, 5.2.3, 7, 8.3.1, 9.7, 10.3.2,
11.4.1
Mutual Responsibility
6.2
Nonconforming Work, Acceptance of
9.6.6, 9.9.3, 12.3
Nonconforming Work, Rejection and Correction of
2.3, 2.4, 3.5.1, 4.2.6, 6.2.5, 9.5.1, 9.8.2, 9.9.3, 9.10.4, 12.2.1,
13.7.1.3
Notice
2.2.1, 2.3, 2.4, 3.2.3, 3.3.1, 3.7.2, 3.7.4, 3.12.9, 4.3, 4.4.8, 4.6.5,
5.2.1, 8.2.2, 9.7, 9.10, 10.2.2, 11.1.3, 11.4.6, 12.2.2, 12.2.4, 13.3,
13.5.1, 13.5.2, 14.1, 14.2
Notice, Written
2.3, 2.4, 3.3.1, 3.9, 3.12.9, 3.12.10, 4.3, 4.4.8, 4.6.5, 5.2.1, 8.2.2,
9.7, 9.10, 10.2.2, 10.3, 11.1.3, 11.4.6, 12.2.2, 12.2.4, 13.3.4
Notice of Testing and Inspections
13.5.1, 13.5.2
Notice to Proceed
8.2.2
Notices, Permits, Fees and
2.2.2, 3.7, 3.13, 7.3.6.4, 10.2.2
Observations, Contractor's
1.5.2, 3.2, 3.7.3, 4.3.4
<PAGE>
Occupancy
2.2.2, 9.6.6., 9.8, 11.4.1.5
Orders Written
1.1.1, 2.3, 3.9, 4.3.6, 7, 8.2.2, 11.4.9, 12.1, 12.2, 13.5.2, 14.3.1
OWNER
2
Owner, Definition of
2.1
Owner, Information and Services Required of the
2.1.2, 2.2, 3.2.1, 3.12.4, 3.12.10, 4.2.7, 4.3.3, 6.1.3, 6.1.4, 6.2.5,
9.3.2, 9.6.1, 9.6.4, 9.9.2, 9.10.3, 10.3.3, 11.2, 11.4, 13.5.1, 13.5.2,
14.1.1.4, 14.1.4
Owner's Authority
1.6, 2.1.1, 2.3, 2.4, 3.4.2, 3.8.1, 3.12.10, 3.14.2, 4.1.2, 4.1.3, 4.2.4,
4.2.9, 4.3.6, 4.4.7, 5.2.1, 5.2.4, 5.4.1, 6.1, 6.3, 7.2.1, 7.3.1, 8.2.2,
8.3.1, 9.3.1, 9.3.2, 9.5.1, 9.9.1, 9.10.2, 10.3.2, 11.1.3, 11.3.1, 11.4.3,
11.4.10, 12.2.2, 12.3.1, 13.2.2, 14.3, 14.4
Owner's Financial Capability
2.2.1, 13.2.2, 14.1.1.5
Owner's Liability Insurance
11.2
Owner's Loss of Use Insurance
11.4.3
Owner's Relationship with Subcontractors
1.1.2, 5.2, 5.3, 5.4, 9.6.4, 9.10.2, 14.2.2
Owner's Right to Carry Out the Work
2.4, 12.2.4, 14.2.2.2
Owner's Right to Clean Up
6.3
Owner's Right to Perform Construction and to Award Separate Contracts
6.1
Owner's Right to Stop the Work
2.3
Owner's Right to Suspend the Work
14.3
<PAGE>
Owner's Right to Terminate the Contract
14.2
Ownership and Use of Drawings, Specifications and Other
Instruments of Service
1.1.1, 1.6, 2.2.5, 3.2.1, 3.11.1, 3.17.1, 4.2.12, 5.3
Partial Occupancy or Use
9.6.6, 9.9, 11.4.1.5
Patching, Cutting and
3.14, 6.2.5
Patents
3.17
Payment, Applications for
4.2.5, 7.3.8, 9.2, 9.3, 9.4, 9.5.1, 9.6.3, 9.7.1, 9.8.5, 9.10.1, 9.10.3,
9.10.5, 11.13, 14.2.4, 14.4.3
Payment, Certificates for
4.2.5, 7.3.8, 9.2, 9.3, 9.4, 9.5.1, 9.6.3, 9.7.1, 9.8.5, 9.10.1, 9.10.3,
9.10.5, 11.13, 14.2.4, 14.4.3
Payment Certificates for
4.2.5, 4.2.9, 9.3.3, 9.4, 9.5, 9.6.1, 9.6.6, 9.7.1, 9.10.1, 9.10.3, 13.7,
14.1.1.3, 14.2.4
Payment, Failure of
4.3.6, 9.5.1.3, 9.7, 9.10.2, 14.1.1.3, 14.2.1.2, 13.6
Payment Final
4.2.1, 4.2.9, 4.3.2, 9.8.2, 9.10, 11.1.2, 11.1.3, 11.4.1, 11.4.5, 12.3.1,
13.7, 14.2.4, 14.4.3
Payment Bond, Performance Bond and
7.3.6.4, 9.6.7, 9.10.3, 11.4.9, 11.5
Payments, Progress
4.3.3, 9.3, 9.6, 9.8.5, 9.10.3, 13.6, 14.2.3
PAYMENTS AND COMPLETION
9
Payments to Subcontractors
5.4.2, 9.5.1.3, 9.6.2, 9.6.3, 9.6.4, 9.6.7, 11.4.8, 14.2.1.2
PCB
10.3.1
<PAGE>
Performance bond and Payment Bond
7.3.6.4, 9.6.7, 9.10.3, 11.4.9, 11.5
Permits, Fees and Notices
2.2.2, 3.7, 3.13, 7.3.6.4, 10.2.2
PERSONS AND PROPERTY, PROTECTION OF
10
Polychlorinated Biphenyl
10.3.1
Product Data, Definition of
3.12.2
Product Data and Samples, Shop Drawings
3.11, 3.12, 4.2.7
Progress and Completion
4.2.2, 4.3.3, 8.2, 9.8, 9.9.1, 14.1.4
Progress Payments
4.3.3, 9.3, 9.6, 9.8.5, 9.10.3, 13.6, 14.2.3
Project, Definition of the
1.1.4
Project Management Protective Liability Insurance
11.3
Project Manual, Definition of the
1.1.7
Project Manuals
2.2.5
Project Representatives
4.2.10
Property Insurance
10.2.5, 11.4
PROTECTION OF PERSONS AND PROPERTY
10
Regulations and Laws
1.6, 3.2.2, 3.6, 3.7, 3.12.10, 3.13, 4.1.1, 4.4.8, 4.6, 9.6.4, 9.9.1,
10.2.2, 11.1, 11.4, 13.1, 13.4, 13.5.1, 13.5.2, 13.6, 14
Rejection of Work
3.5.1, 4.2.6, 12.2.1
<PAGE>
Releases and Waivers of Liens
9.10.2
Representations
1.5.2, 3.5.1, 3.12.6, 6.2.2, 8.2.1, 9.3.3, 9.4.2, 9.5.1, 9.8.2, 9.10.1
Representatives
2.1.1, 3.1.1, 3.9, 4.1.1, 4.2.1, 4.2.10, 5.1.1, 5.1.2, 13.2.1
Resolution of Claims and Disputes
4.4, 4.5, 4.6
Responsibility for Those Performing the Work
3.3.2, 3.18, 4.2.3, 4.3.8, 5.3.1, 6.1.3, 6.2, 6.3, 9.5.1, 10
Retainage
9.3.1, 9.6.2, 9..5, 9.9.1, 9.10.2, 9.10.3
Review of contract Documents and field Conditions by
Contractor
1.5.2, 3.2, 3.7.3, 3.12.7, 6.13
Review of Contractor's Submittals by Owner and Architect
3.10.1, 3.10.2, 3.11, 3.12, 4.2, 5.2, 6.1.3, 9.2, 9.8.2
Review of Shop Drawings Product Data and Samples by
Contractor
3.12
Rights and Remedies
1.1.2, 2.3, 2.4, 3.5.1, 3.15.2, 4.2.6, 4.3.4, 4.5, 4.6, 5.3, 5.4, 6.1, 6.3,
7.3.1, 8.3, 9.5.1, 9.7, 10.2.5, 10.3, 12.2.2, 12.2.4, 13.4, 14
Royalties Patents and Copyrights
3.17
Rules and Notices for Arbitration
4.6.2
Safety of Persons and Property
10.2, 10.6
Safety precautions and Programs
3.3.1, 4.2.2, 4.2.7, 5.3.1, 10.1, 10.2, 10.6
Samples, Definition of
3.12.3
Samples, Shop Drawings, product Data and
3.11, 3.12, 4.2.7
<PAGE>
Samples at the Site, Documents and
3.11
Schedule of Values
9.2, 9.3.1
Schedules Construction
1.4.1.2, 3.10, 3.12.1, 3.12.2, 4.3.7.2, 6.13
Separate Contracts and Contractors
1.1.4, 3.12.5, 3.14.2, 4.2.4, 4.2.7, 4.6.4, 6, 8.3.1, 11.4.7, 12.1.2,
12.2.5
Shop Drawings, Definition of
3.12.1
Shop Drawings, Product Data and Samples
3.11, 3.12, 4.2.7
Site, Use of
3.13.6.1.1, 6.2.1
Site Inspections
1.2.2, 3.2.1, 3.3.3, 3.7.1, 4.2, 4.3.4, 9.4.2, 9.10.1, 13.5
Site Visits Architect's
4.2.2, 4.2.9, 4.3.4, 9.4.2, 9.5.1, 9.9.2, 9.10.1, 13.5
Special Inspections and Testing
4.2.6, 12.2.1, 13.5
Specifications, Definitions of the
1.1.6
Specifications, The
1.1.1, 1.1.6, 1.1.7, 1.2.2, 1.6, 3.11, 3.12.10, 3.17
Statute of Limitations
4.6.3, 12.2.6, 13.7
Stopping the Work
2.3, 4.3.6, 9.7, 10.3, 14.1
Stored Materials
6.2.1, 9.3.2, 10.2.1.2, 10.2.4, 11.4.4
Subcontractor, Definition of
5.1.1
SUBCONTRACTORS
5
<PAGE>
Subcontractors, Work by
1.2.2, 3.3.2, 3.12.1, 4.2.3, 5.2.3, 5.3, 5.4, 9.3.1.2, 9.6.7
Subcontractual Relations
5.3, 5.4, 9.3.1.2, 9.6, 9.10, 10.2.1, 11.4.7, 11.4.8, 14.1, 14.2.1, 14.3.2
Submittals
1.6, 3.10, 3.11, 3.12, 4.2.7, 5.2.1, 5.2.3, 7.3.6, 9.2, 9.3, 9.8, 9.9.1,
9.10.2, 9.10.3, 11.1.3
Subrogation, Waivers of
6.1.1, 11.4.5, 11.4.7
Substantial Completion
4.2.9, 8.1.1, 8.1.3, 8.2.3, 9.4.2, 9.8, 9.9.1, 9.10.3, 9.10.4.2, 12.2, 13.7
Substantial Completion, Definition of
9.8.1
Substitution of Subcontractors
5.2.3, 5.2.4
Substitution of Architect
4.1.3
Substitutions of Materials
3.4.2, 3.5.1, 7.3.7
Sub-subcontractor, Definition of
5.1.2
Subsurface Conditions
4.3.4
Successors and Assigns
13.2
Superintendent
3.9, 10.2.6
Supervision and Construction Procedures
1.2.2, 3.3, 3.4, 3.12.10, 4.2.2, 4.2.7, 4.3.3, 6.1.3, 6.2.4, 7.1.3, 7.3.6,
8.2, 8.3.1, 9.4.2, 10, 12, 14
Surety
4.4.7, 5.4.1.2, 9.8.5, 9.10.2, 9.10.3, 14.2.2
Surety, Consent of
9.10.2, 9.10.3
<PAGE>
Surveys
2.2.3
Suspension by the Owner for Convenience
14.4
Suspension of the Work
5.4.2, 14.3
Suspension or Termination of the Contract
4.3.6, 5.4.1.1, 11.4.9, 14
Taxes
3.6, 3.8, 2.1, 7.3, 6.4
Termination by the Contractor
4.3.10, 14.1
Termination by the Owner for Cause
4.3.10, 5.4.1.1, 14.2
Termination of the Architect
4.1.3
Termination of the Contractor
14.2.2
TERMINATION OR SUSPENSION OF THE CONTRACT
14
Tests and Inspections
3.1.3, 3.3.3, 4.2.2, 4.2.6, 4.2.9, 9.4.2, 9.8.3, 9.9.2, 9.10.1, 10.3.2,
11.4.1.1, 12.2.1, 13.5
TIME
8
Time, Delays and Extensions of
3.2.3, 4.3.1, 4.3.4, 4.3.7, 4.4.5, 5.2.3, 7.2.1, 7.3.1, 7.4.1, 7.5.1, 8.3,
9.5.1, 9.7.1, 10.3.2, 10.6.1, 14.3.2
Time Limits
2.1.2, 2.2, 2.4, 3.2.1, 3.7.3, 3.10, 3.11, 3.12.5, 3.15.1, 4.2, 4.3, 4.4,
4.5, 4.6, 5.2, 5.3, 5.4, 6.2.4, 7.3, 7.4, 8.2, 9.2, 9.3.1, 9.3.3, 9.4.1,
9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 11.13, 11.4.1.5, 11.4.6, 11.4.10, 12.2,
13.5, 13.7, 14
Time Limits on Claims
4.3.2, 4.3.4, 4.3.8, 4.4, 4.5, 4.6
<PAGE>
Title to Work
9.3.2, 9.3.3
UNCOVERING AND CORRECTION OF WORK
12
Uncovering of Work
12.1
Unforeseen Conditions
4.3.4, 8.3.1, 10.3
Unit Prices
4.3.9, 7.3.3.2
Use of Document
1.1.1, 1.6, 2.2.5, 3.12.6, 5.3
Use of Site
3.13, 6.1.1, 6.2.1
Values, Schedule of
9.2, 9.3.1
Waiver of Claims by the Architect
13.4.2
Waiver of Claims by the Contractor
4.3.10, 9.10.5, 11.4.7, 13.4.2
Waiver of Claims by the Owner
4.3.10, 9.9.3, 9.10.3, 9.10.4, 11.4.3, 11.4.5, 11.4.7, 12.2.2.1, 13.4.2,
14.2.4
Waiver of Consequential Damages
4.3.10, 14.2.4
Waiver of Liens
9.10.2, 9.10.4
Waivers of Subrogation
6.1.1, 11.4.5, 11.4.7
Warranty
3.5, 4.2.9, 4.3.5.3, 9.3.3, 9.8.4, 9.9.1, 9.10.4, 12.2.2, 13.7.1.3
Weather Delays
4.3.7.2
Work, Definition of
1.1.3
<PAGE>
Written Consent
1.6, 3.4.2, 3.12.8, 3.14.2, 4.1.2, 4.3.4, 4.6.4, 9.3.2, 9.8.5, 9.9.1,
9.10.2, 9.10.3, 11.4.1, 13.2, 13.4.2
Written Interpretations
4.2.11, 4.2.12, 4.3.6
Written Notice
2.3, 2.4, 3.3.1, 3.9, 3.12.9, 3.12.10, 4.3, 4.4.8, 4.6.5, 5.2.1, 8.2.2,
9.7, 9.10, 10.2.2, 10.3, 11.1.3, 11.4.6, 12.2.2, 12.2.4, 13.3, 14
Written Orders
1.1.1, 2.3, 3.9, 4.3.6, 7, 8.2.2, 11.4.9, 12.1, 12.2, 13.5.2, 14.3.1
<PAGE>
1. ARTICLE 1 GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 THE CONTRACT DOCUMENTS
The Contract Documents consist of the Agreement between Owner and Contractor
(hereinafter the Agreement), Conditions of the Contract (General, Supplementary
and other Conditions), Drawings, Specifications, Addenda issued prior to
execution of the Contract, other documents listed in the Agreement and
modifications issued after execution of the Contract. A Modification is (1) a
written amendment to the Contract signed by both parties, (2) a Change Order,
(3) a Construction Change Directive or (4) a written order for a minor change in
the Work issued by the Architect. Unless specifically enumerated in the
Agreement, the Contract Documents do not include other documents such as bidding
requirements (advertisement or invitation to bid, Instructions to Bidders,
sample forms, the Contractor's bid or portions of Addenda relating to bidding
requirements).
1.1.2 THE CONTRACT
The Contract Documents form the Contract for Construction. The Contract
represents the entire and integrated agreement between the parties hereto and
supersedes prior negotiations, representations or agreements, either written or
oral. The Contract may be amended or modified only by a Modification. The
Contract Documents shall not be construed to create a contractual relationship
of any kind (1) [TEXT DELETED] (2) between the Owner and a Subcontractor or Sub-
subcontractor, (3) between the Owner and Architect or (4) between any persons or
entities other than the Owner and Contractor. [TEXT DELETED].
1.1.3 THE WORK
The term "Work" means the construction and services required by the Contract
Documents, whether completed or partially completed, and includes all other
labor, materials, equipment and services provided or to be provided by the
Contractor to fulfill the Contractor's obligations. The Work may constitute the
whole or a part of the Project.
<PAGE>
1.1.4 THE PROJECT
The Project is the total construction of which the Work performed under the
Contract Documents may be the whole or a part and which may include construction
by the Owner or by separate contractors.
1.1.5 THE DRAWINGS
The Drawings are the graphic and pictorial portions of the Contract Documents
showing the design, location and dimensions of the Work, generally including
plans, elevations, sections, details, schedules and diagrams.
1.1.6 THE SPECIFICATIONS
The Specifications are that portion of the Contract Documents consisting of the
written requirements for materials, equipment, systems, standards and
workmanship for the Work, and performance of related services.
1.1.7 THE PROJECT MANUAL
The Project Manual is a volume assembled for the Work which may include the
bidding requirements, sample forms, Conditions of the Contract and
Specifications.
1.2 CORRELATION AND INTENT OF THE CONTRACT DOCUMENTS
1.2.1 The intent of the Contract Documents is to include all
items necessary for the proper execution and completion of the Work by the
Contractor. The Contract Documents are complementary, and what is required by
one shall be as binding as if required by all; performance by the Contractor
shall be required only to the extent consistent with the Contract Documents and
reasonably inerrable from them as being necessary to produce the indicated
results.
1.2.2 Organization of the Specifications into divisions,
sections and articles, and arrangement of Drawings shall not control the
Contractor in dividing the Work among Subcontractors or in establishing the
extent of Work to be performed by any trade.
<PAGE>
1.2.3 Unless otherwise stated in the Contract Documents, words
which have well-known technical or construction industry meanings are used in
the Contract Documents in accordance with such recognized meanings.
1.3 CAPITALIZATION
1.3.1 Terms capitalized in these General Conditions include
those which are (1) specifically defined, (1) specifically defined, (2) the
titles of numbered articles and identified references to Paragraphs,
subparagraphs and Clauses in the document or (3) the titles of other document
published by the American Institute Architects.
1.4 INTERPRETATION
1.4.1 In the interest of brevity the Contract Documents
frequently omit modifying words such as "all" and "any" and articles such as
"the" and "an," but the fact that a modifier or an article is absent from one
statement and appears in another is not intended to affect the interpretation of
either statement.
1.5 EXECUTION OF CONTRACT DOCUMENTS
1.5.1 The contract Documents shall be signed by the Owner and
Contractor. [TEXT DELETED]
1.5.2 Execution of the Contract by the Contractor is a
representation that the Contractor has visited the site, become generally
familiar with local conditions under which the Work is to be performed and
correlated personal observations with requirements of the Contract Documents.
1.6 OWNERSHIP AND USE OF DRAWINGS, SPECIFICATIONS AND OTHER
INSTRUMENTS OF SERVICE
1.6.1 [TEXT DELETED]
<PAGE>
2. ARTICLE 2 OWNER
2.1 GENERAL
2.1.1 The Owner is the person or entity identified as such in
the Agreement and is referred to throughout the Contract Documents as if
singular in number. The Owner shall designate in writing representative who
shall have express authority to bind the Owner with respect to all matters
requiring the Owner's approval or authorization. Except as otherwise provided in
Subparagraph 4.2.1, the Architect does not have such authority. The term "Owner"
means the Owner or the Owner's authorized representative.
2.1.2 The Owner shall furnish to the Contractor within fifteen
days after receipt of a written request, information necessary and relevant for
the Contractor to evaluate, give notice of or enforce mechanic's lien rights.
Such information shall include a correct statement of the record legal title to
the property on which the Project is located, usually referred to as the site,
and the owner's interest therein.
2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
2.2.1 The Owner shall, at the written request of the contractor,
prior to commencement of the Work and thereafter, furnish to the Contractor
reasonable evidence that financial arrangements have been made to fulfill the
Owner's obligations under the Contract. Furnishing of such evidence shall be a
condition precedent to commencement or continuation of the Work. After such
evidence has been furnished, the Owner shall not materially vary such financial
arrangements without prior notice to the Contractor.
2.2.2 [TEXT DELETED]
2.2.3 [TEXT DELETED]
<PAGE>
2.2.4 Information or services required of the Owner by the
Contract Documents shall be furnished by the Owner with reasonable promptness.
Any other information or services relevant to the Contractor's performance of
the Work under the Owner's control shall be furnished by the Owner after receipt
from the Contractor of a written request for such information or services.
2.2.5 [TEXT DELETED]
2.3 OWNER'S RIGHT TO STOP THE WORK
2.3.1 If the Contractor fails to correct Work which is not in
accordance with the requirements of the Contract Documents as required by
Paragraph 12.2 or persistently fails to carry out Work in accordance with the
Contract Documents, the Owner may issue a written order to the Contractor to
stop the Work, or any portion thereof, until the cause for such order has been
eliminated; however, the right of the Owner to stop the Work shall not give rise
to a duty on the part of the Owner to exercise this right for the benefit of the
Contractor or any other person or entity, except to the extent required by
Subparagraph 6.1.3.
2.4 OWNER'S RIGHT TO CARRY OUT THE WORK
2.4.1 If the Contractor defaults or neglects to carry out the
Work in accordance with the Contract Documents and fails within a seven-day
period after receipt of written notice from the Owner to commence and continue
correction of such default or neglect with diligence and promptness, the Owner
may after such seven-day period give the Contractor a second written notice to
correct such deficiencies with a three-day period. If the Contractor within such
three-day period after receipt of such second notice fails to commence and
continue to correct any deficiencies, the Owner may, without prejudice to other
remedies the Owner may have, correct such deficiencies. In such case an
appropriate. Change Order shall be issued deducting from payments then or
thereafter due the Contractor the reasonable cost of correcting such
deficiencies, including Owner's expenses and compensation for the Architect'
additional services made necessary by such default, neglect or failure. [TEXT
DELETED] If payments then or thereafter due the contractor are not
<PAGE>
sufficient to cover such amounts, the Contractor shall pay the difference to the
Owner.
3. ARTICLE 3 CONTRACTOR
3.1 GENERAL
3.1.1 The Contractor is the person or entity identified as such
in the Agreement and is referred to throughout the Contract Documents as if
singular in number. The term "contractor" means the Contractor or the
contractor's authorized representative.
3.1.2 The Contractor shall perform the Work in accordance with
the Contract Documents.
3.1.3 The Contractor shall not be relieved of obligations to
perform the Work in accordance with the Contract Documents either by activities
or duties of the Architect in the Architect's administration of the Contract, or
by tests, inspections or approvals required or performed by persons other than
the Contractor.
3.2 REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR
3.2.1 Since the Contract Documents [eligible] carefully study
and compare the various Drawings and other Contract Documents relative to that
portion of the Work, as well as the information furnished by the Owner pursuant
to Subparagraph 2.2.3, shall take field measurements of any existing conditions
related to that portion of the Work and shall observe any conditions at the site
affecting it. These obligations are for the purpose of facilitating construction
by the Contractor and are not for the purpose of discovering errors, omissions,
or inconsistencies in the Contract Documents; however, any errors
inconsistencies or omissions discovered by the Contractor shall be reported
promptly to the [TEXT DELETED] Owner. [TEXT DELETED]
<PAGE>
3.2.2 Any design errors or omissions noted by the Contractor
during this review shall be reported promptly to the [TEXT DELETED] Owner, but
it is recognized that the Contractor's review is made in the Contractor's
capacity as a contractor and not as a licensed design professional unless
otherwise specifically provided in the Contract Documents. [TEXT DELETED]
3.2.3 [TEXT DELETED]
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES
3.3.1 The Contractor shall supervise and direct the Work, using
the Contractor's best skill and attention. The Contractor shall be solely
responsible for and have control over construction means, methods, techniques,
sequences and procedures and for coordinating all portions of the Work under the
Contract, unless the Contract Documents give other specific instructions
concerning these matters. If the Contract Documents give specific instructions
concerning construction means, methods, techniques, sequences or procedures, the
contractor shall evaluate the jobsite safety thereof and, except as stated
below, shall be fully and solely responsible for the jobsite safety of such
means, methods, techniques, sequences or procedures. If the Contractor
determines that such means, methods, techniques, sequences or procedures may not
be safe, the Contractor shall give timely written notice to the Owner [TEXT
DELETED] and shall not proceed with that portion of the Work without further
written instructions from the [TEXT DELETED] Owner. If the Contractor is then
instructed to proceed with the required means, methods, techniques, sequences or
procedures without acceptance of changes proposed by the Contractor, the Owner
shall be solely responsible for any resulting loss or damage.
3.3.2 The Contractor shall be responsible to the owner for acts
and omissions of the Contractor's employees, Subcontractors and their agents and
employees, and other persons or entities performing portions of the Work for or
on behalf of the Contractor or any of its Subcontractors.
3.3.3 The Contractor shall be responsible for inspection of
portions of Work already performed to determine that such portions are in proper
conditions to receive subsequent Work.
<PAGE>
3.4 LABOR AND MATERIALS
3.4.1 Unless otherwise provided in the Contract documents the
contractor shall provide and pay for labor, materials, equipment, tools,
construction equipment and machinery, [TEXT DELETED] transportation, and other
facilities and services necessary for proper execution and completion of the
Work, whether temporary or permanent and whether or not incorporated or to be
incorporated in the Work.
3.4.2 The contractor may make substitutions only with the
consent of the owner, [TEXT DELETED] and in accordance with a Change Order.
3.4.3 The Contractor shall enforce strict discipline and good
order among the Contractors employees and other persons carrying out the
Contract. The Contractor shall not permit employment of unfit persons or persons
not skilled in tasks assigned to them.
3.5 WARRANTY
3.5.1 The Contractor warrants to the Owner [TEXT DELETED] that
materials and equipment furnished under the Contract will be of good quality and
new unless otherwise required or permitted by the Contract Documents, that the
Work will be free from defects not inherent in the quality required or
permitted, and that the Work will conform to the requirements of the Contract
Documents. Work not conforming to these requirements, including substitutions
not properly approved and authorized, may be considered defective. The
Contractor's warranty excludes remedy for damage or defect caused by abuse,
modifications not executed by the Contractor, improper or insufficient
maintenance, improper operation, or normal wear and tear and normal usage. If
required by the [TEXT DELETED] Owner, the Contractor shall furnish satisfactory
evidence as to the kind and quality of materials and equipment.
<PAGE>
3.6 TAXES
3.6.1 The Contractor shall pay sales, consumer, use and similar
taxes for the Work provided by the contractor which are legally enacted when
bids are received or negotiations concluded, whether or not yet effective or
merely scheduled to go into effect.
3.7 PERMITS, FEES AND NOTICES
3.7.1 Unless otherwise provided in the Contract Documents, the
Contractor shall secure and pay for the building permit and other permits and
governmental fees, licenses and inspections necessary for proper execution and
completion of the Work which are customarily secured after execution of the
Contract and which are legally required when bids are received or negotiations
concluded.
3.7.2 The Contractor shall comply with and give notices required
by laws, ordinances, rules, regulations and lawful orders of public authorities
applicable to performance of the Work.
3.7.3 [TEXT DELETED]
3.7.4 If the Contractor performs Work knowing it to be contrary
to laws, statutes, ordinances, building codes, and rules and regulations without
such notice to the [TEXT DELETED] Owner, the Contractor shall assume appropriate
responsibility for such Work and shall bear the costs attributable to
correction.
3.8 ALLOWANCES
3.8.1 [TEXT DELETED]
3.8.2 [TEXT DELETED]
3.8.2.1 [TEXT DELETED]
<PAGE>
3.8.2.2 [TEXT DELETED]
3.8.2.3 [TEXT DELETED]
3.8.3 [TEXT DELETED]
3.9 SUPERINTENDENT
3.9.1 The Contractor shall employ a competent superintendent and
necessary assistants who shall be in attendance at the Project site during
performance of the Work. The superintendent shall represent the contractor, and
communications given to the superintendent shall be as binding as if given to
the Contractor. Important communications shall be confirmed in writing. Other
communications shall be similarly confirmed on written request in each case.
3.10 CONTRACTOR'S CONSTRUCTION SCHEDULES
3.10.1 The Contractor, promptly after being awarded the Contract,
shall prepare and submit for the Owner's [TEXT DELETED] information a
Contractor's construction schedule for the Work. The schedule shall not exceed
time limits current under the Contract Documents, shall be revised at
appropriate intervals as required by the conditions of the Work and Project,
shall be related to the entire Project to the extent required by the Contract
Documents, and shall provide for expeditions and practicable execution of the
Work.
3.10.2 The Contractor shall prepare and keep current, for the
Architect's approval, a schedule of Submittals which is coordinated with the
Contractor's construction schedule and allows the Architect reasonable time to
review Submittals.
3.10.3 The Contractor shall perform the Work in general
accordance with the most recent schedules submitted to the Owner [TEXT DELETED].
<PAGE>
3.11 DOCUMENTS AND SAMPLES AT THE SITE
3.11.1 The Contractor shall maintain at the site for the Owner
one record copy of the Drawings, Specifications, Addenda, Change Order and other
Modifications, in good order and marked currently to record field changes and
selections made during construction, and one record copy of approved Shop
Drawings, Product Data, Samples and similar required submittals. [TEXT DELETED].
3.12 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES
3.12.1 Shop Drawings are drawings, diagrams, schedules and other
data specially prepared for the Work by the Contractor or a Subcontractor, Sub-
subcontractor, manufacturer, supplier or distributor to illustrate some portion
of the Work.
3.12.2 Product Data are illustrations, standard schedules,
performance charts, instructions, brochures, diagrams and other information
furnished by the Contractor to illustrate materials or equipment for some
portion of the Work.
3.12.3 Samples are physical examples which illustrate materials,
equipment or workmanship and establish standards by which the Work will be
judged.
3.12.4 Shop Drawings, Product Data, Samples and similar
submittals are not Contract Documents. The purpose of their submittals is to
demonstrate for those portions of the Work for which submittals are required by
the Contract Documents the way by which the Contractor proposes to conform to
the information given and the design concept expressed in the Contract
Documents. [TEXT DELETED].
3.12.5 The Contractor shall review for compliance with the
Contract Documents, approve and submit to the [TEXT DELETED] Owner Shop
Drawings, Product Data, Samples and similar submittals required by the Contract
Documents with reasonable promptness and in such sequence as to cause no delay
in
<PAGE>
the Work or in the activities of the Owner or of separate contractors. [TEXT
DELETED].
3.12.6 By approving and submitting Shop Drawings, Product Data,
Samples and similar submittals, the Contractor represents that the Contractor
has determined and verified materials, field measurements and field construction
criteria related thereto, or will do so, and has checked and coordinated the
information contained within such submittals with the requirements of the Work
and of the Contract Documents.
3.12.7 The Contractor shall perform no portion of the Work for
which the Contract Documents require submittals and review of the Shop Drawings,
Project Data, Samples or similar submittals until the respective submittals has
been approved by the [TEXT DELETED] Owner.
3.12.8 The Work shall be in accordance with approved submittals
except that the contractor shall not be relieved of responsibility for
deviations from requirements of the contract Documents by the [TEXT DELETED]
Owner's approval of Shop Drawings, Product Data, Samples or similar submittals
unless the Contractor has specifically informed the [TEXT DELETED] Owner in
writing of such deviation oat the time of submittals and (1) the [TEXT DELETED]
Owner has given written approval to the specific deviation as a minor change in
the Work, or (2) a Change Order or Construction Change Directive has been issued
authorizing the deviation. The Contractor shall not be relieved of
responsibility for errors or omissions in Shop Drawings, Product Data, Samples
or similar submittals by the [TEXT DELETED] Owner's approval thereof.
3.12.9 The Contract shall direct specific attention, in writing
or on resubmitted Shop Drawings, Product Data, Samples or similar submittals, to
revisions other than those requested by the [TEXT DELETED] Owner on previous
submittals. In the absence of such written notice the [TEXT DELETED] Owner's
approval of a resubmission shall not apply to such revisions.
3.12.10 [TEXT DELETED]. The Contractor shall not be
required to provide professional services in violation of applicable law. If
profes-
<PAGE>
sional design services or certifications by a design professional related to
systems, materials or equipment are specifically required of the Contractor by
the Contract Documents, the Owner [TEXT DELETED] will specify all performance
and design criteria that such services must satisfy. The Contractor shall cause
such services or certifications to be provided by a properly licensed design
professional, whose signature and seal shall appear on all drawings,
calculations, specifications, certifications, Shop Drawings and other submittals
prepared by such professional. Shop Drawings and other submittals related to the
Work designed or certified by such professional, if prepared by others, shall
bear such professional's written approval when submitted to the [TEXT DELETED]
Owner. The Owner [TEXT DELETED] shall be entitled to rely upon the adequacy,
accuracy and completeness of the services, certifications or approvals performed
by such design professionals, provided the Owner [TEXT DELETED] have specified
to the Contractor all performance and design criteria that such services must
satisfy. Pursuant to this Subparagraph 3.12.10, the [TEXT DELETED] Owner will
promptly review, approve or take other appropriate action on submittals only for
the limited purpose of checking for conformance with information given and the
design concept expressed in the Contract Documents. the Contractor shall not be
responsible for the adequacy of the performance or design criteria required by
the Contract Documents.
3.13 USE OF SITE
3.13.1 The Contractor shall confine operations at the site to
areas permitted by law, ordinances, permits and the Contract Documents and shall
not unreasonably encumber the site with materials or equipment.
3.14 CUTTING AND PATCHING
3.14.1 The Contractor shall be responsible for cutting, fitting
or patching required to complete the Work or to make its parts fit together
properly.
3.14.2 The Contractor shall not damage or endanger a portion of
the Work or fully or partially completed construction of the Owner or separate
contractors by cutting, patching or otherwise altering such construction, or by
excavation. The Contractor shall not cut or otherwise alter such construction by
the
<PAGE>
Owner or a separate contractor except with written consent of the Owner and of
such separate contractor, such consent shall not be unreasonably withheld. The
Contractor shall not unreasonably withhold from the Owner or a separate
contractor the Contractor's consent to cutting or otherwise altering the Work.
3.15 CLEANING UP
3.15.1 The Contractor shall keep the premises and surrounding
area free from accumulation of waste materials or rubbish caused by operations
under the Contract. At completion of the Work, the Contractor shall remove from
and about the Project waste materials, rubbish, the Contractor's tools,
construction equipment, machinery and surplus materials.
3.16 ACCESS TO WORK
3.16.1 The Contractor shall provide the Owner [TEXT DELETED]
access to the Work in preparation and progress wherever located.
3.17 ROYALTIES, PATENTS AND COPYRIGHTS
3.17.1 The Contractor shall pay all royalties and license fees.
The Contractor shall defend suits or claims for infringement of copyrights and
patent rights and shall hold the Owner [TEXT DELETED] harmless from loss on
account thereof, but shall not be responsible for such defense or loss when a
particular design, process or product of a particular manufacturer or
manufacturers is required by the Contract Documents or where the copyright
violations are contained in Drawings, Specifications or other documents prepared
by the Owner or Architect. However, if the Contractor has reason to believe that
the required design, process or product is an infringement of a copyright or a
patent, the Contractor shall be responsible for such loss unless such
information is promptly furnished to the [TEXT DELETED] Owner.
3.18 INDEMNIFICATION
<PAGE>
3.18.1 To the fullest extent permitted by law and to the extent
claims, damages, losses or expenses are not covered by Project Management
Protective liability insurance purchased by the contractor in accordance with
Paragraph 11.3, the Contractor shall indemnify and hold harmless the Owner,
[TEXT DELETED] and agents and employees of any of them from and against claims,
damages, losses and expenses, including but not limited to attorneys' fees,
arising out of or resulting from performance of the Work, provided that such
claim, damage, loss or expense is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other
than the Work itself), but only to the extent caused by the [TEXT DELETED] acts
or omissions of the contractor, a Subcontractor, anyone directly or indirectly
employed by them or anyone for whose acts they may be liable, regardless of
whether or not such claim, damage, loss or expense is caused in part by a party
indemnified hereunder. Such obligations shall not be construed to negate,
abridge, or reduce other rights or obligations of indemnity which would
otherwise exist as to a party or person described in this Paragraph 3.18.
3.18.2 In claims against any person or entity indemnified under
this paragraph 3.18 by an employee of the Contractor, a Subcontractor, anyone
directly or indirectly employed by them or anyone for whose acts they may be
liable, the indemnification obligation under Subparagraph 3.18.1 shall not be
limited by a limitation on amount or type of damages, compensation or benefits
payable by or for the Contractor or a Subcontractor under workers' compensation
acts, disability benefit acts or other employee benefit acts.
4. ADMINISTRATION OF THE CONTRACT
4.1 ARCHITECT
4.1.1 [TEXT DELETED]
4.1.2 [TEXT DELETED]
4.1.3 [TEXT DELETED]
4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT
<PAGE>
4.2.1 [TEXT DELETED]
4.2.2 [TEXT DELETED]
4.2.3 [TEXT DELETED]
4.2.4 [TEXT DELETED]
4.2.5 [TEXT DELETED]
4.2.6 [TEXT DELETED]
4.2.7 [TEXT DELETED]
4.2.8 [TEXT DELETED]
4.2.9 [TEXT DELETED]
4.2.10 [TEXT DELETED]
4.2.11 [TEXT DELETED]
4.2.12 [TEXT DELETED]
4.2.13 [TEXT DELETED]
4.3 CLAIMS AND DISPUTES
4.3.1 Definition. A Claim is a demand or assertion by one of
the parties seeking, as a matter of right, adjustment or interpretation of
Contract terms, payment of money, extension of time or other relief with respect
to the terms of the Contract. The term "Claim" also includes other disputes and
matters in question between the Owner and Contractor arising out of or relating
to the Contract.
<PAGE>
Claims must be initiated by written notice. The responsibility to substantiate
Claims shall rest with the party making the Claim.
4.3.2 Time Limits on Claims. Claims by either party must be
initiated within 21 days after occurrence of the event giving rise to such Claim
or within 21 days after the claimant first recognizes the condition giving rise
to the Claim, whichever is later. Claims must be initiated by written notice to
[TEXT DELETED] the other party.
4.3.3 Continuing Contract Performance. Pending final resolution
of a Claim except as otherwise agreed in writing or as provided in Subparagraph
9.7.1 and Article 14, the Contractor shall proceed diligently with performance
of the Contract and the Owner shall continue to make payments in accordance with
the Contract Documents.
4.3.4 [TEXT DELETED]
4.3.5 Claims for Additional Cost. If the Contractor wishes to
make Claim for an increase in the Contract Sum, written notice as provided
herein shall be given before proceeding to execute the Work. Prior notice is not
required for Claims relating to an emergency endangering life or property
arising under Paragraph 10.6.
4.3.6 If the Contractor believes additional cost is involved for
reasons including but not limited to [TEXT DELETED] (1) an order by the Owner to
stop the work where the Contractor was not at fault (2) a written order for a
minor change in the Work issued by the [TEXT DELETED] Owner] (3) failure of
payment by the Owner, (4) termination of the Contract by the Owner, (5) Owner's
suspension or (6) other reasonable grounds, Claims shall be filed in accordance
with this Paragraph 4.3.
4.3.7 Claims for Additional Time
4.3.7.1 If the Contractor wishes to make Claim for an
increase in the Contract Time, written notice as provided herein shall be given.
The
<PAGE>
Contractor's Claim shall include an estimate of cost and of probable effect of
delay on progress of the Work. In the case of a continuing delay only one Claim
is necessary.
4.3.7.2 If adverse weather conditions are the basis for a
Claim for additional time, such Claim shall be documented by data substantiating
that weather conditions were abnormal for the period of time, could not have
been reasonably anticipated and had an adverse effect on the scheduled
construction.
4.3.8 Injury or Damage to Person or Property. If either party to
the Contract suffers injury or damage to person or property because of an act or
omission of the other party, or of others for whose acts such party is legally
responsible, written notice of such injury or damage, whether or not insured,
shall be given to the other party within a reasonable time not exceeding 21 days
after discovery. The notice shall provide sufficient detail to enable the other
party to investigate the matter.
4.3.9 If unit prices are stated in the Contract Documents or
subsequently agreed upon, and if quantities originally contemplated are
materially changed in a proposed Change Order or Construction Change Directive
so that application of such unit prices to quantities of Work proposed will
cause substantial inequity to the Owner or Contractor, the applicable unit
prices shall be equitably adjusted.
4.3.10 Claims for Consequential Damages. The Contractor and Owner
waive Claims against each other for consequential damages arising out of or
relating to this Contract. This mutual waiver includes:
4.3.10.1 damages incurred by the Owner for rental
expenses, for losses of use, income, profit, financing, business and reputation,
and for loss of management or employee productivity or of the services of such
persons; and
4.3.10.2 damages incurred by the Contractor for principal
office expenses including the compensation of personnel stationed there,
<PAGE>
for losses of financing, business and reputation, and for loss of profit except
anticipated profit arising directly from the Work.
This mutual waiver is applicable, without limitation, to all consequential
damages due to either party's termination in accordance with Article 14. Nothing
contained in this Subparagraph 4.3.10 shall be deemed to preclude an award of
liquidated direct damages, when applicable, in accordance with the requirements
of the Contract Documents.
4.4 RESOLUTION OF CLAIMS AND DISPUTES
4.4.1 [TEXT DELETED]
4.4.2 [TEXT DELETED]
4.4.3 [TEXT DELETED]
4.4.4 [TEXT DELETED]
4.4.5 [TEXT DELETED]
4.4.6 [TEXT DELETED]
4.4.7 [TEXT DELETED]
4.4.8 If a Claim relates to or is the subject of a mechanic's
lien, the party asserting such Claim may proceed in accordance with applicable
law to comply with the lien notice or filing deadlines prior to resolution of
the Claim. [TEXT DELETED]
4.5 MEDIATION
4.5.1 [TEXT DELETED]
<PAGE>
4.5.2 [TEXT DELETED]
4.5.3 [TEXT DELETED]
4.6 ARBITRATION
4.6.1 [TEXT DELETED]
4.6.2 Claims not resolved by mediation shall be decided by
arbitration which, unless the parties mutually agree otherwise, shall be in
accordance with the Construction Industry Arbitration Rules of the American
Arbitration Association currently in effect. The demand for arbitration shall be
filed in writing with the other party to the Contract and with the American
Arbitration Association. [TEXT DELETED]
4.6.3 A demand for arbitration shall be made within the time
limits specified in Subparagraphs 4.4.6 and 4.6.1 as applicable, and in other
cases within a reasonable time after the Claim has arisen, and in no event shall
it be made after the date when institution of legal or equitable proceedings
based on such Claim would be barred by the applicable statute of limitations as
determined pursuant to Paragraph 13.7.
4.6.4 Limitation on Consolidation or Joinder. [TEXT DELETED]. No
arbitration shall include, by consolidation or joinder or in any other manner,
parties other than the Owner, Contractor, a separate contractor as described in
Article 6 and other persons substantially involved in a common question of fact
or law whose presence is required if complete relief is to be accorded in
arbitration. No person or entity other than the Owner, Contractor or a separate
contractor as described in Article 6 shall be included as an original third
party or additional third party to an arbitration whose interest or
responsibility is insubstantial. Consent to arbitration involving an additional
person or entity shall not constitute consent to arbitration of a Claim not
described therein or with a person or entity not named or described therein. The
foregoing agreement to arbitrate and other agreements to arbitrate with an
additional person or entity duly consented to by parties to the
<PAGE>
Agreement shall be specifically enforceable under applicable law in any court
having jurisdiction thereof.
4.6.5 Claims and Timely Assertion of Claims. The party filing a
notice of demand for arbitration must assert in the demand all Claims then known
to that party on which arbitration is permitted to be demanded.
4.6.6 Judgment on Final Award. The award rendered by the
arbitrator or arbitrators shall be final, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof.
5. SUBCONTRACTORS
5.1 DEFINITIONS
5.1.1 A Subcontractor is a person or entity who has a direct
contract with the Contractor to perform a portion of the work at the site. The
term "Subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Subcontractor or an authorized representative of
the Subcontractor. The term "Subcontractor" does not include a separate
contractor or subcontractors of a separate contractor.
5.1.2 A Sub-subcontractor is a person or entity who has a direct
or indirect contract with a Subcontractor to perform a portion of the Work at
the site. The term "Sub-subcontractor" is referred to throughout the Contract
Documents as if singular in number and means a Sub-subcontractor or an
authorized representative of the Sub-subcontractor.
5.2 AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE
WORK
5.2.1 [TEXT DELETED]. The Contractor, as soon as practicable
after award of the Contract, shall furnish in writing to the Owner [TEXT
DELETED] the names of persons or entities (including those who are to furnish
materials or equipment fabricated to a special design) proposed for each
principal
<PAGE>
portion of the Work. The [TEXT DELETED] Owner will promptly reply to the
Contractor in writing stating whether or not the Owner [TEXT DELETED], after due
investigation, has reasonable objection to any such proposed person or entity.
[TEXT DELETED]
5.2.2 The Contractor shall not contract with a proposed person
or entity to whom the Owner [TEXT DELETED] has made reasonable and timely
objection. The Contractor shall not be required to contract with anyone to whom
the Contractor has made reasonable objection.
5.2.3 If the Owner [TEXT DELETED ] has reasonable objection to a
person or entity proposed by the Contractor, the Contractor shall propose
another to whom the Owner [TEXT DELETED] has no reasonable objection. If the
proposed but rejected Subcontractor was reasonably capable of performing the
Work, the Contract Sum and Contract Time shall be increased or decreased by the
difference, if any, occasioned by such change, and an appropriate Change Order
shall be issued before commencement of the substitute Subcontractor's work.
However, no increase in the Contract Sum or Contract Time shall be allowed for
such change unless the Contractor has acted promptly and responsively in
submitting names as required.
5.3 SUBCONTRACTUAL RELATIONS
5.3.1 By appropriate written agreement, [TEXT DELETED] the
Contractor shall require each Subcontractor, to the extent of the Work to be
performed by the Subcontractor, to be bound to the Contractor by terms of the
Contract Documents, and to assume toward the Contractor all the obligations and
responsibilities, including the responsibility for safety of the Subcontractor's
Work, which the Contractor, by these Documents, assumes toward the Owner [TEXT
DELETED]. Each subcontract agreement shall preserve and protect the rights of
the Owner [TEXT DELETED] under the Contract Documents with respect to the Work
to be performed by the Subcontractor so that subcontracting thereof will not
prejudice such rights, and shall allow to the Subcontractor, unless specifically
provided otherwise in the subcontract agreement, the benefit of all rights,
remedies and redress against the Contractor that the Contractor, by the Contract
Documents, has against
<PAGE>
the Owner. Where appropriate, the Contractor shall require each Subcontractor to
enter into similar agreements with Sub-subcontractors. The Contractor shall make
available to each proposed Subcontractor, prior to the execution of the
subcontract agreement, copies of the Contract Documents to which the
Subcontractor will be bound, and, upon written request of the Subcontractor,
identify to the Subcontractor terms and conditions of the proposed subcontract
agreement which may be at variance with the Contract Documents. Subcontractors
will similarly make copies of applicable portions of such documents available to
their respective proposed Sub-subcontractors.
5.4 CONTINGENT ASSIGNMENT OF SUBCONTRACTS
5.4.1 Each subcontract agreement for a portion of the Work is
assigned by the Contractor to the Owner provided that:
5.4.1.1 assignment is effective only after termination of
the Contract by the Owner for cause pursuant to Paragraph 14.2 and only for
those subcontract agreements which the Owner accepts by notifying the
Subcontractor and Contractor in writing; and
5.4.1.2 assignment is subject to the prior rights of the
surety, if any, obligated under bond relating to the Contract.
5.4.2 Upon such assignment, if the Work has been suspended for
more than 30 days, the Subcontractor's compensation shall be equitably adjusted
for increases in cost resulting from the suspension.
6. CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
6.1 OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE
CONTRACTS
6.1.1 The Owner reserves the right to perform construction or
operations related to the Project with the Owner's own forces, and to award
separate contracts in connection with other portions of the Project or other
construction or
<PAGE>
operations on the site under Conditions of the Contract identical or
substantially similar to these including those portions related to insurance and
waiver of subrogation. If the Contractor claims that delay or additional cost is
involved because of such action by the Owner, the Contractor shall make such
Claim as provided in Paragraph 4.3.
6.1.2 When separate contracts are awarded for different portions
of the Project or other construction or operations on the site, the term
"Contractor" in the Contract Documents in each case shall mean the Contractor
who executes each separate Owner-Contractor Agreement.
6.1.3 [TEXT DELETED]. The Contractor shall make any revisions to
the construction schedule deemed necessary after a joint review and mutual
agreement. The construction schedules shall then constitute the schedules to be
used by the Contractor, separate contractors and the Other until subsequently
revised.
6.1.4 Unless otherwise provided in the Contract Documents, when
the Owner performs construction or operations related to the Project and the
Owner's own forces, the Owner shall be deemed to be subject to the same
obligations and to have the same rights which apply to the Contractor under the
Conditions of the Contract, including, without excluding others, those stated in
Article 3, this Article 6 and Articles 10, 11 and 12.
6.2 MUTUAL RESPONSIBILITY
6.2.1 The Contractor shall afford the Owner and separate
contractors reasonable opportunity for introduction and storage of their
materials and equipment and performance of their activities, and shall connect
and coordinate the Contractor's construction and operations with theirs as
required by the Contract documents.
6.2.2 If part of the Contractor's Work depends for proper
execution or results upon construction or operations by the Owner or a separate
contractor, the Contractor shall, prior to proceeding with that portion of the
Work,
<PAGE>
promptly report to the [TEXT DELETED] apparent discrepancies or defects in such
other construction that would render it unsuitable for such proper execution and
results. Failure of the contractor so to report shall constitute an
acknowledgment that the Owner's or separate contractor's completed or partially
completed construction is fit and proper to receive the Contractor's Work,
except as to defects not then reasonably discoverable.
6.2.3 The Owner shall be reimbursed by the Contractor for costs
incurred by the Owner which are payable to a separate contractor because of
delays, improperly timed activities or defective construction of the Contractor.
The Owner shall be responsible to the Contractor for costs incurred by the
Contractor because of delays, improperly timed activities, damage to the Work or
defective construction of a separate contractor.
6.2.4 The Contractor shall remedy damage wrongfully caused by
the Contractor to completed or partially completed construction or to property
of the Owner or separate contractors as provided in Subparagraph 10.2.5.
6.2.5 The Owner and each separate contractor shall have the same
responsibilities for cutting and patching as are described for the Contractor in
Subparagraph 3.14.
6.3 OWNER'S RIGHT TO CLEAN UP
6.3.1 If a dispute arises among the Contractor, separate
contractors and the Owner as to the responsibility under their respective
contracts for maintaining the premises and surrounding area free from waste
materials and rubbish, the Owner may clean up and [TEXT DELETED] allocate the
cost among those responsible.
7. CHANGES IN THE WORK
7.1 GENERAL
<PAGE>
7.1.1 Changes in the Work may be accomplished after execution of
the Contract, and without invalidating the Contract, by Change Order,
Construction Change Directive or order for a minor change in the Work, subject
to the limitations stated in this Article 7 and elsewhere in the Contract
Documents.
7.1.2 A Change Order shall be based upon agreement among the
Owner, and Contractor [TEXT DELETED] a Construction Change Directive requires
agreement by the Owner [TEXT DELETED] and may or may not be agreed to by the
Contractor; an order for a minor change in the Work may be issued by the [TEXT
DELETED] Owner alone.
7.1.3 Changes in the Work shall be performed under applicable
provisions of the Contract Documents, and the Contractor shall proceed promptly,
unless otherwise provided in the Change Order, Construction Change Directive or
order for a minor change in the Work.
7.2 CHANGE ORDERS
7.2.1 [TEXT DELETED]
7.2.2 Methods used in determining adjustments to the Contract
Sum may include those listed in Subparagraph 7.3.3.
7.3 CONSTRUCTION CHANGE DIRECTIVES
7.3.1 A Construction Change Directive is a written order [TEXT
DELETED] signed by the Owner [TEXT DELETED], directing a change in the Work
prior to the agreement on adjustment, if any, in the Contract sum or Contract
Time, or both. The Owner may by Construction Change Directive, without
invalidating the Contract, order changes in the Work within the general scope of
the Contract consisting of additions, deletions or other revisions, the Contract
Sum and Contract Time being adjusted accordingly.
7.3.2 A Construction Change Directive shall be used in the
absence of total agreement on the terms of a Change Order.
<PAGE>
7.3.3 If the Construction Change Directive provides for an
adjustment to the Contract Sum, the adjustment shall be based on one of the
following methods:
.1 mutual acceptance of a lump sum properly itemized and supported
by sufficient substantiating data to permit evaluation;
.2 unit prices stated in the Contract Documents or subsequently
agreed upon
.3 cost to be determined in a manner agreed upon by the parties and
a mutually acceptable fixed or percentage fee; or
.4 as provided in Subparagraph 7.3.6.
7.3.4 Upon receipt of a Construction Change Directive, the
Contractor shall promptly proceed with the change in the Work involved and
advise the [TEXT DELETED] Owner of the Contractor's agreement or disagreement
with the method, if any, provided in the Construction Change Directive for
determining the proposed adjustment in the Contract Sum or Contract Time.
7.3.5 A Construction Change Directive signed by the Contractor
indicates the agreement of the Contractor therewith, including adjustment in
Contract Sum and Contract Time or the method for determining them. Such
agreement shall be effective immediately and shall be recorded as a Change
Order.
7.3.6 If the Contractor does not respond promptly or disagrees
with the method for adjustment in the Contract Sum, the method and the
adjustment shall be determined by the Architect on the basis of reasonable
expenditures and savings of those performing the Work attributable to the
change, including, in the case of an increase in the Contract Sum, a reasonable
allowance for overhead and profit. In such case, and also under Clause 7.3.3.3,
the Contractor shall keep and present, in such form as the Architect may
prescribe, an itemized accounting together with appropriate supporting data.
Unless otherwise provided in the Contract Docu-
<PAGE>
ments, costs for the purposes of this Subparagraph 7.3.6 shall be limited to the
following:
.1 costs of labor, including social security, old age and
unemployment insurance, fringe benefits required by agreement or
custom, and workers' compensation insurance;
.2 costs of materials, supplies and equipment, including cost of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment, exclusive of hand tools,
whether rented from the Contractor or others;
.4 costs of premiums for all bonds and insurance, permit fees, and
sales, use of similar taxes related to the Work; and
.5 additional costs of supervision and field office personnel
directly attributable to the change.
7.3.7 The amount of credit to be allowed by the Contractor to
the Owner for a deletion or change which results in a net decrease in the
Contract Sum shall be actual net cost [TEXT DELETED]. When both additions and
credits covering related Work or substitutions are involved in a change, the
allowance for overhead and profit shall be figured on the basis of net increase,
if any, with respect to that change.
7.3.8 Pending final determination of the total cost of a
Construction Change Directive to the Owner, amounts not in dispute for such
changes in the Work shall be included in Applications for Payment accompanied by
a Change Order indicating the parties' agreement with part or all of such costs.
[TEXT DELETED]
7.3.9 When the Owner and Contractor agree with [TEXT DELETED]
the adjustments in the Contract Sum and Contract Time, or otherwise reach
agreement upon the adjustments, such agreement shall be effective immedi-
<PAGE>
ately and shall be recorded by preparation and execution of an appropriate
Change Order.
7.4 MINOR CHANGES IN THE WORK
7.4.1 [TEXT DELETED]
8. TIME
8.1 DEFINITIONS
8.1.1 Unless otherwise provided, Contract Time is the period of
time, including authorized adjustments, allotted in the Contract Documents for
Substantial Completion of the Work.
8.1.2 The date of commencement of the Work is the date
established in the Agreement.
8.1.3 [TEXT DELETED]
8.1.4 The term "day" as used in the Contract Documents shall
mean calendar day unless otherwise specifically defined.
8.2 PROGRESS AND COMPLETION
8.2.1 Time limits stated in the Contract Documents are of the
essence of the Contract. By executing the Agreement the Contractor confirms that
the Contract Time is a reasonable period for performing the Work.
8.2.2 The Contractor shall not knowingly, except by agreement or
instruction of the Owner in writing, prematurely commence operations on the site
or elsewhere prior to the effective date of insurance required by Article 11 to
be furnished by the Contractor and Owner. The date of commencement of the Work
shall not be changed by the effective date of such insurance. Unless the date of
<PAGE>
commencement is established by the Contract Documents or a notice to proceed
given by the Owner, the Contractor shall notify the Owner in writing not less
than five days or other agreed period before commencing the Work to permit the
timely filing of mortgages, mechanic's liens and other security interests.
8.2.3 The Contractor shall proceed expeditiously with adequate
forces and shall achieve Substantial Completion within the Contract Time.
8.3 DELAYS AND EXTENSIONS OF TIME
8.3.1 If the Contractor is delayed at any time in the
commencement or progress of the Work by an act or neglect of the Owner, [TEXT
DELETED] or of an employee [TEXT DELETED], or of a separate contractor employed
by the Owner, or by changes ordered in the Work, or by labor disputes, fires,
unusual delay in deliveries, unavoidable casualties or other causes beyond the
Contractor's control, and are not reasonably foreseeable [TEXT DELETED] then the
Contract Time shall be extended by the Change Order for such reasonable time as
the [TEXT DELETED] Owner and Contractor may mutually determine.
8.3.2 Claims relating to time shall be made in accordance with
applicable provisions of Paragraph 4.3.
8.3.3 This Paragraph 8.3 does not preclude recovery of damages
for delay by either party under other provisions of the Contract Documents.
9. PAYMENTS AND COMPLETION
9.1 CONTRACT SUM
9.1.1 The Contract Time is stated in the Agreement and,
including authorized adjustments, is the total amount payable by the Owner to
the Contractor for performance of the Work under the Contract Documents.
<PAGE>
9.2 SCHEDULE OF VALUES
9.2.1 Before the first Application for Payment, the Contractor
shall submit to the [TEXT DELETED] Owner a schedule of values allocated to
various portions of the Work, prepared in such form and supported by such data
to substantiate its accuracy as the [TEXT DELETED] Owner may require. This
schedule, unless objected to by the [TEXT DELETED] Owner, shall be used as a
basis for reviewing the Contractor's Applications for Payment.
9.3 APPLICATIONS FOR PAYMENT
9.3.1 At least ten days before the date established for each
progress payment, the Contractor shall submit to the [TEXT DELETED] Owner an
itemized Application for Payment for operations completed in accordance with the
schedule of values. Such application shall be [TEXT DELETED] supported by such
data substantiating the Contractor's right to payment as the Owner [TEXT
DELETED] may require, such as copies of requisitions from Subcontractors and
material suppliers, and reflecting retainage if provided for in the Contract
Documents.
9.3.1.1 As provided in Subparagraph 7.3.8, such
applications may include requests for payment on account of changes in the Work
which have been properly authorized by Construction Change Directives, [TEXT
DELETED] but not yet included in Change Orders.
9.3.1.2 Such applications may not include requests for
payment for portions of the Work for which the Contractor does not intend to pay
to a Subcontractor or material supplier, unless such Work has been performed by
others whom the Contractor intends to pay.
9.3.2 Unless otherwise provided in the Contract Documents,
payments shall be made on account of materials and equipment delivered and
suitably stored at the site for subsequent incorporation in the Work. If
approved in advance by the Owner, payment may similarly be made for materials
and equipment suitably stored off site at a location agreed upon in writing.
Payment for materials
<PAGE>
and equipment stored on or off site shall be conditioned upon compliance by the
Contractor with procedures satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and shall include the costs of applicable insurance, storage and transportation
to the site for such materials and equipment stored off the site.
9.3.3 The Contractor warrants that title to all Work covered by
an Application for Payment will pass to the Owner no later than the time of
payment. The Contractor further warrants that upon submittals of an Application
for Payment all Work for which [TEXT DELETED] payments received from the Owner
shall, to the best of the Contractor's knowledge, information and belief, be
free and clear of liens, claims, security interests or encumbrances in favor of
the Contractor, Subcontractors, material suppliers, or other persons or entities
making a claim by reason of having provided labor, materials and equipment
relating to the Work.
9.4 CERTIFICATES FOR PAYMENT
9.4.1 [TEXT DELETED]
9.4.2 [TEXT DELETED]
9.5 DECISIONS TO WITHHOLD CERTIFICATION
9.5.1 [TEXT DELETED]
.1 defective Work not remedied;
.2 third party claims filed or reasonable evidence indicating
probable filing of such claims unless security acceptable to the
Owner is provided by the Contractor;
.3 failure of the Contractor to make payments properly to
Subcontractors or for labor, materials or equipment;
<PAGE>
.4 reasonable evidence that the Work cannot be completed for the
unpaid balance of the Contract Sum;
.5 damage to the Owner or another contractor;
.6 [TEXT DELETED]
.7 persistent failure to carry out the Work in accordance with the
Contract Documents.
.8 [TEXT DELETED]
9.6 PROGRESS PAYMENTS
9.6.1 The Owner shall make payment in the manner and within the
time provided in the Contract Documents [TEXT DELETED].
9.6.2 The Contractor shall promptly pay each Subcontractor, upon
receipt of payment from the Owner, out of the amount paid to the Contractor on
account of such Subcontractor's portion of the Work, the amount to which said
Subcontractor is entitled, reflecting percentages actually retained from the
payments to the Contractor on account of such Subcontractor's portion of the
Work. The Contractor shall, by appropriate agreement with each Subcontractor,
require each Subcontractor to make payments to Sub-subcontractors in a similar
manner.
9.6.3 [TEXT DELETED]
9.6.4 [TEXT DELETED] The Owner [TEXT DELETED] shall not have an
obligation to pay or to see to the payment of money to a Subcontractor except as
may otherwise be required by law.
9.6.5 Payment to material suppliers shall be treated in a manner
similar to that provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4.
<PAGE>
9.6.6 [TEXT DELETED] A progress payment, or partial or entire
use or occupancy of the Project by the Owner shall not constitute acceptance of
Work not in accordance with the Contract Documents.
9.6.7 Unless the Contractor provides the Owner with a payment
bond in the full penal sum of the Contract Sum, payments received by the
Contractor for Work properly performed by Subcontractors and suppliers shall be
held by the Contractor for those Subcontractors or suppliers who performed Work
or furnished materials, or both, under contract with the Contractor for which
payment was made by the Owner. Nothing contained herein shall require money to
be placed in a separate account and not commingled with money of the Contractor,
shall create any fiduciary liability or tort liability on the part of the
Contractor for breach of trust or shall entitle any person or entity to an award
of punitive damages against the Contractor for breach of the requirements of
this provision.
9.7 FAILURE OF PAYMENT
9.7.1 [TEXT DELETED]
9.8 SUBSTANTIAL COMPLETION
9.8.1 [TEXT DELETED]
9.8.2 When the Contractor considers that the Work, or a portion
thereof which the Owner agrees to accept separately, is substantially complete,
the Contractor shall prepare and submit to the Owner [TEXT DELETED] a
comprehensive list of items to be completed or corrected prior to final payment.
Failure to include an item on such list does not alter the responsibility of the
Contractor to complete all Work in accordance with the Contract Documents.
9.8.3 Upon receipt of the Contractor's list, the [TEXT DELETED]
Owner will make an inspection to determine whether the Work or designated
portion thereof is substantially complete. If the [TEXT DELETED] Owner's
inspection discloses any item, whether or not included on the Contractor's list,
which is not sufficiently complete in accordance with the Contract Documents so
that the
<PAGE>
Owner can occupy or utilize the Work or designated portion thereof for its
intended use, the Contractor shall, before insurance of the Certificate of
Substantial Completion, complete or correct such item upon notification by the
[TEXT DELETED] Owner. In such case, the Contractor shall then submit a request
for another inspection by the [TEXT DELETED] Owner to determine Substantial
Completion.
9.8.4 When the Work or designated portion thereof is
substantially complete, the [TEXT DELETED] Owner will prepare a Certificate of
Substantial Completion which shall establish the date of Substantial Completion,
shall establish responsibilities of the Owner and Contractor for security,
maintenance, heat, utilities, damage to the Work and insurance, and shall fix
the time within which the Contractor shall finish all items on the list
accompanying the Certificate. Warranties required by the Contract Documents
shall commence on the date of Substantial Completion of the Work or designated
portion thereof, unless otherwise provided in the Certificate of Substantial
Completion.
9.8.5 The Certificate of Substantial Completion shall be
submitted to the [TEXT DELETED] Contractor for [TEXT DELETED] its written
acceptance of responsibilities assigned to them in such Certificate. Upon such
acceptance and consent of surety, if any Upon Substantial Completion of the Work
, the Owner shall make payment of retainage applying to such Work or designated
portion thereof. such payment shall be adjusted for Work that is incomplete or
not in accordance with the requirements of the Contract Documents.
9.9 PARTIAL OCCUPANCY OR USE
9.9.1 The Owner may occupy or use any completed or partially
completed portion of the Work at any stage when such portion is designated by
separate agreement with the Contractor, provided such occupancy or use is
consented to by the insurer as required under Clause 11.4.1.5 and authorized by
public authorities having jurisdiction over the Work. Such partial occupancy or
use may commence whether or not the portion is substantially complete, provided
the Owner and Contractor have accepted in writing the responsibilities assigned
to each of them for payments, retainage, if any, security, maintenance, heat,
utilities, damage to the Work and insurance, and have agreed in writing
concerning the period for correction
<PAGE>
of the Work and commencement of warranties required by the Contract Documents.
When the Contractor considers a portion substantially complete, the Contractor
shall prepare and submit a list to the [TEXT DELETED] Owner [TEXT DELETED].
Consent of the Contractor to partial occupancy or use shall not be unreasonably
withheld. The stage of the progress of the Work shall be determined by written
agreement between the Owner and Contractor. [TEXT DELETED]
9.9.2 Immediately prior to such partial occupancy or use, the
own, and Contractor [TEXT DELETED] shall jointly inspect the area to be occupied
or portion of the Work to be used in order to determine and record the condition
of the Work.
9.9.3 Unless otherwise agreed upon, partial occupancy or use of
a portion or portions of the Work shall not constitute acceptance of Work not
complying with the requirements of the Contract Documents.
9.10 FINAL COMPLETION AND FINAL PAYMENT
9.10.1 [TEXT DELETED]
9.10.2 neither final payment nor any remaining retained
percentage shall become due until the Contractor submits to the [TEXT DELETED]
Owner (1) an affidavit that payrolls, bills for materials and equipment, and
other indebtedness connected with the Work for which the Owner or the Owner's
property might be responsible or encumbered (less amounts withheld by Owner)
have been paid or otherwise satisfied, (2) a certificate evidencing that
insurance required by the Contract Documents to remain in force after final
payment is currently in effect and will not be canceled or allowed to expire
until at lease 30 days' prior written notice has been given to the Owner, (3) a
written statement that the Contractor knows of no substantial reason that the
insurance will not be renewable to cover the period required by the Contract
Documents, (4) consent of surety, if any, to final payment and (5), if required
by the Owner, other data establishing payment or satisfaction of obligations,
such as receipts, releases and waivers of liens, claims, security interests or
encumbrances arising out of the Contract, to the extent and in such form as may
be designated by the Owner. If a Subcontractor refuses to furnish a release or
waiver
<PAGE>
required by the Owner, the Contractor may furnish a bond satisfactory to the
Owner to indemnify the Owner against such lien. If such lien remains unsatisfied
after payments are made, the Contractor shall refund to the Owner all money that
the Owner may be compelled to pay in discharging such lien, including all costs
and reasonable attorneys' fees.
9.10.3 If, after Substantial Completion of the Work, final
completion thereof is materially delayed through no fault of the Contractor or
by issuance of Change Orders affecting final completion, [TEXT DELETED] the
Owner shall, upon application by the Contractor [TEXT DELETED], and without
terminating the Contract, make payment of the balance due for that portion of
the Work fully completed and accepted. If the remaining balance for Work not
fully completed or corrected is less than retainage stipulated in the Contract
Documents, and if bonds have been furnished, the written consent of surety to
payment of the balance due for that portion of the Work fully completed and
accepted shall be submitted by the [TEXT DELETED] Contractor to the [TEXT
DELETED] Owner prior to [DELETE- certification of] such payment. Such payment
shall be made under terms and conditions governing final payment, except that it
shall not constitute a waiver of claims.
9.10.4 The making of final payment shall constitute a waiver of
Claims by the Owner except those arising from:
.1 liens, Claims, security interests or encumbrances arising out of
the Contract and unsettled;
.2 failure of the Work to comply with the requirements of the
Contract Documents; or
.3 terms of special warranties required by the Contract Documents.
<PAGE>
.4 Acceptance of final payment by the Contractor, a Subcontractor or
material supplier shall constitute a waiver of claims by that
payee except those previously made in writing and identified by
that payee as unsettled at the time of final Application for
Payment.
10. PROTECTION OF PERSONS AND PROPERTY
10.1 SAFETY PRECAUTIONS AND PROGRAMS
10.1.1 The Contractor shall be responsible for initiating,
maintaining and supervising all safety precautions and programs in connection
with the performance of the Contract.
10.2 SAFETY OF PERSONS AND PROPERTY
10.2.1 The Contractor shall take reasonable precautions for
safety of, and shall provide reasonable protection to prevent damage, injury or
loss to:
10.2.1.1 employees on the Work and other persons who may
be affected thereby;
10.2.1.2 the Work and materials and equipment to be
incorporated therein, whether in storage on or off the site, under care, custody
or control of the Contractor or the Contractor's Subcontractors or
Sub-Subcontractors; and
10.2.1.3 other property at the site or adjacent thereto,
such as trees, shrubs, lawns, pavements, roadways, structures and utilities not
designated for removal, relocation or replacement in the course of construction.
10.2.2 The Contractor shall give notices and comply with
applicable laws, ordinances, rules, regulations and lawful orders of public
authorities
<PAGE>
bearing on safety of persons or property or their protection from damage, injury
or loss.
10.2.3 The Contractor shall erect and maintain, as required by
existing conditions and performance of the Contract, reasonable safeguards for
safety and protection, including posting danger signs and other warnings against
hazards, promulgating safety regulations and notifying owners and users of
adjacent sites and utilities.
10.2.4 When use or storage of explosives or other hazardous
materials or equipment or unusual methods are necessary for execution of the
Work, the Contractor shall exercise utmost care and carry on such activities
under supervision of properly qualified personnel.
10.2.5 The Contractor shall promptly remedy damage and loss
(other than damage or loss insured under property insurance required by the
Contract Documents ) to property referred to in Clauses 10.2.1.2 and 10.2.1.3
caused in whole or in part by the Contractor, a Subcontractor, a
Sub-Subcontractor, or anyone directly or indirectly employed by any of them, or
by anyone for whose acts they may be liable and for which the Contractor is
responsible under Clauses 10.2.1.2 and 10.2.1.3 except damage or loss
attributable to acts or omissions of the Owner or Architect or anyone directly
or indirectly employed by either of them, or by anyone for whose acts either of
them may be liable, and not attributable to the fault or negligence of the
Contractor. The foregoing obligations of the Contractor are in addition to the
Contractor's obligations under Paragraph 3.18.
10.2.6 The Contractor shall designate a responsible member of
the Contractor's organization at the site whose duty shall be the prevention of
accidents. This person shall be the Contractor's superintendent unless otherwise
designated by the Contractor in [TEXT DELETED] writing to the Owner [TEXT
DELETED].
10.2.7 The Contractor shall not load or permit any part of the
construction or site to be loaded so as to endanger its safety.
<PAGE>
10.3 HAZARDOUS MATERIALS
10.3.1 If reasonable precautions will be inadequate to prevent
foreseeable bodily injury or death to persons resulting from a material or
substance, including but not limited to asbestos or polychlorinated biphenyl
(PCB), encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner [TEXT DELETED] in writing.
10.3.2 [TEXT DELETED]
10.3.3 [TEXT DELETED]
10.4 The Owner shall not be responsible [TEXT DELETED] for materials
and substances brought to the site by the Contractor unless such materials or
substances were required by the Contract Documents.
10.5 If, without negligence on the part of the Contractor, the
Contractor is held liable for the cost of remediation of a hazardous material or
substance solely by reason of performing Work as required by the Contract
Documents, the Owner shall indemnify the Contractor for all cost and expense
thereby incurred.
10.6 EMERGENCIES
10.6.1 In an emergency affecting safety of persons or property,
the Contractor shall act, at the Contractor's discretion, to prevent threatened
damage, injury or loss. Additional compensation or extension of time claimed by
the Contractor on account of an emergency shall be determined as provided in
Paragraph 4.3 and Article 7.
11. INSURANCE AND BONDS
11.1 CONTRACTOR'S LIABILITY INSURANCE
<PAGE>
11.1.1 The Contractor shall purchase from and maintain in a
company or companies lawfully authorized to do business in the jurisdiction in
which the Project is located such insurance as will protect the Contractor and
Owner from claims set forth below which may arise out of or result from the
Contractor's operations under the Contract and for which the Contractor may be
legally liable, whether such operations be by the Contractor or by a
Subcontractor or by anyone directly or indirectly employed by any of them, or by
anyone for whose acts any of them may be liable:
.1 claims under workers' compensation, disability benefit and other
similar employee benefit acts which are applicable to the Work to
be performed;
.2 claims for damages because of bodily injury, occupational
sickness or disease, or death of the Contractor's employees;
.3 claims for damages because of bodily injury, sickness or disease,
death of any person other than the Contractor's employees;
.4 claims for damages insured by usual personal injury liability
coverage;
.5 claims for damages, other than to the Work itself, because of
injury to or destruction of tangible property, including loss of
use resulting therefrom;
.6 claims for damages because of bodily injury, death of a person or
property damage arising out of ownership, maintenance or use of a
motor vehicle;
.7 claims for bodily injury or property damage arising out of
completed operations; and
.8 claims involving contractual liability insurance applicable to
the Contractor's obligations under Paragraph 3.18.
<PAGE>
11.1.2 The insurance required by Subparagraph 11.1.1 shall be
written for not less than limits of liability specified in the Contract
Documents or required by law, whichever coverage is greater. Coverages, whether
written on an occurrence or claims-made basis, shall be maintained without
interruption from date of commencement of the Work until date of final payment
and termination of any coverage required to be maintained after final payment.
11.1.3 Certificates of insurance acceptable to the Owner shall
be filed with the Owner prior to commencement of the Work. These certificates
and the insurance policies required by this Paragraph 11.1 shall contain a
provision that coverages afforded under the policies will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Owner. If any of the foregoing insurance coverages are required to remain in
force after final payment and are reasonably available, an additional
certificate evidencing continuation of such coverage shall be submitted with the
final Application for Payment as required by Subparagraph 9.10.2. Information
concerning reduction of coverage on account of revised limits or claims paid
under the General Aggregate, or both, shall be furnished by the Contractor with
reasonable promptness in accordance with the Contractor's information and
belief.
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 The Owner shall be responsible for purchasing and
maintaining the Owner's usual liability insurance.
11.3 PROJECT MANAGEMENT PROTECTIVE LIABILITY INSURANCE
11.3.1 Optionally, the Owner may require the Contractor to
purchase and maintain Project Management Protective Liability insurance from the
Contractor's usual sources as primary coverage for the Owner's, Contractor's and
Architect's vicarious liability for construction operations under the Contract.
Unless otherwise required by the Contract Documents, the Owner shall reimburse
the Contractor by increasing the Contract Sum to pay the cost of purchasing and
maintaining such optional insurance coverage, and the Contractor shall not be
responsible
<PAGE>
for purchasing any other liability insurance on behalf of the Owner.
The minimum limits of liability purchased with such coverage shall be equal to
the aggregate of the limits required for Contractor's Liability Insurance under
Clauses 11.1.1.2 through 11.1.1.5.
11.3.2 To the extent damages are covered by Project management
Protective Liability insurance, the Owner, Contractor and Architect waive all
rights against each other for damages, except such rights as they may have to
the proceeds of such insurance. The policy shall provide for such waivers of
subrogation by endorsement or otherwise.
11.3.3 The Owner shall not require the Contractor to include the
Owner, Architect or other persons or entities as additional insureds on the
Contractor's Liability Insurance coverage under Paragraph 11.1.
11.4 PROPERTY INSURANCE
11.4.1 Unless otherwise provided, the Owner shall purchase and
maintain, in a company or companies lawfully authorized to do business in the
jurisdiction in which the Project is located, property insurance written on a
builder's risk "all-risk" or equivalent policy form in the amount of the initial
Contract Sum, plus value of subsequent Contract modifications and cost of
materials supplied or installed by others, comprising total value for the entire
Project at the site on a replacement cost basis without optical deductibles.
Such property insurance shall be maintained, unless otherwise provided in the
Contract Documents or otherwise agreed in writing by all persons and entities
who are beneficiaries of such insurance, until final payment has been made as
provided in Paragraph 9.10 or until no person or entity other than the Owner has
an insurable interest in the property required by this Paragraph 11.4 to be
covered, whichever is later. This insurance shall include interests of the
Owner, the Contractor, Subcontractors, and Sub-subcontractors in the Project.
11.4.1.1 Property insurance shall be on an "all-risk" or
equivalent policy form and shall include, without limitation, insurance against
the perils of fire (with extended coverage) and physical loss or damage
including,
<PAGE>
without duplication of coverage, theft, vandalism, malicious mischief, collapse,
earthquake, flood, windstorm, falsework, testing and startup, temporary
buildings and debris removal including demolition occasioned by enforcement of
any applicable legal requirements, and shall cover reasonable compensation for
Architect's and Contractor's services and expenses required as a result of such
insured loss.
11.4.1.2 If the Owner does not intend to purchase such
property insurance required by the Contract and with all of the coverages in the
amount described above, the Owner shall so inform the Contractor in writing
prior to commencement of the Work. The Contractor may then effect insurance
which will protect the interests of the contractor, Subcontractors and Sub-
subcontractors in the Work, and by appropriate Change Order the cost thereof
shall be charged to the Owner. If the Contractor is damaged by the failure or
neglect of the Owner to purchase or maintain insurance as described above,
without so notifying the Contractor in writing, then the Owner shall bear all
reasonable costs properly attributable thereto.
11.4.1.3 If the property insurance requires deductibles,
the Owner shall pay costs not covered because of such deductibles.
11.4.1.4 This property insurance shall cover portions of
the Work stored off the site, and also portions of the Work in transit.
11.4.1.5 Partial occupancy or use in accordance with
Paragraph 9.9 shall not commence until the insurance company or companies
providing property insurance have consented to such partial occupancy or use by
endorsement or otherwise. The Owner and the Contractor shall take reasonable
steps to obtain consent of the insurance company or companies and shall, without
mutual written consent, take no action with respect to partial occupancy or use
that would cause cancellation, lapse or reduction of insurance.
11.4.2 Boiler and Machinery Insurance. The Owner shall purchase
and maintain boiler and machinery insurance required by the Contract Document or
by law, which shall specifically cover such insured objects during installation
and until final acceptance by the Owner, this insurance shall include
<PAGE>
interests of the Owner, Contractor, Subcontractors and Sub-subcontractors in the
Work, and the Owner and Contractor shall be named insureds.
11.4.3 Loss of Insurance. The Owner, at the Owner's option, may
purchase and maintain such insurance as will insure the Owner against loss of
use of the Owner's property due to fire or other hazards, however caused. The
Owner waives all rights of action against the Contractor for loss of use of the
Owner's property, including consequential losses due to fire or other hazards
however caused.
11.4.4 If the Contractor requests in writing that insurance for
risks other than those described herein or other special causes of loss be
included in the property insurance policy, the Owner shall, if possible, include
such insurance, and the cost thereof shall be charged to the Contractor by
appropriate Change Order.
11.4.5 If during the Project construction period the Owner
insures properties, real or personal or both, at or adjacent to the site by
property insurance under policies separate from those insuring the Project, or
if after final payment property insurance is to be provided on the completed
Project through a policy or policies other than those insuring the Project
during the construction period, the Owner shall waive all rights in accordance
with the terms of Subparagraph 11.4.7 for damages caused by fire or other causes
of loss covered by this separate property insurance. All separate policies shall
provide this waiver of subrogation by endorsement or otherwise.
11.4.6 Before an exposure to loss may occur, the Owner shall
file with the Contractor a copy of each policy that includes insurance coverages
required by this Paragraph 11.4. Each policy shall contain all generally
applicable conditions, definitions, exclusions and endorsements related to this
Project. Each policy shall contain a provision that the policy will not be
canceled or allowed to expire, and that its limits will not be reduced, until at
least 30 days' prior written notice has been given to the Contractor.
11.4.7 Waivers of Subrogation. The Owner and Contractor waive
all rights against (1) each other and any of their subcontractors, sub-subcon-
<PAGE>
tractors, agents and employees, each of the other, and (2) the Architect,
Architect's consultants, separate contractors described in Article 6, if any,
and any of their subcontractors, sub-subcontractors, agents and employees, for
damages caused by fire or other causes of loss to the extent covered by property
insurance obtained pursuant to this Paragraph 11.4 or other property insurance
applicable to the Work, except such rights as they have to proceeds of such
insurance held by the Owner as fiduciary. The Owner or Contractor, as
appropriate, shall required of the Architect, Architect's consultants, separate
contractors described in Article 6, if any, and the subcontractors, sub-
subcontractors, agents and employees of any of them, by appropriate agreements,
written where legally required for validity, similar waivers each in favor of
other parties enumerated herein. the policies shall provide such waivers of
subrogation by endorsement or otherwise. A waiver of subrogation shall be
effective as to a person or entity even though that person or entity would
otherwise have a duty of indemnification, contractual or otherwise, did not pay
the insurance premium directly or indirectly, and whether or not the person or
entity had an insurable interest in the property damaged.
11.4.8 A loss insured under Owner's property insurance shall be
adjusted by the Owner as fiduciary and made payable to the Owner as fiduciary
for the insureds, as their interests may appear, subject to requirements of any
applicable mortgagee clause and of Subparagraph 11.4.10. The Contractor shall
pay Subcontractors their just shares of insurance proceeds received by the
Contractor, and by appropriate agreements, written where legally required for
validity, shall require Subcontractors to make payments to their Sub-
subcontractors in similar manner.
11.4.9 If required in writing by a party in interest, the Owner
as fiduciary shall, upon occurrence of an insured loss, give bond for proper
performance of the Owner's duties. The cost of required bonds shall be charged
against proceeds received as fiduciary. The Owner shall deposit in a separate
account proceeds so received, which the Owner shall distribute in accordance
with such agreement as the parties in interest may reach, or in accordance with
an arbitration award in which case the procedure shall be as provided in
Paragraph 4.6. If after such loss not other special agreement is made and unless
the Owner terminates the Contract for conve-
<PAGE>
nience, replacement of damaged property shall be performed by the Contractor
after notification of a Change in the Work in accordance with Article 7.
11.4.10 The Owner as fiduciary shall have power to adjust and
settle a loss with insurers unless one of the parties in interest shall object
in writing within five days after occurrence of loss to the Owner's exercise of
this power, if such objection is made, the dispute shall be resolved as provided
in Paragraphs 4.5 and 4.6. The Owner as fiduciary shall, in the case of
arbitration, make settlement with insurers in accordance with directions of the
arbitrators. If distribution of insurance proceeds by arbitration is required,
the arbitrators will direct such distribution.
11.5 PERFORMANCE BOND AND PAYMENT BOND
11.5.1 The Owner shall have the right to require the Contractor
to furnish bonds covering faithful performance of the Contract and payment of
obligations arising thereunder as stipulated in bidding requirements or
specifically required in the Contract Documents on the date of execution of the
Contract.
11.5.2 Upon the request of any person or entity appearing to be
a potential beneficiary of bonds covering payment of obligations arising under
the Contract, the Contractor shall promptly furnish a copy of the bonds or shall
permit a copy to be made.
12. UNCOVERING AND CORRECTION OF WORK
12.1 UNCOVERING OF WORK
12.1.1 If a portion of the Work is covered contrary to the [TEXT
DELETED] requirements specifically expressed in the Contract Documents, it must,
if required in writing by the [TEXT DELETED] requirements specifically expressed
in the Contract Documents, it must, if required in writing by the [TEXT DELETED]
Owner be uncovered for the [TEXT DELETED] Owner's examination and be replaced at
the Contractor's expense without change in the Contract Time.
<PAGE>
12.1.2 If a portion of the Work has been covered with the [TEXT
DELETED] Owner has not specifically requested to examine prior to its being
covered, the [TEXT DELETED] Owner may request to see such Work and it shall be
uncovered by the Contractor. If such Work is in accordance with the Contract
Documents, costs of uncovering and replacement shall, by appropriate Change
Order, be at the Owner's expense. if such Work is not in accordance with the
Contract Documents, correction shall be at the Contractor's expense unless the
condition was caused by the Owner or a separate contractor in which event the
Owner shall be responsible for payment of such costs.
12.2 CORRECTION OF WORK
12.2.1 BEFORE OR AFTER SUBSTANTIAL COMPLETION
12.2.1.1 The Contractor shall promptly correct Work
reject by the [TEXT DELETED] Owner or failing to conform to the requirements of
the contract Documents, whether discovered before or after Substantial
Completion and whether or not fabricated, installed or completed. Costs of
correcting such rejected Work, including additional testing and inspections and
[TEXT DELETED] expenses made necessary thereby, shall be at the Contractor's
expense.
12.2.2 AFTER SUBSTANTIAL COMPLETION
12.2.2.1 In addition to the contractor's obligations
under Paragraph 3.5, if, within one year after the date of Substantial
Completion of the Work or designated portion thereof or after the date for
commencement of warranties established under Subparagraph 9.9.1, or by terms of
an applicable special warranty required by the Contract Documents, any of the
Work is found to be not in accordance with the requirements of the Contract
Documents, the Contractor shall correct it promptly after receipt of written
notice from the Owner to do so unless the Owner has previously given the
Contractor a written acceptance of such condition. The Owner shall give such
notice promptly after discovery of the condition. During the one-year period for
correction of Work, if the Owner fails to notify the contractor and give the
Contractor an opportunity to make the correction, the Owner waives the rights to
require correction by the Contractor and to make a claim for breach of
<PAGE>
warranty. If the Contractor fails to correct nonconforming Work within a
reasonable time during that period after receipt of notice from the Owner [TEXT
DELETED], the Owner may correct it in accordance with Paragraph 2.4.
12.2.2.2 The one-year period for correction of Work
shall be extended with respect to portions of Work first performed after
Substantial Completion by the period of time between Substantial Completion and
the actual performance of the Work.
12.2.2.3 [TEXT DELETED]
12.2.3 The Contractor shall remove from the site portions of the
Work which are not in accordance with the requirements of the Contract Documents
and are neither corrected by the Contractor nor accepted by the Owner.
12.2.4 The Contractor shall bear the cost of correcting
destroyed or damaged construction, whether completed or partially completed, of
the Owner or separate contractors caused by the Contractor's correction or
removal of Work which is not in accordance with the requirements of the Contract
Documents.
12.2.5 Nothing contained in this Paragraph 12.2 shall be
construed to establish a period of limitation with respect to other obligations
which the contractor might have under the Contract Documents. Establishment of
the one-year period for correction of Work as described in Subparagraph 12.2.2
relates only to the specific obligation of the contractor to correct the Work,
and has no relationship to the time within which the obligation to comply with
the Contract Documents may be sought to be enforced, nor to the time within
which proceedings may be commenced to establish the Contractor's liability with
respect to the Contractor's obligations other than specifically to correct the
Work.
12.3 ACCEPTANCE OF NONCONFORMING WORK
12.3.1 If the Owner prefers to accept Work which is not in
accordance with the requirements of the Contract Documents, the Owner may do so
instead of requiring its removal and correction, in which case the Contract Sum
will
<PAGE>
be reduced as appropriate and equitable. Such adjustment shall be effected
whether or not final payment has been made.
13. MISCELLANEOUS PROVISIONS
13.1 GOVERNING LAW
13.1.1 The Contract shall be governed by the law of the place
where the Project is located.
13.2 SUCCESSORS AND ASSIGNS
13.2.1 The Owner and Contractor respectively bind themselves,
their partners, successors, assigns and legal representatives to the other party
hereto and to partners, successors, assigns and legal representatives of such
other party in respect to covenants, agreements and obligations contained in the
Contract Documents. Except as provided in Subparagraph 13.2.2, neither party to
the Contract shall assign the Contract as a whole without written consent of the
other. If either party attempts to make such an assignment without such consent,
that party shall nevertheless remain legally responsible for all obligations
under the Contract.
13.2.2 The Owner may, without consent of the Contractor, assign
the Contract to an institutional lender providing construction financing for the
Project. In such event, the lender shall assume the Owner's rights and
obligations under the Contract Documents. The Contractor shall execute all
consents reasonably required to facilitate such assignment.
13.3 WRITTEN NOTICE
13.3.1 [TEXT DELETED]
13.4 RIGHTS AND REMEDIES
13.4.1 Duties and obligations imposed by the Contract Documents
and rights and remedies available thereunder shall be in addition to and not a
<PAGE>
limitation of duties, obligations, rights and remedies otherwise imposed or
available by law.
13.4.2 No action or failure to act by the Owner, [TEXT DELETED]
or Contractor shall constitute a waiver of a right or duty afforded them under
the Contract, nor shall such action or failure to act constitute approval of or
acquiescence in a breach thereunder, except as may be specifically agreed in
writing.
13.5 TESTS AND INSPECTIONS
13.5.1 Test, inspections and approvals of portions of the Work
required by the Contract Documents or by laws, ordinances, rules, regulations or
orders of public authorities having jurisdiction shall be made at an appropriate
time. Unless otherwise provided, the Contractor shall make arrangements of such
tests, inspections and approvals with an independent testing laboratory or
entity acceptable to the Owner, or with the appropriate public authority, and
shall bear all related costs of tests, inspections and approvals. The Contractor
shall give the [TEXT DELETED] Owner timely notice of when and where tests and
inspections are to be made so that the [TEXT DELETED] Owner may be present for
such procedures. The Owner shall bear costs of tests, inspections or approvals
which do not become requirements until after bids are received or negotiations
concluded.
13.5.2 If the [TEXT DELETED] Owner or public authorities having
jurisdiction determine that portions of the Work require additional testing,
inspection or approval not included under Subparagraph 13.5.1, the [TEXT
DELETED] Owner will, [TEXT DELETED] instruct the Contractor to make arrangements
for such additional testing, inspection or approval by an entity acceptable to
the Owner, and the Contractor shall give timely notice to the [TEXT DELETED]
Owner of when and where tests and inspections are to be made so that the [TEXT
DELETED] Owner may be present for such procedures. Such costs, except as
provided in Subparagraph 13.5.3, shall be at the Owner's expense.
13.5.3 If such procedures for testing, inspection or approval
under Subparagraphs 13.5.1 and 13.5.2 reveal failure of the portions of the Work
to comply with requirements established by the Contract Documents, all costs
made
<PAGE>
necessary by such failure including those of repeated procedures [TEXT DELETED]
shall be at the Contractor's expense.
13.5.4 Required certificates of testing, inspection or approval
shall, unless otherwise required by the contract Documents, be secured by the
Contractor and promptly delivered to the [TEXT DELETED] Owner.
13.5.5 If the [TEXT DELETED] Owner is to observe tests,
inspections or approvals required by the Contract Documents, the [TEXT DELETED]
Owner will do so promptly and, where practicable, at the normal place of
testing.
13.5.6 Tests or inspections conducted pursuant to the Contract
Documents shall be made promptly to avoid unreasonable delay in the Work.
13.6 INTEREST
13.6.1 [TEXT DELETED]
13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
13.7.1 As between the Owner and Contractor:
.1 Before Substantial Completion. As to acts or failures to act
occurring prior to the relevant date of Substantial Completion,
any applicable statute of limitations shall commence to run and
any alleged cause of action shall be deemed to have accrued in
any and all events not later than such date of Substantial
Completion;
.2 Between Substantial Completion and Final Certificate for Payment.
As to acts or failures to act occurring subsequent to the
relevant date of Substantial Completion and prior to issuance of
the final Certificate for Payment, any applicable statute of
<PAGE>
limitations shall commence to run and any alleged cause of action
shall be deemed to have accrued in any and all events not later
than the date of issuance of the final Certificate for Payment;
and
.3 After Final Certificate of Payment. As to acts or failures to act
occurring after the relevant date of issuance of the final
Certificate for Payment, any applicable statute of limitations
shall commence to run and any alleged cause of action shall be
deemed to have accrued in any and all events not later than the
date of any act or failure to act by the Contractor pursuant to
any Warranty provided under Paragraph 3.5, the date of any
correction of the Work or any failure to correct the Work by the
Contractor under Paragraph 12.2, or the date of actual commission
of any other act or failure to perform any duty or obligation by
the Contractor or Owner, whichever occurs last.
14. TERMINATION OR SUSPENSION OF THE CONTRACT
14.1 TERMINATION BY THE CONTRACTOR
14.1.1 The Contractor may terminate the Contract if he Work is
stopped for a period of 30 consecutive days through no act or fault of the
Contractor or a Subcontractor, Sub-subcontractor or their agents or employees or
any other persons or entities performing portions of the Work under direct or
indirect contract with the Contractor, for any of the following reasons:
.1 issuance of an order of a court or other public authority having
jurisdiction which requires all Work to be stopped;
.2 an act of government, such as a declaration of national emergency
which requires all Work to be stopped;
.3 [TEXT DELETED]
<PAGE>
.4 [TEXT DELETED]
14.1.2 The Contractor may terminate the Contract if, through no
act or fault of the Contractor or a Subcontractor, Sub-subcontractor or their
agents or employees or any other persons or entities performing portions of the
Work under direct or indirect contract with the contractor, repeated
suspensions, delays or interruptions of the entire Work by the Owner as
described in Paragraph 14.3 constitute in the aggregate more that 100 percent of
the total number of days scheduled for completion, or 120 days in any 365-day
period, whichever is less.
14.1.3 If one of the reasons described in Subparagraph 14.1.1 or
14.1.2 exists, the Contractor may, upon seven days' written notice to the Owner
and Architect, terminate the Contract and recover from the Owner payment for
Work executed and for proven loss with respect to materials, equipment, tools,
and construction equipment and machinery, including reasonable overhead, profit
and damages.
14.1.4 If [TEXT DELETED] the Work is stopped for a period of 60
consecutive days through no act or fault of the Contractor or a Subcontractor or
their agents or employees or any other persons performing portions of the Work
under contract with the Contractor because the Owner has persistently failed to
fulfill the Owner's obligations under the Contract Documents with respect to
matters important to the progress of the Work, the Contractor may, upon seven
additional day's written notice of the Owner [TEXT DELETED], terminate the
Contract and recover from the Owner as provided in Subparagraph 14.1.3.
14.1.5 See ARTICLE 15.2.
14.2 TERMINATION BY THE OWNER FOR CAUSE
14.2.1 [TEXT DELETED]
.1 [TEXT DELETED]
.2 [TEXT DELETED]
<PAGE>
.3 [TEXT DELETED]
.4 [TEXT DELETED]
14.2.2 When any of the above reasons exist, the Owner, [TEXT
DELETED] may without prejudice to any other rights or remedies of the Owner and
after giving the contractor and the Contractor's surety, if any, seven days'
written notice, terminate employment of the Contractor and may, subject to any
prior right of the surety:
.1 [TEXT DELETED] take possession of the site and of all materials,
equipment, tools, and construction equipment and machinery
thereon owned by the Contractor;
.2 accept assignment of subcontracts pursuant to Paragraph 5.4; and
.3 finish the Work by whatever reasonable method the Owner may deem
expedient. Upon request of the Contractor, the Owner shall
furnish to the contractor a detailed accounting of the costs
incurred by the Owner in finishing the Work.
14.2.3 When the Owner terminates the Contract for one of the
reasons stated in Subparagraph 14.2.1, the Contractor shall not be entitled to
receive further payment until the Work is finished.
14.2.4 If the unpaid balance of the contract sum exceeds costs
of finishing the work, [TEXT DELETED] and other damages incurred by the Owner
and not expressly waived, such excess shall be paid to the Contractor. If such
costs and damages exceed the unpaid balance, the Contractor shall pay the
difference to the Owner. [TEXT DELETED]
<PAGE>
14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE
14.3.1 The Owner may, without cause, order the Contractor in
writing to suspend, delay or interrupt the Work in whole or in part for such
period of time as the Owner may determine.
14.3.2 The Contract Sum and Contract time shall be adjusted for
increases in the cost and time caused by suspension, delay or interruption as
described in Subparagraph 14.3.1. Adjustment of the Contract Sum shall include
profit. No adjustment shall be made to the extent:
.1 that performance is, was or would have been so suspended, delayed
or interrupted by another cause for which the Contractor is
responsible; or
.2 that an equitable adjustment is made or denied under another
provision of the Contract.
14.4 TERMINATION BY THE OWNER FOR CONVENIENCE
14.4.1 The Owner may, at any time, terminate the Contractor for
the Owner's convenience and without cause.
14.4.2 Upon receipt of written notice from the Owner of such
termination for the Owner's convenience, the Contractor shall:
.1 cease operations as directed by the Owner in the notice;
.2 take actions necessary, or that the Owner may direct, for the
protection and preservation of the Work; and
.3 except for Work directed to be performed prior to the effective
date of termination stated in the notice, terminate all existing
subcontracts and purchase orders and enter into no further
subcontracts and purchase orders.
<PAGE>
14.4.3 In case of such termination for the Owner's convenience,
the Contractor shall be entitled to receive payment for Work executed, and costs
incurred by reason of such termination, along with reasonable overhead and
profit on the Work not executed.
15. MISCELLANEOUS PROVISIONS
15.1 [TEXT DELETED] Article 4.6 relating to Arbitration shall only
apply to Claims involving a sum of less than $100,000. Any Claim involving a sum
of $100,000 or more may be subject to mediation and/or binding or non-binding
arbitration, but only upon the separate written agreement of Contractor and
Owner agreeing to such mediation or arbitration.
15.2 [TEXT DELETED]
15.3 Progress Payments under this Contract which are not paid within
thirty (30) days following the date on which such payments are due, are subject
to and will be charged a late fee of two percent (2%) per month on the unpaid
amount. See California Civil Code Section 3260.
15.4 If the Final Payment under this Contract is not paid within
forty-five (45) days following the date of completion, the unpaid amount will be
subject to a late fee of two percent (2%) per month on the unpaid amount. See
California Civil Code Section 3260.
15.5 Should any litigation be commenced by any party hereto with
respect to this Contract, the prevailing party shall be entitled to recover its
reasonable attorney's fees and all costs of suit.
<PAGE>
STANDARD FORM OF AGREEMENTS BETWEEN
OWNER AND DESIGN/BUILDER
AIA Document A191- Electronic Format
This document has important legal consequences: consultation with an attorney is
encouraged with respect to its completion or modification. Authentication of
this electronically drafted AIA document may be made by using AIA document D401.
Copyright 1985, (C) 1996 The American Institute of Architects, 1735 New York
Avenue, NW, Washington, DC 20006-5292. Reproduction of the material herein or
substantial quotation of its provisions without the written permission of the
AIA violates the copyright laws of the United States and will subject the
violator to legal prosecution.
1996 EDITION
TABLE OF ARTICLES
PART 1 AGREEMENT
1. Design/Builder 6. Dispute Resolution - Mediation and Arbitration
2. Owner 7. Miscellaneous Provisions
3. Ownership and Use of 8. Termination of the Agreement
Documents and 9. Basis of Compensation
Electronic Data 10. Other Conditions and Services
4. Time
5. Payments
PART 2 AGREEMENT
1. General Provisions 8. Changes in the Work
2. Owner 9. Correction of Work
3. Design/Builder 10. Dispute Resolution - Mediation and Arbitration
4. Time 11. Miscellaneous Provisions
5. Payments 12. Termination of the Agreement
6. Protection of Persons 13. Basis of Compensation
and Property 14. Other Conditions and Services
7. Insurance and Bonds
<PAGE>
STANDARD FORM OF AGREEMENTS BETWEEN
OWNER AND DESIGN/BUILDER
AIA Document A191 - Electronic Format
This document comprises two separate Agreements: Part 1 Agreement and Part 2
Agreement. Before executing the Part 1 Agreement, the parties should reach
substantial agreement on the Part 2 Agreement. To the extent referenced in these
Agreements, subordinate parallel agreements to A191 consist of AIA Document
A491, Standard Form of Agreements Between Design/Builder and Contractor, and AIA
Document B901, Standard Form of Agreements Between Design/Builder and Architect.
PART 1 AGREEMENT
1996 EDITION
AGREEMENT
made as of the 14 day of June in the year of 1999
(In words, indicate day, month and year.)
BETWEEN the Owner:
(Name and Address)
NaviSite, Inc.
100 Brickstone Square
Andover, MA 01810
The Owner is a Delaware corporation.
The Owner hereby represents and warrants to Design/Builder that Owner is a
lessee of the real property at which the Work is to be performed and that the
name and address of the fee simple is: Carr America Realty Corporation, 1810
Gateway Drive, Suite 150, San Mateo, CA 94404
and the Design/Builder:
(Name and Address)
XL CONSTRUCTION, a California Corporation
<PAGE>
1500 Berger Drive
San Jose, CA 95112-2703
License No. 64780
For the following Project:
(Include Project name, location and a summary description.)
NaviSite Zanker Road Data Center, a 66,000 s.f. Design/Builder Internet data
center
2720 Zanker Road
San Jose, CA 95134
The architectural services described in Article I will be provided by the
following person or entity who is lawfully licensed to practice architecture:
<TABLE>
<CAPTION>
(Name and address) (Registration Number) (Relationship to Design/Builder)
<S> <C> <C>
Dowler Gruman Associates,
550 Ellis St., Mountain View, CA 94043 Architect
</TABLE>
Normal structural, mechanical and electrical engineering services will be
provided contractually through the Architect except as indicated below:
<TABLE>
<CAPTION>
(Name, address and discipline) (Relationship to Design/Builder)
<S> <C>
Structural Engineers, Inc., 4970 El Camino Real #100,
Los Altos, CA 94022-1461 Structural Engineer
</TABLE>
The name and address of the Construction Lender is:
None
The Owner and the Design/Builder agree as set forth below.
<PAGE>
TERMS AND CONDITIONS - PART 1 AGREEMENT
ARTICLE 1
DESIGN/BUILDER
1.1 SERVICES
1.1.1 Preliminary design, budget, and schedule comprise the services required
to accomplish the preparation and submission of the Design/Builder's Proposal as
well as the preparation and submission of the Design/Builder's Proposal as well
as the preparation and submission of any modifications to the Proposal prior to
execution of the Part 2 Agreement.
1.2 RESPONSIBILITIES
1.2.1 Design services required by this Part 1 Agreement shall be performed by
qualified architects and other design professionals. The contractual obligations
of such professional persons or entities are undertaken and performed in the
interest of the Design/Builder.
1.2.2 The agreements between the Design/Builder and the persons or entities
identified in this Part 1 Agreement, and any subsequent modifications, shall be
in writing. These agreements, including financial agreements with respect to
this Project, shall be promptly and fully disclosed to the Owner upon request.
1.2.3 Construction budgets shall be prepared by qualified professionals, cost
estimators or contractors employed, or, retained by and acting in the interest
of the Design/Builder.
1.2.4 The Design/Builder shall be responsible to the Owner for acts and
omissions of the Design/Builder's employees, subcontractors and their agents and
employees, and other persons, including the Architect and other design
professionals, performing any portion of the Design/Builder's obligations under
this Part 1 Agreement.
1.2.5 If the Design/Builder believes or is advised by the Architect or by
another design professional retained to provide services on the Project that
implementation of
<PAGE>
any instruction received from the Owner would cause a violation of any
applicable law, the Design/Builder shall notify the Owner in writing. Neither
the Design/Builder nor the Architect shall be obligated to perform any act which
either believes will violate any applicable law.
1.2.6 Nothing contained in this Part 1 Agreement shall create a contractual
relationship between the Owner and any person or entity other than the
Design/Builder.
1.3 BASIC SERVICES
1.3.1 The Design/Builder shall provide a preliminary evaluation of the Owner's
program and project budget requirements, each in terms of the other.
1.3.2 The Design/Builder shall visit the site, become familiar with the local
conditions, and correlate observable conditions with the requirements of the
Owner's program, schedule and budget.
1.3.3 The Design/Builder shall review laws applicable to design and
construction of the Project; correlate such laws with the Owner's program
requirements; and advise the Owner if any program requirement may cause a
violation of such laws. Necessary changes to the Owner's program shall be
accomplished by appropriate written modification or disclosed as described in
Paragraph 1.3.5.
1.3.4 The Design/Builder shall review with the Owner alternative approaches to
design and construction of the Project.
1.3.5 The Design/Builder shall submit to the Owner a Proposal, including the
completed Preliminary Design Documents, a statement of the proposed contract
sum, and a proposed schedule for completion of the Project. Preliminary Design
Documents shall consist of preliminary design drawings, outline specifications
or other documents sufficient to establish the size, quality and character of
the entire Project, its architectural, structural, mechanical and electrical
systems and the materials and such other elements of the Project as may be
appropriate. Deviations from the
<PAGE>
Owner's program shall be disclosed in the Proposal. If the Proposal is accepted
by the Owner, the parties shall then execute the Part 2 Agreement. A
modification to the Proposal before execution of the Part 2 Agreement shall be
recorded in writing as an addendum and shall be identified in the Contract
Documents of the Part 2 Agreement.
1.4 ADDITIONAL SERVICES
1.4.1 The Additional Services described under this Paragraph 1.4 shall be
provided by the Design/Builder and paid for by the Owner if authorized or
confirmed in writing by the Owner.
1.4.2 Making revisions in the Preliminary Design Documents, budget or other
documents when such revisions are:
.1 inconsistent with approvals or instructions previously given by the
Owner, including revisions made necessary by adjustments in the
Owner's program or Project budget;
.2 required by the enactment or revision of codes, laws or regulations
subsequent to the preparation of such documents; or
.3 due to changes required as a result of the Owner's failure to render
decisions in a timely manner.
1.4.3 [TEXT DELETED] When authorized, the Design/Builder shall provide
professional services to assist the Owner in the preparation of the program.
Programming services may consist of:
.1 consulting with the Owner and other persons or entities not
designated in this Part 1 Agreement to define the program
requirements of the Project and to review the understanding of such
requirements with the Owner;
<PAGE>
.2 documentation of the applicable requirements necessary for the
various Project functions or operations;
.3 providing a review and analysis of the functional and organizational
relationships, requirements, and objectives for the Project;
.4 setting forth a written program of requirements for the Owner's
approval which summarizes the Owner's objectives, schedule,
constraints, and criteria.
1.4.4 Providing financial feasibility or other special studies.
1.4.5 Providing planning surveys, site evaluations, or comparative studies of
prospective sites.
1.4.6 Providing special surveys, environmental studies, and submissions
required for approvals of governmental authorities or others having jurisdiction
over the Project.
1.4.7 Providing services relative to future facilities, systems, and
equipment.
1.4.8 Providing services at the Owner's specific request to perform detailed
investigations of existing conditions or facilities or to make measured drawings
thereof.
1.4.9 Providing services at the Owner's specific request to verify the
accuracy of drawings or other information furnished by the Owner.
1.4.10 Coordinating services in connection with the work of separate persons
or entities retained by the Owner, subsequent to the execution of this Part 1
Agreement.
1.4.11 Providing analyses of owning and operating costs.
<PAGE>
1.4.12 Providing interior design and other similar services required for or in
connection with the selection, procurement or installation of furniture,
furnishings, and related equipment.
1.4.13 Providing services for planning tenant or rental spaces.
1.4.14 Making investigations, inventories of materials or equipment, or
valuations and detailed appraisals of existing facilities.
ARTICLE 2
OWNER
2.1 RESPONSIBILITIES
2.1 The Owner shall provide full information in a timely manner regarding
requirements for the Project, including a written program which shall set forth
the Owner's objectives, schedule, constraints and criteria.
2.1.2 The Owner shall establish and update an overall budget for the Project,
including reasonable contingencies. This budget shall not constitute the
contract sum.
2.1.3 The Owner shall designate a representative authorized to act on the
Owner's behalf with respect to the Project. The Owner or such authorized
representative shall render decisions in a timely manner pertaining to documents
submitted by the Design/Builder in order to avoid unreasonable delay in the
orderly and sequential progress of the Design/Builder's services. The Owner may
obtain independent review of the documents by a separate architect, engineer,
contractor, or cost estimator under contract to or employed by the Owner. Such
independent review shall be undertaken at the Owner's expense in a timely manner
and shall not delay the orderly progress of the Design/Builder's services.
2.1.4 [TEXT DELETED]
<PAGE>
2.1.5 [TEXT DELETED]
2.1.6 [TEXT DELETED]
2.1.7 [TEXT DELETED]
2.1.8 [TEXT DELETED]
2.1.9 [TEXT DELETED]
2.1.10 If the Owner requires the Design/Builder to maintain any special
insurance coverage, policy, amendment, or rider, the Owner shall pay the
additional cost thereof, except as otherwise stipulated in this Part 1
Agreement.
2.1.11 The Owner shall communicate with persons or entities employed or
retained by the Design/Builder through the Design/Builder, unless otherwise
directed by the Design/Builder.
ARTICLE 3
OWNERSHIP AND USE OF DOCUMENTS
AND ELECTRONIC DATA
3.1 [TEXT DELETED]
3.2 [TEXT DELETED]
3.3 [TEXT DELETED]
3.4 [TEXT DELETED]
ARTICLE 4
TIME
4.1 Upon the request of the Owner, the Design/Builder shall prepare a
schedule for the performance of the Basic and Additional Services which shall
not exceed the
<PAGE>
time limits contained in Paragraph 10.1 and shall include allowances for periods
of time required for the Owner's review and for approval of submissions by
authorities having jurisdiction over the Project.
4.2 If the Design/Builder is delayed in the performance of services under
this Part 1 Agreement through no fault of the Design/Builder, any applicable
schedule shall be equitably adjusted.
ARTICLE 5
PAYMENTS
5.1 [TEXT DELETED]
5.2 [TEXT DELETED] Payments for Basic Services, Additional Services, and
Reimbursable Expenses provided for in this Part 1 Agreement shall be made
monthly on the basis set forth in Article 9.
5.3 Within thirty [TEXT DELETED] (30) days of the Owner's receipt of a
properly submitted and correct Application for Payment, the Owner shall make
payment to the Design/Builder.
5.4 [TEXT DELETED] Amended. See 10.5.
ARTICLE 6
DISPUTE RESOLUTION - MEDIATION
AND ARBITRATION
6.1 Subject to Article 10.6, claims, disputes or other matters in question
between the parties to this Part 1 Agreement arising out of or relating to this
Part 1 Agreement or breach thereof shall be subject to and decided by [TEXT
DELETED] binding arbitration [TEXT DELETED]. Such arbitration shall be conducted
in accordance with the Construction Industry Arbitration Rules of the American
Arbitration Association currently in effect.
<PAGE>
6.2 [TEXT DELETED]
6.3 Demand for arbitration shall be filed in writing with the other party to
this Part 1 Agreement and with the American Arbitration Association. A demand
for arbitration shall be made within a reasonable time after the claim, dispute
or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of repose or limitations.
6.4 An arbitration pursuant to this Paragraph may be joined with an
arbitration involving common issues of law or fact between the Design/Builder
and any person or entity with whom the Design/Builder has a contractual
obligation to arbitrate disputes. No other arbitration arising out of or
relating to this Part 1 Agreement shall include, by consolidation, joinder or in
any other manner, an additional person or entity not a party to this Part 1
Agreement or not a party to an agreement with the Design/Builder, except by
written consent containing a specific reference to this Part 1 Agreement signed
by the Owner, the Design/Builder and all other persons or entities sought to be
joined. Consent to arbitration involving an additional person or entity shall
not constitute consent to arbitration of any claim, dispute or other matter in
question not described in written consent or with a person or entity not named
or described therein. The foregoing agreement to arbitrate and other agreements
to arbitrate with an additional person or entity duly consented to by the
parties to this Part 1 Agreement shall be specifically enforceable in accordance
with applicable law in any court having jurisdiction thereof.
6.5 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof. Amended by Article 10.6.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Unless otherwise provided, this Part 1 Agreement shall be governed by the
law of the place where the Project is located.
<PAGE>
7.2 The Owner and the Design/Builder, respectively, bind themselves, their
partners, successors, assigns and legal representatives to the other party to
this Part 1 Agreement and to the partners, successors and assigns of such other
party with respect to all covenants of this Part 1 Agreement. [TEXT DELETED]
Design/Builder shall not assign this Part 1 Agreement without the written
consent of the other. Design/Builder acknowledges that execution by CMGI, Inc.
of the form of Guaranty attached here to satisfies the requirements that proper
financial arrangements are in place with respect to the owner regarding this
agreement.
7.3 Unless otherwise provided, neither the design for nor the cost of
remediation of hazardous materials shall be the responsibility of the
Design/Builder.
7.4 This Part 1 Agreement represents the entire and integrated agreement
between the Owner and the Design/Builder and supersedes all prior negotiations,
representations or agreements, either written or oral. This Part 1 Agreement
may be amended only by written instrument signed by both the Owner and the
Design/Builder.
7.5 Prior to the termination of the services of the Architect or any other
design professional designated in this Part 1 Agreement, the Design/Agreement
shall identify to the Owner in writing another architect or design professional
with respect to whom the Owner has no reasonable objection, who will provide the
services originally to have been provided by the Architect or other design
professional whose services are being terminated.
ARTICLE 8
TERMINATION OF THE AGREEMENT
8.1 This Part 1 Agreement may be terminated by either party upon seven (7)
days' written notice should the other party fail to perform substantially in
accordance with its terms through no fault of the party initiating the
termination.
8.2 This Part 1 Agreement may be terminated by the Owner without cause upon at
least seven (7) days' written notice to the Design/Builder.
<PAGE>
8.3 In the event of termination not the fault of the Design/Builder, the
Design/Builder shall be compensated for services performed to the termination
date, together with Reimbursable Expenses the due and Termination Expenses.
Termination Expenses are expenses directly attributable to termination,
including a reasonable amount for overhead and profit, for which the
Design/Builder is not otherwise compensated under this Part 1 Agreement.
ARTICLE 9
BASIC OF COMPENSATION
9.1 COMPENSATION FOR BASIC SERVICES
9.1.1 [TEXT DELETED]
9.1.2 [TEXT DELETED]
9.1.3 [TEXT DELETED]
9.2 COMPENSATION FOR ADDITIONAL SERVICES
9.2.1 [TEXT DELETED]
9.3 REIMBURSABLE EXPENSES
9.3.1 [TEXT DELETED]
9.3.2 [TEXT DELETED]
9.4 [TEXT DELETED]
9.5 INTEREST PAYMENTS
9.5.1 [TEXT DELETED] See Article 10.5
<PAGE>
(Usury laws and requirements under the Federal truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Design/Builder's principal places of business at the location of the Project and
elsewhere may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletion, modification or other requirements,
such as written disclosures or waivers)
9.6 [TEXT DELETED]
9.7 [TEXT DELETED]
ARTICLE 10
OTHER CONDITIONS AND SERVICES
10.1 The Basic Services to be performed shall be commenced on and, subject to
authorized adjustments and to delays not caused by the Design/Builder, shall be
completed, in accordance with the Project Schedule, Exhibit "C" dated 6/22/99.
The Design/Builder's Basic Services consist of those described in Paragraph 1.3
as part of Basic Services, and include normal professional engineering and
preliminary design services, unless otherwise indicated.
10.2 Services beyond those described in Paragraph 1.4 are as follows:
(insert descriptions of other services, identify Additional Services indicated
within Basic Compensation and modifications to the payment and compensation
terms included in this Agreement)
10.3 The Owner's preliminary program, budget, and other documents, if any, are
enumerated as follows:
Title: Date:
10.4 Should any litigation be connected by any party hereto with respect to
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and all cost of suit.
10.5 Article 5.4 shall read as follows: Payments due the Design/Builder under
this Part 1 Agreement which are not paid with in thirty (30) days following the
date on which such payments are due, are subject to and will be charged a late
fee of two percent (2%) per month on the unpaid amount. See California Civil
Code 3260.1.
<PAGE>
10.6 Article 6 relating to arbitration shall only apply to claims or disputes
involving a sum of less than $50,000. Any claim or dispute involving a sum of
$50,000 or more may be subject to arbitration, binding or non-binding, but only
upon the separate written agreement of Owner and Design/Builder agreeing to such
arbitration.
10.7 Contractors are required by law to be licensed and regulated by the
Contractors' State License Board which has jurisdiction to investigate
complaints against contractors if a complaint regarding a patent act or omission
is filed within four years of the date of the alleged violation. A complaint
regarding a latent act or omission pertaining to structural defects must be
filed within 10 years of the date of the alleged violation. Any question
concerning a contractor may be referred to the Registrar, Contractors' State
License Board, P.O. Box 2600, Sacramento, California 95826.
This Agreement entered into as of the day and year first written above.
OWNER DESIGN/BUILDER
/s/ Eric Raff
- ----------------------------------------- -----------------------------------
(Signature) (Signature)
Date: Eric Raff, President Date: 9/27/99
- ----------------------------------------- -----------------------------------
(Printed name and title) (Printed name and title)
<PAGE>
Standard Form of Agreements Between
Owner and Design/Builder
AIA Document A191 - Electronic Format
This document comprises two separate Agreements Part I Agreement and Part 2
Agreement. Before executing the Part I Agreement, the parties should reach
substantial agreement on the Part 2 Agreements. To the extent referenced in
these Agreements, subordinate parallel agreements to A191 consists of AIA
Documents A491, Standard Form of Agreement Between Design/Builder and
Contractor, and AIA Documents B901, Standard Form of Agreement Between
Design/Builder and Architect.
PART 2 AGREEMENT
1996 EDITION
- --------------------------------------------------------------------------------
AGREEMENT
made as of the 14th day of July in the year of 1999
(In words, indicate day, month and year.)
BETWEEN the Owner:
(Name and address)
NaviSite, Inc.
300 Federal St.
Andover, MA 01810
The Owner is a Delaware Corporation.
The Owner hereby represents and warrants to Design/Builder that Owner is a
lessee of the real property at which the Work is to be performed and that the
name and address of the owner of the fee simple is:
<PAGE>
Carr America Realty Corporation
1819 Gateway Drive, Suite 150
San Mateo, CA 94404
and the Design/Builder:
(Name and address)
XL CONSTRUCTION, a California corporation
1500 Berger Drive
San Jose, CA 95112-2703
License No. 647480
For the following Project:
(Include Project name, location and a summary description)
NaviSite Zanker Road Data Center, a 66,000 s.f. Design/build internet data
center
2720 Zanker Road
San Jose, CA 95134
The architectural services described in Article 3 will be provided by the
following person or entity who is lawfully licensed to practice architecture:
(Name and address) (Registration Number) (Relationship to Design/Builder)
Dowler Gruman Associates
550 Ellis St.
Mountain View, CA 94043 Architect
Normal structural, mechanical and electrical engineering services will be
provided contractually through the Architect except as indicated below:
(Name, address and discipline)
Structural Engineers, Inc., 4970 El Camino Real #100, Los Altos, CA 94022-1461
The Owner and the Design/Builder agree as set forth below.
<PAGE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS -- PART 2 AGREEMENT
- --------------------------------------------------------------------------------
ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS
1.1.1 The Contract Documents consist of the Part I Agreement to the extent not
modified by this Part 2 Agreement, this Part 2 Agreement, the Design/Builder's
Proposal and written addenda to the Proposal identified in Article 14, the
Construction Documents approved by the Owner in accordance with Subparagraph
3.2.3 and Modifications issued after execution of this Part 2 Agreement. A
Modification is a Change Order or a written amendment to this Part 2 Agreement
signed by both parties, or a Construction Change Directive issued by the Owner
in accordance with Paragraph 8.3.
1.1.2 The term "Work" means the construction and services provided by the
Design/Builder to fulfill the Design/Builder's obligations.
1.2 EXECUTION, CORRELATION AND INTENT
1.2.1 It is the intent of the Owner and Design/Builder that the Contract
Documents include all items necessary for proper execution and completion of the
Work. The Contract Documents are complementary, and what is required by one
shall be as binding as if required by all; performance by the Design/Builder
shall be required only to the extent consistent with and reasonably inferable
from the Contract Documents as being necessary to produce the intended results.
Words that have well-known technical or construction industry meanings are used
in the Contract Documents in accordance with such recognized meanings.
<PAGE>
1.2.2 If the Design/Builder believes or is advised by the Architect or by
another design professional retained to provide services on the Project that
implementation of any Instruction received from the Owner would cause a
violation of any applicable law, the Design/Builder, shall notify the Owner in
writing. Neither the Design/Builder nor the Architect shall be obligated to
perform any act which either believes will violate any applicable law.
1.2.3 Nothing contained in this Part 2 Agreement shall create a contractual
relationship between the Owner and any person or entity other than the
Design/Builder.
1.3 OWNERSHIP AND USE OF DOCUMENTS
1.3.1 [TEXT DELETED]
1.3.2 [TEXT DELETED]
1.3.3 [TEXT DELETED]
1.3.4 [TEXT DELETED]
ARTICLE 2
OWNER
2.1 The Owner shall designate a representative authorized to act on the
Owner's behalf with respect to the Project. The Owner or such authorized
representative shall examine documents submitted by the Design/Builder and shall
render decisions in a timely manner and in accordance with the schedule accepted
by the Owner. The Owner may obtain independent review of the Contract Documents
by a separate architect, engineer, contractor, or cost estimator under contract
to or employed by the Owner. Such independent review shall be undertaken at the
Owner's expense in a timely manner and shall not delay the orderly progress of
the Work.
2.2 The Owner may appoint an on-site project representative to observe the
Work and to have such other responsibilities as the Owner and Design/Builder
agree in writing.
<PAGE>
2.3 The Owner shall cooperate with the Design/Builder in securing building and
other permits, licenses and inspections. The Owner shall not be required to pay
the fees for such permits, licenses and inspections unless the cost of such fees
is excluded from the Design/Builder's Proposal.
2.4 [TEXT DELETED]
2.5 [TEXT DELETED]
2.6 [TEXT DELETED]
2.7 [TEXT DELETED]
2.8 [TEXT DELETED]
2.9 If the Owner observes or otherwise becomes aware of a fault or defect in
the Work or noncomformity with the Design/Builder's Proposal or the Construction
Documents, the Owner shall give prompt written notice thereof to the
Design/Builder.
2.10 [TEXT DELETED] The Owner shall at the request of the Design/Builder upon
execution of this Part 2 Agreement furnish to the Design/Builder the form of
guaranty attached hereto excecuted by CMGI, Inc.
2.11 The Owner shall communicate with persons or entities employed or retained
by the Design/Builder through the Design/Builder, unless otherwise directed by
the Design/Builder.
ARTICLE 3
DESIGN/BUILDER
3.1 SERVICES AND RESPONSIBILTIES
<PAGE>
3.1.1 Design services required by this Part 2 Agreement shall be performed by
qualified architects and other design professionals. The contractual
obligations of such professional persons or entities are undertaken and
performed in the interest of the Design/Builder.
3.1.2 The agreements between the Design/Builder and the persons or entities
identified in this Part 2 Agreement, and any subsequent modifications, shall be
in writing. These agreements, including financial arrangements with respect to
this Project, shall be promptly and fully disclosed to the Owner upon request.
3.1.3 The Design/Builder shall be responsible to the Owner for wilful
misconduct and negligent acts and omissions of the Design/Builder's employees,
subcontractors and their agents and employees, and other persons, including the
Architect and other design professionals performing any portion of the
Design/Builder's obligations under this Part 2 Agreement.
13.2 BASIC SERVICES
3.2.1 The Design/Builder's Basic Services are described below and in Article
14.
3.2.2 The Design/Builder shall designate a representative authorized to act on
the Design/Builder's behalf with respect to the Project.
3.2.3 The Design/Builder shall submit Construction Documents for review and
approval by the Owner. Construction Documents may include drawings,
specifications, and other documents and electronic data setting forth in detail
the requirements for construction of the Work, and shall:
.1 be consistent with the intent of the Design/Builder's Proposal;
.2 provide information for the use of those in the building trades; and
.3 include documents customarily required for regulatory agency
approvals.
<PAGE>
3.2.4 The Design/Builder, with the assistance of the Owner, shall file
documents required to obtain necessary approvals of governmental authorities
having jurisdiction over the Project.
3.2.5 Unless otherwise provided in the Contract Documents, the Design/Builder
shall provide or cause to be provided and shall pay for design services, labor,
materials, equipment, tools, construction equipment and machinery, [TEXT
DELETED] transportation and other facilities and services necessary for proper
execution and completion of the Work, whether temporary or permanent and whether
or not incorporated or to be incorporated in the Work.
3.2.6 The Design/Builder shall be responsible for all construction, means,
methods, techniques, sequences and procedures, and for coordinating all portions
of the Work under this Part 2 Agreement.
3.2.7 The Design/Builder shall keep the Owner informed of the progress and
quality of the Work.
3.2.8 The Design/Builder shall be responsible for correcting Work which does
not conform to the Contract Documents.
3.2.9 The Design/Builder warrants to the Owner that materials and equipment
furnished under the Contract will be of good quality and new [TEXT DELETED] that
the construction will be free from faults and defects, and that the construction
will conform with the requirements of the Contract Documents. Construction not
conforming to these requirements, including substitutions not properly approved
by the Owner, shall be corrected in accordance with Article 9.
3.2.10 The Design/Builder shall pay all sales, consumer, use and similar taxes
which had been legally enacted at the time the Design/Builder's Proposal was
first submitted to the Owner, and shall secure and pay for building and other
permits and governmental fees, licenses and inspections necessary for the proper
execution and completion of the Work which are either customarily secured after
execution of a contract for construction or are legally required at the time the
Design/Builder's Proposal was first submitted to the Owner.
<PAGE>
3.2.11 The Design/Builder shall comply with and give notices required by laws,
ordinances, rules, regulations and lawful orders of public authorities relating
to the Project.
3.2.12 The Design/Builder shall pay royalties and license fees for patented
designs, processes or products. The Design/Builder shall defend suits or claims
for infringement of patent rights and shall hold the Owner harmless from loss on
account thereof, but shall not be responsible for such defense or loss when a
particular design, process or product of a particular manufacturer is required
by the Owner. However, if the Design/Builder has reason to believe the use of a
required design, process or product is an infringement of a patent, the
Design/Builder shall be responsible for such loss unless such information is
promptly furnished to the Owner.
3.2.13 The Design/Builder shall keep the premises and surrounding area free
from accumulation of waste materials or rubbish caused by operations under this
Part 2 Agreement. At the completion of the Work, the Design/Builder shall
remove from the site waste materials, rubbish, the Design/Builder's tools,
construction equipment, machinery, and surplus materials.
3.2.14 [TEXT DELETED]
3.2.15 The Design/Builder shall maintain at the site for the Owner one record
copy of the drawings, specifications, product data, samples, shop drawings,
Change Orders and other modifications, in good order and regularly updated to
record the completed construction. These shall be delivered to the Owner upon
completion of construction and prior to final payment.
3.3 ADDITIONAL SERVICES
3.3.1 The services described in this Paragraph 3.3 are not included in Basic
Services unless so identified in Article 14, and they shall be paid for by the
owner as provided in this Part 2 Agreement, in addition to the compensation for
Basic Ser-
<PAGE>
vices. The services described in this Paragraph 3.3 shall be provided only if
authorized or confirmed in writing by the Owner.
3.3.2 Making revisions in drawings, specifications, and other documents or
electronic data when such revisions are required by the enactment or revision of
codes, laws or regulations subsequent to the preparation of such documents or
electronic data.
3.3.3 Providing consultation, concerning replacement of Work damaged by fire
or other cause during construction, and furnishing services required in
connection with the replacement of such Work.
3.3.4 Providing services in connection with a public hearing, arbitration
proceeding or legal proceeding, except where the Design/Builder is a party
thereto.
3.3.5 Providing coordination of construction performed by the Owner's own
forces or separate contractors employed by the Owner, and coordination of
services required in connection with construction performed and equipment
supplied by the Owner.
3.3.6 Preparing a set of reproducible record documents or electronic data
showing significant changes in the Work made during construction.
3.3.7 Providing assistance in the utilization or equipment or systems such as
preparation of operation and maintenance manuals, training personnel for
operation and maintenance, and consultation during operation.
ARTICLE 4
TIME
4.1 Unless otherwise indicated, the Owner and the Design/Builder shall
perform their respective obligations as expeditiously as is consistent with
reasonable skill and care and the orderly progress of the Project.
<PAGE>
4.2 Time limits stated in the Contract Documents are of the essence. The
Work to be performed under this Part 2 Agreement has [TEXT DELETED] commenced
[TEXT DELETED] and, subject to authorized Modifications, Substantial Completion
shall be achieved on or before the date established in Article 14.
4.3 Substantial Completion is the stage in the progress of the Work when the
Work or designated portion thereof is sufficiently complete in accordance with
the Contract Documents so the Owner can occupy [TEXT DELETED] and utilize the
work for its intended use.
4.4 Based on the Design/Builder's Proposal, a construction schedule shall be
provided consistent with Paragraph 4.2 above.
4.5 If the Design/Builder is delayed at any time in the progress of the Work
by an act or neglect of the Owner, Owner's employees, or separate contractors
employed by the Owner, or by changes ordered in the Work, or by labor disputes,
fire unusual delay in deliveries, adverse weather conditions not reasonably
anticipatable, unavoidable casualties or other causes beyond the
Design/Builder's control, or by delay authorized by the Owner pending
arbitration, or by other causes which the Owner and Design/Builder agree may
justify delay, then the Contract Time shall be reasonably extended by Change
Order.
ARTICLE 5
PAYMENTS
5.1 PROGRESS PAYMENTS
5.1.1 The Design/Builder shall deliver to the Owner itemized Applications for
Payment in such detail as indicated in Article 14.
5.1.2 Within [TEXT DELETED] thirty (30) days of the Owner's receipt of a
properly submitted and correct Application for Payment, the Owner shall make
payment to the Design/Builder.
5.1.3 The Application for Payment shall constitute a representation by the
Design/Builder to the Owner that the design and construction have progressed to
the
<PAGE>
point indicated; the quality of the Work covered by the application is in
accordance with the Contract Documents; and the Design/Builder is entitled to
payment in the amount requested.
5.1.4 Upon receipt of payment from the Owner, the Design/Builder shall promptly
pay the Architect, other design professionals and each contractor the amount to
which each is entitled in accordance with the terms of their respective
contracts.
5.1.5 The Owner shall have no obligation under this Part 2 Agreement to pay or
to be responsible in any way for payment to the Architect, another design
professional, or a contractor performing portions of the Work.
5.1.6 Neither progress payment nor partial or entire use or occupancy of the
Project by the Owner shall constitute an acceptance of Work not in accordance
with the Contract Documents.
5.1.7 The Design/Builder warrants that title to all construction covered by an
Application for Payment will pass to the Owner no later than the time of
payment. The Design/Builder further warrants that upon submittal of an
Application for Payment all construction for which payments have been received
from the Owner shall be free and clear of liens, claims, security interests or
encumbrances in favor of the Design/Builder or any other person or entity
performing construction at the site or furnishing materials or equipment
relating to the construction.
5.1.8 At the time of Substantial Completion, the Owner shall pay the
Design/Builder the retainage, if any, less 200% of the reasonable cost to
correct or complete incorrect or incomplete Work. Final payment of such
withheld sum shall be made upon correction or completion of such Work.
5.2 FINAL PAYMENT
5.2.1 Neither final payment nor amounts retained, if any, shall become due
until the Design/Builder submits to the Owner (1) an affidavit that payrolls,
bills for materials and equipment, and other indebtedness connected with the
Work for which the Owner of Owner's property might be responsible or encumbered
(less amounts
<PAGE>
withheld by the Owner) have been paid or otherwise satisfied; (2) a certificate
evidencing that insurance required by the Contract Documents to remain in force
after final payment is currently in effect and will not be canceled or allowed
to expire until at least 30 days' prior written notice has been given to the
Owner; (3) a written statement that the Design/ Builder knows of no substantial
reason that the insurance will not be renewable to cover the period required by
the Contract Documents; (4) consent of surety, if any, to final payment; and (5)
if required by the Owner, other data establishing payment or satisfaction or
obligations, such as receipts, releases and waivers of liens, claims, security
interests or encumbrances arising out f the Contract, to the extent and in such
form as may be designated by the Owner. If a contractor or other person or
entity entitled to assert a lien against the Owner's property refuses to furnish
a release or waiver required by the Owner, the Design/Builder may furnish a bond
satisfactory to the Owner to indemnify the Owner against such lien. If such lien
remains unsatisfied after payments are made, the Design/Builder shall indemnify
the Owner for all loss and cost, including reasonable attorneys' fees incurred
as a result of such lien.
5.2.2 When the Work has been completed and the contract fully performed, the
Design/Builder shall submit a final application for payment to the Owner, who
shall make final payment within 30 days of receipt.
5.2.3 The making of final payment shall constitute a waiver of claims by the
Owner except those arising from:
.1 liens, claims, security interests or encumbrances arising out of the
Contract and unsettled.
.2 failure of the Work to comply with the requirements of the Contract
Documents; or
.3 terms of special warranties required by the Contract Documents.;
.4 Faulty or Defective Work;
<PAGE>
.5 Errors or Omissions in the Architectural or Engineering services
performed in connection with the work.
5.2.4 Acceptance of final payment shall constitute a waiver of all claims by
the Design/Builder except those previously made in writing and identified by the
Design/Builder as unsettled at the time of final Application for Payment.
5.2.5 See Article 14.8.
5.3 INTEREST PAYMENTS
5.3.1 [TEXT DELETED]
ARTICLE 6
PROTECTION OF PERSONS AND PROPERTY
6.1 The Design/Builder shall be responsible for initiating, maintaining and
providing supervision of all safety precautions and programs in connection with
the performance of this Part 2 Agreement.
6.2 The Design/Builder shall take reasonable precautions for the safety of,
and shall provide reasonable protection to prevent damage, injury or loss to:
(a) employees n the Work and other persons who may be affected thereby; (2) the
Work and materials and equipment to be incorporated therein, whether in storage
on or off the site, under care, custody, or control of the Design/Builder or the
Design/Builder's contractors; and (3) other property at or adjacent thereto,
such as trees, shrubs, lawns, walks, pavements, roadways, structures and
utilities not designated for removal relocation, or replacement in the course of
construction.
6.3 The Design/Builder shall give notices and comply with applicable laws,
ordinances, rules regulations and lawful orders of public authorities bearing on
the safety or persons or property or their protection from damage, injury or
loss.
6.4 The Design/Builder shall promptly remedy damage and loss (other than
damage or loss insured under property insurance provided or required by the
Con-
<PAGE>
tract Documents) to property at the site caused in whole or in part by the
Design/Builder, a contractor of the Design/Builder or anyone directly or
indirectly employed by any of them, or by anyone for whose acts they may be
liable.
ARTICLE 7
INSURANCE AND BONDS
7.1 DESIGN/BUILDER'S LIABILITY INSURANCE
7.1.1 The Design/Builder shall purchase from and maintain, in a company or
companies lawfully authorized to do business in the jurisdiction in which the
Project is located, such insurance as will protect the Design/Builder from
claims set forth below which may arise out of or result from operations under
this Part 2 Agreement by the Design/Builder or by a contractor of the
Design/Builder, or by anyone directly or indirectly employed by any of them, or
by anyone for whose acts any of them may be liable:
.1 claims under workers' compensation, disability benefit and other
similar employee benefit laws that are applicable to the Work to be
performed;
.2 claims for damages because of bodily injury, occupational sickness or
disease, or death of the Design/Builder's employees;
.3 claims for damages because of bodily injury, sickness or disease, or
death of persons other than the Design/Builder;'s employees;
.4 claims for damages covered by usual personal injury liability
coverage which are sustained (1) by a person as a result of an
offense directly or indirectly related to employment of such person
by the Design/Builder or (2) by another person;
<PAGE>
.5 claims for damages, other than to the Work itself, because of injury
to or destruction of tangible property, including loss of use
resulting therefrom;
.6 claims for damages because of bodily injury, death of a person or
property damage arising out of ownership, maintenance or use of a
motor vehicle; and
.7 claims involving contractual liability insurance applicable to the
Design/Builder's obligations under paragraph 11.5.
7.1.2 The insurance required by Subparagraph 7.1.1 shall be written for not
less than limits of liability specified in this Part 2 Agreement or required by
law, whichever coverage is greater. coverages, whether written on an occurrence
or claims-made basis, shall be maintained without interruption from date of
commencement of the Work until date of final payment [TEXT DELETED] and
termination of any coverage required to be maintained after final payment.
[TEXT DELETED].
7.1.3 Certificates of Insurance acceptable to the Owner shall be delivered to
the Owner immediately after execution of this Part 2 Agreement. These
Certificates and the insurance policies required by this Paragraph 7.1 shall
contain a provision that coverages afforded under the policies will not be
canceled or allowed to expire until at least 30 days' prior written notice has
been given to the Owner. If any of the foregoing insurance coverages are
required to remain in force after final payment, an additional certificate
evidencing continuation of such coverage shall be submitted with the application
for final payment. Information concerning reduction of coverage shall be
furnished by the Design/Builder with reasonable promptness in accordance with
the Design/Builder's information and belief.
7.2 OWNER'S LIABILITY INSURANCE
7.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's
usual liability insurance. Optionally, the Owner may purchase and maintain
other insurance for self-protection against claims which may arise from
operations under this Part 2 Agreement. The Design/Builder shall not be
responsible for purchasing
<PAGE>
and maintaining this optional Owner's liability insurance unless specifically
required by the Contract Documents.
7.3 PROPERTY INSURANCE
7.3.1 Unless otherwise provided under this Part 2 Agreement, the Owner shall
purchase and maintain, in a company or companies authorized to do business in
the jurisdiction in which the principal improvements are to be located, property
insurance upon the Work to the full insurable value thereof, on a replacement
costs basis without optional deductibles. Such property insurance shall be
maintained, unless otherwise provided in the Contract Documents or otherwise
agreed in writing by all persons and entities who are beneficiaries of such
insurance, until final payment has been made or until no person or entity other
than the Owner has an insurable interest in the property required by this
Paragraph 7.3 to be insured, whichever is earlier. This insurance shall include
interests of the Owner, the Design/Builder, and their respective contractors and
subcontractors in the Work.
7.3.2 Property insurance shall be on an all-risk policy form and shall insure
against the perils of fire and extended coverage and physical loss or damage
including, without duplication of coverage, theft, vandalism, malicious
mischief, collapse, false work, temporary buildings and debris removal including
demolition occasioned by enforcement of any applicable legal requirements, and
shall cover reasonable compensation for the services and expenses of the
Design/Builder's Architect and other professionals required as a result of such
insured loss. Coverage for other perils shall not be required unless otherwise
provided in the Contract Documents.
7.3.3 If the Owner does not intend to purchase such property insurance
required by this Part 2 Agreement and with all of the coverages in the amounts
described above, the Owner shall so inform the Design/Builder prior to
commencement of the construction. The Design/Builder may then effect insurance
which will protect the interests of the Design/Builder and the Design/Builder's
contractors in the construction, and by appropriate Change Order the cost
thereof shall be charged to the Owner. If the Design/Builder is damaged by the
failure or neglect of the Owner to purchase or maintain insurance as described
above, then the Owner shall bear all reasonable costs properly attributable
thereto.
<PAGE>
7.3.4 Unless otherwise provided, the Owner shall purchase and maintain such
boiler and machinery insurance required by this Part 2 Agreement or by law,
which shall specifically cover such insured objects during installation and
until final acceptance by the Owner. This insurance shall include interests of
the Owner, the Design/Builder, the Design/Builder's Architect and other design
professionals. The Owner and the Design/Builder shall be named insureds.
7.3.5 A loss insured under the Owner's property insurance shall be adjusted by
the Owner as trustee and made payable to the Owner as trustee for the insureds,
as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 7.3.10. The Design/Builder shall pay
contractors their shares of insurance proceeds received by the Design/Builder,
and by appropriate agreement, written where legally required for validity, shall
require contractors to make payments to their subcontractors in similar manner.
7.3.6 Before an exposure to loss may occur, the Owner shall file with the
Design/Builder a copy of each policy that includes insurance coverages required
by this Paragraph 7.3. Each policy shall contain all generally applicable
conditions, definitions, exclusions and endorsements related to this Project.
Each policy shall contain a provision that the policy will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Design/Builder.
7.3.7 If the Design/Builder requests in writing that insurance for risks other
than those described herein or for other special hazards be included in the
property insurance policy, the Owner shall, if possible, obtain such insurance,
and the cost thereof shall be charged to the Design/Builder by appropriate
Change Order.
7.3.8 The Owner and the Design/Builder waive all rights against each other and
the Architect and other design professionals, contractors, subcontractors,
agents and employees; each of the other, for damages caused by fire or other
perils to the extent covered by property insurance obtained pursuant to this
Paragraph 7.3 or other property insurance applicable to the Work, except such
rights as they may have to proceeds of such insurance held by the Owner as
trustee. The Owner or Design/Builder, as appropriate, shall require from
contractors and subcontractors by
<PAGE>
appropriate agreements, written where legally required for validity, similar
waivers each in favor of other parties enumerated in this Paragraph 7.3. The
policies shall provide such waivers of subrogation shall be effective as to a
person or entity even though that person or entity would otherwise have a duty
of indemnification, contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.
7.3.9 [TEXT DELETED]
7.3.10 The Owner as trustee shall have power to adjust and settle a loss with
insurers unless one of the parties in interest shall object in writing, within
five (5) days after occurrence or loss to the Owner's exercise of this power, if
such objection be made, the parties shall enter into dispute resolution under
procedures provided in Article 10. If distribution of insurance proceeds by
arbitration is required, the arbitrators will direct such distribution.
7.3.11 Partial occupancy or use prior to Substantial Completion shall not
commence until the insurance company or companies providing property insurance
have consented to such partial occupancy or use by endorsement or otherwise.
The Owner and the Design/Builder shall take reasonable steps to obtain consent
of the insurance company or companies and shall not, without mutual written
consent, take any action with respect to partial occupancy or use that would
cause cancellation, lapse or reduction of coverage.
7.4 LOSS OF USE INSURANCE
7.4.1 The Owner, at the Owner's option, may purchase and maintain such
insurance as will insure the Owner against loss of use of the Owner's property
due to fire or other hazards, however caused. The Owner waives all rights of
action against the Design/Builder for loss of use of the Owner's property,
including consequential losses due to fire or other hazards, however caused.
<PAGE>
ARTICLE 8
CHANGES IN THE WORK
8.1 CHANGES
8.1.1 Changes in the Work may be accomplished after execution of this Part 2
Agreement, without invalidating this Part 2 Agreement by Change Order,
Construction Change Directive, or order for a minor change in the Work, subject
to the limitations stated in the Contract Documents.
8.1.2 A Change Order shall be based upon agreement between the Owner and the
Design/Builder, a Construction Change Directive may be issued by the Owner
without the agreement of the Design/Builder, an order for a minor change in the
Work may be issued by the Design/Builder alone.
8.1.3 Changes in the Work shall be performed under applicable provisions of the
Contract Documents, and the Design/Builder shall proceed promptly, unless
otherwise provided in the Change Order, Construction Change Directive, or order
for a minor change in the Work.
8.1.4 If unit prices are stated in the Contract Documents or subsequently
agreed upon, and if quantities originally contemplated are so changed in a
proposed Change Order or Construction Change Directive that application of such
unit prices to quantities of Work proposed will cause substantial inequity to
the Owner or the Design/Builder, the applicable unit prices shall be equitably
adjusted.
8.2 CHANGE ORDERS
8.2.1 A Change Order is a written instrument prepared by the Design/Builder and
signed by the Owner and the Design/Builder, stating their agreement upon all of
the following:
.1 a change in the Work;
.2 the amount of the adjustment, if any, in the Contract Sum; and
<PAGE>
.3 the extent of the adjustment, if any, in the contract Time.
8.2.2 If the owner requests a proposal for a change in the Work from the
Design/Builder and subsequently elects not to proceed with the change, a Change
Order shall be issued to reimburse the Design/Builder for any costs incurred for
estimating services, design services or preparation of proposed revisions to the
Contract Documents.
8.3 CONSTRUCTION CHANGE DIRECTIVES
8.3.1 A Construction Change Directive is a written order prepared and signed by
the Owner, directing a change in the Work prior to agreement on adjustment, if
any, in the Contract Sum or Contract Time, or both.
8.3.2 Except as otherwise agreed by the Owner and the Design/Builder, the
adjustment to the Contract Sum shall be determined on the basis of reasonable
expenditures and savings of those performing the Work attributable to the
change, including the expenditures for design services and revisions to the
Contract Documents. In case of an increase in the Contract Sum, the cost shall
include a reasonable allowance for overhead and profit. In such case, the
Design/Builder shall keep and present an itemized accounting together with
appropriate supporting date for inclusion in a Change Order. Unless otherwise
provided in the Contract Documents, costs for these purposes shall be limited to
the following:
.1 costs of lab or, including social security, old age and unemployment
insurance, fringe benefits required by agreement or custom, and
workers' compensation insurance;
.2 costs of materials, supplies and equipment, including cost of
transportation, whether incorporated or consumed;
.3 rental costs of machinery and equipment exclusive of hand tools,
whether rented from the Design/Builder or others;
.4 costs of premiums for all bonds and insurance permit fees, and
sales, use or similar taxes;
<PAGE>
.5 additional costs of supervision and field office personnel directly
attributable to the change; and fees paid to the Architect,
engineers and other professionals.
8.3.3 Pending final determination of cost to the Owner amounts not in dispute
may be included in Applications for Payment. The amount of credit to be allowed
by the Design/Builder to the Owner for deletion or change which results in a net
decrease in the Contract Sum will be actual net cost. When both additions and
credits covering related Work or substitutions are involved in a change, the
allowance for overhead and profit shall be figured on the basis of the net
increase, if any, with respect to that change.
8.3.4 When the Owner and the Design/Builder agree upon the adjustments in the
Contract Sum and Contract Sum and Contract Time, such agreement shall be
effective immediately and shall be recorded by preparation and execution of an
appropriate Change Order.
8.4 MINOR CHANGES IN THE WORK
8.4.1 The Design/Builder shall have authority to make minor changes in the
Construction Documents and construction consistent with the intent of the
Contract Documents when such minor changes to not involve adjustment in the
Contract Sum or extension of the Contract Time. The Design/Builder shall
promptly inform the Owner, in writing, of minor changes in the Construction
Documents and construction. [TEXT DELETED]
8.5 CONCEALED CONDITIONS
8.5.1 If conditions are encountered at the site which are (1) subsurface or
otherwise concealed physical conditions which differ materially from those
indicated in the Contract Documents, or (2) unknown physical conditions of an
unusual nature which differ materially from those ordinarily found to exist and
generally recognized as inherent in construction activities of the character
provided for in the Contract Documents, then notice by the observing party shall
be given to the other party promptly before conditions are disturbed and in no
event later than 21 days after first observance of the conditions. The Contract
Sum shall be equitably adjusted for such
<PAGE>
concealed or unknown conditions by Change Order upon claim by either party made
within 21 days after the claimant becomes aware of the conditions. Any
information on the design drawings for the building in which the site is located
shall not be deemed a "concealed condition."
8.6 REGULATORY CHANGES
8.6.1 The Design/Builder shall be compensated for changes in the construction
necessitated by the enactment or revision of codes, laws or regulations
subsequent to the [TEXT DELETED] execution of this Agreement.
ARTICLE 9
CORRECTION OF WORK
9.1 The Design/Builder shall promptly correct Work rejected by the Owner or
known by the Design/Builder to be defective or failing to conform to the
requirements of the Contract Documents, whether observed before or after
Substantial Completion and whether or not fabricated, installed or completed.
The Design/Builder shall bear costs of correcting such rejected Work, including
testing and inspections.
9.2 If, within one (1) year after the date of Substantial Completion of the
Work or, after the date for commencement of warranties established in a written
agreement between the Owner and the Design/Builder, or by terms of an applicable
special warranty required by the Contract Documents, any of the Work is found to
be not in accordance with the requirements of the Contract Documents, the
Design/Builder shall correct it promptly after receipt of a written notice from
the Owner to do so unless the Owner has previously given the Design/Builder a
written acceptance of such condition.
9.3 Nothing contained in this Article 9 shall be construed to establish a
period of limitation with respect to other obligations which the Design/Builder
might have under the Contract Documents. Establishment of the time period of
one (1) year as described in Subparagraph 9.2 relates only to the specific
obligation of the Design/Builder to correct the Work, and has no relationship to
the time within which
<PAGE>
the obligation to comply with the Contract Documents may be sought to be
enforced, nor to the time within which proceedings may be commenced to establish
the Design/Builder's liability with respect to the Design/Builder's obligations
other than specifically to correct the Work.
9.4 If the Design/Builder fails to correct nonconforming Work as required or
fails to carry out Work in accordance with the Contract Documents, the Owner, by
written order signed personally or by an agent specifically so empowered by the
Owner in writing, may order the Design/Builder to stop the Work, or any portion
thereof, until the cause for such order has been eliminated; however, the
Owner's right to stop the Work shall not give rise to a duty on the part of the
Owner to exercise the right for benefit of the Design/Builder or other persons
or entities.
9.5 If the Design/Builder defaults or neglects to carry out the Work in
accordance with the Contract Documents and fails within seven (7) days after the
receipt of written notice from the Owner to commence and continue correction of
such default or neglect with diligence and promptness, the Owner may give a
second written notice to the Design/Builder and seven (7) days following receipt
by the Design/Builder of that second written notice and without prejudice to
other remedies, the Owner may have, correct such deficiencies. In such case an
appropriate Change Order shall be issued deducting from payments then or
thereafter due the Design Builder, the costs of correcting such deficiencies.
If the payments then or thereafter due the Design/Builder are not sufficient to
cover the amount of the deduction, the Design/Builder shall pay the difference
to the Owner. Such action by the Owner shall be subject to dispute resolution
procedures as provided in Article 10.
ARTICLE 10
10.1 Subject to Article 14.9 Claims, disputes or other matters in question
arising out of or relating to this Part 2 Agreement or breach thereof shall be
subject to and decided by [TEXT DELETED] or binding arbitration. Such [TEXT
DELETED] or arbitration shall be conducted in accordance with the Construction
Industry [TEXT DELETED] or Arbitration Rules of the American Arbitration
Association currently in effect.
<PAGE>
10.2 [TEXT DELETED]
10.3 Demand for arbitration shall be filed in writing with the other party to
this Part 2 Agreement and with the American Arbitration Association. A demand
for arbitration shall be made within a reasonable time after the claim, dispute
or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of repose or limitations.
10.4 An arbitration pursuant to this Article may be joined with an arbitration
involving common issues of law or fact between the Design/Builder and any person
or entity with whom the Design/Builder has a contractual obligation to arbitrate
disputes. No other arbitration arising out of or relating to this Part 2
Agreement shall include, by consolidation, joinder or in any other manner, an
additional person or entity not a party to this Part 2 Agreement or not a party
to an agreement with the Design/Builder, except by written consent containing a
specific reference to this Part 2 Agreement signed by the Owner, the
Design/Builder and any other person or entities sought to be joined. Consent to
arbitration involving an additional person or entity shall not constitute
consent to arbitration of any claim, dispute or other matter in question not
described in the written consent or with a person or entity not named or
described therein. The foregoing agreement to arbitrate and other agreements to
arbitrate with an additional person or entity duly consented to by the parties
to this Part 2 Agreement shall be specifically enforceable in accordance with
applicable law in any court having jurisdiction thereof.
10.5 The award rendered by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Unless otherwise provided, this Part 2 Agreement, shall be governed by
the law of the place where the Project is located.
<PAGE>
11.2 SUBCONTRACTS
11.2.1 If requested by Owner. The Design/Builder, as soon as practicable after
execution of this Part 2 Agreement, shall furnish to the Owner in writing the
names of the persons or entities the Design/Builder will engage as contractors
for the Project.
11.3 WORK BY OWNER OR OWNER'S CONTRACTORS
11.3.1 The Owner reserves the right to perform construction of operations
related to the Project with the Owner's own forces, and to award separate
contracts in connection with other portions of the Project or other construction
or operations on the site under conditions of insurance and waiver of
subrogation identical to the provisions of this Part 2 Agreement. If the
Design/Builder claims that delay or additional cost is involved because of such
action by the Owner, the Design/Builder shall assert such claims as provided in
Subparagraph 11.4.
11.3.2 The Design/Builder shall afford the Owner's separate contractors
reasonable opportunity for introduction and storage of their materials and
equipment and performance of their activities and shall connect and coordinate
the Design/Builder's construction and operations with theirs as required by the
Contract Documents.
11.3.3 Costs caused by delays or by improperly timed activities or defective
construction shall be borne by the party responsible therefor.
11.4 CLAIMS FOR DAMAGES
11.4.1 If either party to this Part 2 Agreement suffers injury or damage to
person or property because of an act or omission of the other party, of any of
the other party's employees or agents, or of others for whose acts such party is
legally liable, written notice of such injury or damage, whether or not insured,
shall be given to the other party within a reasonable time not exceeding 21 days
after first observance. The notice shall provide sufficient detail to enable the
other party to investigate the
<PAGE>
matter. If a claim of additional cost or time related to this claim is to be
asserted, ti shall be filed in writing.
11.5 INDEMNIFICATION
11.5.1 To the fullest extent permitted by law, the Design/Builder shall
indemnify and hold harmless the Owner, Owner's consultants, and agents and
employees of any of them from and against claims, damages, losses and expenses,
including, but not limited to, attorneys' fees arising out of or resulting from
performance of the Work, provided that such claim, damage, loss or expense is
attributable to bodily injury, sickness, disease or death, or to injury to or
destruction of tangible property (other than the Work itself) including loss of
use resulting therefrom, but only to the extent caused by Design/Builder's
performance or non-performance of work, its obligations hereunder or in whole or
in party by negligent acts or omissions of the Design/Builder, anyone directly
or indirectly employed by the Design/Builder or anyone for whose acts the
Design/Builder may be liable, regardless of whether or not such claim, damage,
loss or expense is caused in part by a party indemnified hereunder. Such
obligation shall not be construed to negate, abridge, or reduce other rights or
obligations of indemnity which would otherwise exist as to a party or person
described in this Paragraph 11.5.
11.5.2 In claims against any person or entity indemnified under this Paragraph
11.5 by an employee of the Design/Builder, anyone directly or indirectly
employed by the Design/Builder or anyone for whose acts the Design/Builder may
be liable, the indemnification obligation under this Paragraph 11.5 shall not be
limited by a limitation on amount or type of damage, compensation or benefits
payable by or for the Design/Builder under workers' compensation acts,
disability benefit acts or other employee benefit acts.
11.6 SUCCESSORS AND ASSIGNS
11.6.1 The Owner and Design/Builder, respectively, bind themselves, their
partners, successors, assigns and legal representatives to the other party to
this Part 2 Agreement and to the partners, successors and assigns of such other
party with respect to all covenants of this Part 2 Agreement. [TEXT DELETED] The
Design/Builder
<PAGE>
shall not assign this Part 2 Agreement without the written consent of [TEXT
DELETED] Owner. The Owner may assign this Part 2 Agreement to any entity or to
any institutional lender providing construction financing, and the
Design/Builder agrees to execute all consents reasonably required to facilitate
such an assignment. If either party makes such an assignment, that party shall
nevertheless remain legally responsible for all obligations under this Part 2
Agreement, unless otherwise agreed by the other party.
11.7 TERMINATION OF PROFESSIONAL DESIGN SERVICES
11.7.1 Prior to termination of the services of the Architect or any other
design professional designated in this Part 2 Agreement, the Design/Builder
shall identify to the Owner in writing another architect or other design
professional with respect to whom the Owner has no reasonable objection, who
will provide the services originally to have been provided by the Architect or
other design professional whose services are being terminated.
11.8 EXTENT OF AGREEMENT
11.8.1 This Part 2 Agreement represents the entire agreement between the Owner
and the Design/Builder and supersedes prior negotiations, representations or
agreements, either written or oral. This Part 2 Agreement may be amended only by
written instrument and signed by both the Owner and the Design/Builder.
ARTICLE 12
TERMINATION OF THE AGREEMENT
12.1 TERMINATION BY THE OWNER
12.1.1 This Part 2 Agreement may be terminated by the Owner upon 14 days'
written notice to the Design/Builder in the event that the Project is abandoned.
If such termination occurs, the Owner shall pay the Design/Builder for Work
completed and for proven loss sustained upon materials, equipment, tools, and
construction equipment and machinery including reasonable profit and applicable
damages.
<PAGE>
12.1.2 If the Design/Builder defaults or persistently fails or neglects to
carry out the Work in accordance with the Contract Documents or fails to perform
the provisions of this Part 2 Agreement, the Owner may give written notice that
the Owner intends to terminate this Part 2 Agreement. If the Design/Builder
fails to correct other defaults, failure or neglect within seven (7) days after
being given notice, the Owner may then give a second written notice and, after
an additional seven (7) days, the Owner may without prejudice to any other
remedy terminate the employment of the Design/Builder and take possession of the
site and of all materials, equipment, tools and construction equipment and
machinery thereon owned by the Design/Builder and finish the Work by whatever
method the Owner may deem expedient. If the unpaid balance of the Contract Sum
exceeds the expense of finishing the Work and all damages incurred by the Owner,
such excess shall be paid to the Design/Builder. If the expense of completing
the Work and all damages incurred by the Owner exceeds the unpaid balance, the
Design/Builder shall pay the difference to the Owner. This obligation for
payment shall survive termination of this Part 2 Agreement.
<PAGE>
12.2 TERMINATION BY THE DESIGN/BUILDER
12.2.1 If the Owner fails more than once to make payment within 10 days of when
due, the Design/Builder may give written notice of the Design/Builder's
intention to terminate this Part 2 Agreement. If the Design/Builder fails to
receive payment within [TEXT DELETED] ten (10) days after receipt of such notice
by the Owner, the Design/Builder may give a second written notice and, [TEXT
DELETED] ten (10) days after receipt of such second written notice by the Owner,
may terminate this Part 2 Agreement and recover from the Owner payment for Work
executed and for proven losses sustained upon materials, equipment, tools, and
construction equipment and machinery, including reasonable profit and applicable
damages.
12.3 TERMINATION FOR CONVENIENCE
12.3.1 Owner has the right to terminate this Agreement for convenience at any
time. Owner will provide seven (7) days' written notice to the Contractor and
will pay all costs incurred to that point of time subject to the terms of this
Agreement, together with a portion of Contractor's fee which shall be the
quantity of months involved multiplied by $37,500.00 per month which shall be
prorated for any partial month.
ARTICLE 13
BASIS OF COMPENSATION
[TEXT DELETED]
13.1 COMPENSATION
13.1.1 [TEXT DELETED]
13.1.2 [TEXT DELETED]
13.2 REIMBURSABLE EXPENSES
<PAGE>
13.2.1 [TEXT DELETED]
13.2.2 [TEXT DELETED]
13.3 INTEREST PAYMENTS
13.3.1 [TEXT DELETED]
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Design/Builder's principal places of business, at the location of the Project
and elsewhere, may affect the validity of this provision. Specific legal advice
should be obtained with respect to deletion, modification or other requirements,
such as written disclosures or waivers.)
ARTICLE 14
OTHER CONDITIONS AND SERVICES
14.1 The Basic Services to be performed shall be commenced on and, subject to
authorized adjustments and to delays not caused by the Design/Builder,
Substantial Completion shall be achieved in the Contract Time of on November 1,
1999 ( ) calendar days.
14.2 The Basic Services beyond those described in Article 3 are as follows:
14.3 Additional Services beyond those described in Article 3 are as follows:
14.4 The Design/Builder shall submit an Application for Payment on the [TEXT
DELETED] the first Wednesday of the month [TEXT DELETED].
14.5 The Design/Builder's Proposal includes the following documents:
(List the documents by specific title and date, include any required performance
and payment bonds)
Title: Date:
<PAGE>
[TEXT DELETED]
14.6 Should any litigation be commenced by any party hereto with respect to
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorney's fees and all costs of the suit.
14.7 Article 5.1.9 shall read as follows: Progress payments which are not
paid within thirty (30) days following the date on which such payments are due,
are subject to and will be charged a late fee of two percent (2%) per month on
the unpaid amount. See California Civil Code Section 3260.1.
14.8 Article 5.2.5 shall read as follows: If the Final Payment under this
Agreement is not paid within forty-five (45) days following the date of
completion, the unpaid amount will be subject to a late fee of (2%) per month on
the unpaid amount See California Civil Code Section 3260.
14.9 Article 10 relating to arbitration shall only apply to claims or
disputes involving a sum of less than 500,000. Any claim or dispute involving a
sum of $50,000 or more may be subject to arbitration, binding or non-binding,
but only upon the separate written agreement of Owner and Design/Builder
agreeing to such arbitration.
14.10 Contractors are required by law to be licensed and regulated by the
Contractors' State License Board which has jurisdiction to investigate
complaints against contractors if a complaint regarding a patent act or omission
is filed with four years of the date of the alleged violation. A complaint
regarding a latent act or omission pertaining to structural defects must be
filed within 10 years of the alleged violation. Any question concerning a
contractor may be referred to the Registrar, Contractor's State License Board,
P.O. Box 26000, Sacramento, California 95826.
14.11 This Agreement entered into as of the day and year first written above.
<PAGE>
OWNER DESIGN/BUILDER
/s/ Eric Raff
_________________________________ -----------------------------------
(Signature) (Signature)
Date: Eric Raff, President Date: 9/27/99
- --------------------------------- -----------------------------------
(Printed name and title) (Printed name and title)
<PAGE>
SUPPLEMENTARY CONDITIONS
SUPPLEMENTARY CONDITIONS DATED AS OF JUNE 14, 1999
- --------------------------------------------------
The following supplements modify, change, delete from or add to the General
Conditions (as modified in the form attached) of the Contract for Construction
AIA Document A201, 1997 ("General Conditions"). Where any Article of the
General Conditions is modified or any paragraph, subparagraph or clause thereof
is modified or deleted by these supplements, the unaltered provisions of that
article, paragraph, subparagraph or clause shall remain in effect.
Numerical designations herein have the same, or are a sequential development of
the same, designations as the General Conditions.
ARTICLE 1 - GENERAL PROVISIONS
Delete the last sentence of Subparagraph 1.1.2.
Add the following Subparagraph 1.1.1.1:
1. Where discrepancies or conflicts occur:
(a) Written amendments or modifications to the Agreement shall take
precedence over the original Agreement;
(b) The Agreement shall take precedence over the General and
Supplementary Conditions;
(c) The Supplementary Conditions shall take precedence over the
General Conditions;
(d) The General Conditions shall take precedence over Drawings or
Specifications;
(e) Specifications shall take precedence over Drawings;
(f) Stated dimensions shall take precedence over dimensions obtained
by scaling;
(g) Large scale detail drawings shall take precedence over small
scale drawings.
provided, however, to the extent one provision is more restrictive, the more
restrictive provision shall govern.
Add the following to the end of Subparagraph 1.1.4
The project is described on Exhibit A attached hereto (the "Project") and
---------
includes without limitation, the following: fit up of [first floor] data
center and MEP support space and with associated infrastructure (rooftop
equipment, generators located at concrete pads on grade, etc.) at 2720
Zanker Road, San Jose, CA 95134, a building of approximately 66,000 square
feet currently under construction, owned by CARRAMERICA REALTY CORPORATION.
Exhibit A represents the complete listing of NaviSite plans as of July 15,
---------
1999. These plans evidence the entirety of the fit-out of the data center
as of such date.
Delete Subparagraph 1.6.1 and add the following:
1.6.1 Title to all work accomplished by Contractor or its subcontractors,
or the employees or agents of any of them, in connection with this Contract
and to all data, information, drawings, plans, specifications and other
documentation of whatsoever nature furnished to Owner by Contractor or such
subcontractors, or the employees or agents of any of them, shall be and
remain Owner's whether completed or partially completed. Without
limitation of the foregoing,
<PAGE>
Owner shall have the unrestricted right to copy and utilize the data,
information, drawings, plans, specifications, and other documentation
performed or delivered by Contractor or its agents or employees, in any
manner that Owner may direct; provided, however, that Contractor shall not
be liable for any losses, damages, claims or liability arising in
connection with any use of such data, information, drawings, plans,
specifications or other work for the design, procurement, construction or
maintenance of any project other than the Project and Owner shall indemnify
and hold harmless Contractor in connection with Owner's use of such
documentation for any project other than the Project.
ARTICLE 2 - OWNER
Delete Subparagraph 2.2.1, which Contractor acknowledges has been satisfied.
Delete Subparagraph 2.2.2 and insert the following: Except for permits and
fees, including those required under Subparagraph 3.7.1 which are the
responsibility of the Contractor, Contractor shall secure (but Owner will pay
for) all necessary approvals, covenants, assessments and charges required for
construction, use or occupancy of the Project or for permanent changes in
existing facilities.
ARTICLE 3 - CONTRACTOR
Insert the following:
3.2.3 Contractor has received and carefully reviewed all of the Contract
Documents, including, without limitation, the Drawings and Specifications,
and (i) Contractor has not observed any error, omission or inconsistency in
the Contract Documents, or any violation thereof with any applicable law,
statute, ordinance, building code, rule or regulation and has confirmed
that the Contract Documents are in accordance with applicable laws, and
(ii) Contractor has approved the Contract Documents and determined that the
Contract Documents are complete and adequate for construction of the Work
in accordance with the terms hereof.
Add the following Subparagraphs to 3.3:
3.3.4 Contractor shall verify all measurements at the Project and shall be
responsible for their accuracy. No increase in the Contract Sum will be
allowed for additional work required due to differences between field
dimensions and Drawing Documents or stated approximate quantities.
3.3.5 Contractor shall consult with representatives of all subcontractors
to avoid interferences. Contractor shall rearrange any work that may cause
interference with work of other trades, without increase in Contract Sum.
Add to the end of Subparagraph 3.4.1 "Owner will provide water and utilities and
Contractor shall use the same, and cause subcontractors to use, the same
prudently."
Add the following Subparagraph to 3.4:
3.4.4 Wherever the terms "or equal," "or approved equal" are used in the
Contract Documents, products other than those specified will be considered
for approval, provided that such products are substantially equal in
quality, durability, design and performance characteristics to the specific
materials. Approval of such "equal" products shall be at the sole
discretion of Owner and shall be in writing to be effective.
2
<PAGE>
Insert the following at the end of Subparagraph 3.5.1:
Contractor shall secure and deliver to Owner written warranties and
guarantees from its Subcontractors, Sub-subcontractors and Suppliers
bearing the date of Substantial Completion (or such later date as may be
agreed to by Owner and Contractor in writing) and stating the period of
warranty or guarantee as required by the Contract Documents. Contractor
shall be responsible for the warranty and guarantee of all Work whether
performed by it or by its Subcontractors at any tier.
Insert the following:
3.7.3 Contractor shall ascertain that the Contract Documents are in
accordance with applicable laws, statutes, ordinances, building codes, and
rules and regulations. The Contractor shall promptly notify Owner in
writing and shall make necessary changes to ensure compliance with such
applicable laws.
Add the following subparagraphs to 3.9:
3.9.2 The Project Superintendent shall be reasonably approved by Owner.
Once assigned and reasonably approved by Owner, the Project Superintendent
may not be changed without the approval of Owner.
3.9.3 The Project Superintendent must attend all Project Meetings.
Insert the following at the end of Subparagraph 3.11.1:
Within thirty (30) days after Substantial Completion, Contractor shall
submit to Owner for approval three (3) complete sets of as-built drawings
and specifications. Contractor shall also prepare three (3) complete,
bound sets of operation and maintenance manuals, which shall include,
without limitation, a vendor and Subcontractor directory, warranty
information and all material cut sheets that were installed in connection
with the Work, manufacturer's catalogs, instructions, and other similar
data, including all necessary photographic cuts, diagrams, valve charts,
and the like, covering all mechanically and manually operated devices
furnished and/or installed in the Work. At Owner's request, Contractor
shall also include in such manuals Owner furnished materials, equipment and
furnishings. Delivery of such as-builts and manuals is intended to serve
to instruct and assist maintenance personnel in the care, operation,
maintenance and repair of all such devices.
Insert the following at the beginning of Subparagraph 3.12.10: Contractor shall
provide architectural and engineering services as required for the design and
construction of the Project.
Insert after "shall" in the second line of Subparagraph 13.18.1: "defend (with
counsel acceptable to Owner) and"
Add the following subparagraph to 3.18:
3.18.3 Unless otherwise stated in the Contract, each respective
Contractor, shall, before commencing work, secure and pay for such
insurance as may be required to comply with the indemnification and hold
harmless provisions outlined under Articles 3.18.1 and 3.18.2. Such
insurance shall be with such companies as may be satisfactory to Owner.
Insurance shall be so written as to prohibit cancellation without at least
thirty (30) days written notice to Owner and Contractor.
3
<PAGE>
ARTICLE 5 - SUBCONTRACTORS
Add the following sentence to the end of Subparagraph 5.1.1:
All portions of the Work that Contractor does not perform with its own
force shall be performed by Subcontractors.
Add the following sentence to the end of Subparagraph 5.2.4:
Owner may require Subcontractor to change any Subcontractor or Subcontractor
previously approved and, if at such time Contractor is not in default hereunder,
the Contract Sum shall be increased or decreased by the difference in cost
occasioned by such change.
Add the following new Subparagraphs at the end of Paragraph 5.3.1:
5.3.2 Contractor shall procure materials from such sources and shall
manage its own forces and the forces of its Subcontractors and Sub-
subcontractors in such a manner as will result in harmonious relations on
the job site. Contractor shall employ, and shall require its
Subcontractors to employ, workers on the Work who will at all times work in
harmony with others engaged in the Work. Should the Work for any reason be
stopped or materially delayed due to a labor dispute involving the
employees of, or directed at, any Subcontractor or any of its Sub-
subcontractors, Owner shall have the right to require Contractor to
substitute a Subcontractor acceptable to Owner.
5.3.3 If applicable, Contractor shall require that each Subcontractor
agree in its Subcontract to be joined in arbitration proceedings involving
Owner or Contractor, or either of them, relating to any Work covered by its
Subcontract, at the election of either Owner or Contractor. Contractor
shall require each Subcontractor to include a similar provision in its
Subcontracts.
If union and non-union workers are employed to perform any part of the
Work, Contractor shall establish and maintain separate entrances to the
Project site for the use of union and non-union workers.
Owner shall have the right (but not the obligation) to review and approve
all Subcontracts to ensure compliance with the provisions of this
Subparagraph and the other provisions of the Contract Documents before
execution thereof. Nothing in this Subparagraph shall create any third-
party beneficiary relationship between Owner and any Subcontractor.
ARTICLE 6 - CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS
Insert the following at the beginning of Subparagraph 6.1.3:
Contractor shall coordinate the activities of Owner's separate contractors
with the Work of this Contract and shall cooperate with them. Contractor
shall plan and review the construction schedule with other separate
contractors and with Owner so as to ensure timely completion of the Work of
the Contract and the work of Owner's separate contractors, without increase
to the Contract Sum.
4
<PAGE>
ARTICLE 7 - CHANGES IN THE WORK
Add the following at the end of Subparagraph 7.1.1:
The parties hereby acknowledge the Project is being designed and built on a
so-called "fast track" basis. As such, the Drawings and Specifications are
not complete as of the date hereof. The development of the Drawings and
Specifications may require multiple rounds of drafting, review, comments,
changes and modifications. The Project Construction Budget, and the
Project Schedule (including the date of Substantial Completion) shall be
subject to adjustment in connection with such changes and modifications to
the Drawings and Specifications. However, subject to the provisions of
Section 7.2.1, no such change or modification to the Drawings and
Specifications shall constitute (or require) a "Change Order" or entitle
Contractor to any claim for an adjustment to Contractor's cost and fee,
notwithstanding whether any such change or modification requires
alteration, removal, replacement or reperformance of Work that has been
completed, provided the Work requested can be completed by the date of
11/1/99. Should the "Change Order" cause an extension of Contractor
service beyond the date of 11/1/99, the Contractor will provide a revised
Exhibit B for the cost of the administration of the change with a fee
calculation as per the terms of Article 17.2.1.
Add the following at the end of Subparagraph 7.1.2:
No Change Order involving an adjustment in the Contract Sum or an extension
of the Contract Time shall in any event be issued except with the written
approval of Owner.
Add the following at the end of Paragraph 7.1:
7.1.4 Refinements and detailing will be accomplished from time to time
with respect to the Drawings and Specifications, including the addition of
items or materials that may have been omitted from the Drawings or
Specifications but that are necessary to complete a detail shown, specified
or reasonably inferable therefrom. If any item or material shown on the
Drawings is omitted from or excepted in the Specifications, or vice versa,
or if any omitted item or material is inferable to complete the detail
shown or specified, Contractor shall, without any increase in the Contract
Sum or extension of the Contract Time, furnish and install such item or
material of type and quality as established by the balance of the detail
shown and specified.
7.1.5 Contractor represents and warrants that, to the extent reasonable
under the circumstances, it has studied and familiarized itself with the
Contract Documents and the site and the utility services provided thereto.
Any change in the Work required because Contractor failed to anticipate or
discover a condition at the site or failed to anticipate or discover that
the utility services to the site or the Contract Documents are insufficient
to complete the Work, which change could have been avoided had Contractor
properly studied and familiarized itself with the Contract Documents and
the site and the utility services provided thereto, shall not result in any
increase in the Contract Sum or extension of the Contract Time.
7.1.6 If the adjustment to the Contract Sum resulting from a change in the
Work is determined under Paragraph 7.3.6, the following shall apply:
.1 The cost of the Work shall include an allowance for Contractor's
overhead or profit in the form of an adjustment in Contractor's
Fee (but only in accordance with Article 17 hereof) pursuant to
the terms of the Contract, subject to Owner's approval in all
cases.
.2 On Work performed by Subcontractors (excluding the Contractor's
architect and engineer), but not by Sub-subcontractors, the
Subcontractors' allowance for overhead and profit shall not
exceed 15% of direct costs.
5
<PAGE>
.3 On Work performed by Sub-subcontractors, the subcontractors'
allowance for overhead and profit shall not exceed 10% of total
direct costs.
Delete Subparagraph 7.2.1 and insert the following:
A "Change Order" is a written order to the Contractor signed by the Owner
or its authorized agent issued after the execution of this Agreement and
the finalization of any applicable Drawings and Specifications, authorizing
a Change in the Project or the method or manner of performance and/or an
adjustment in the Project Construction Budget or the Substantial Completion
Date. Subcontractors shall be entitled to adjustment of their fees and
costs for Change Order work in accordance with the terms of their
respective Subcontracts. The Contractor shall be entitled to compensation
for all Costs of the Project incurred by Contractor in connection with the
applicable Change Order work as per the parameters outlined in Section
7.1.1 above.
In the second and fifth lines of Subparagraph 7.3.6 change "Architect" to
"Owner."
Add the following new Subparagraph at the end of Paragraph 7.3:
7.3.10 Contractor shall submit to Owner, within seven (7) days after a
written request therefor from Owner or within seven (7) days after an order
to proceed with a change in the Work pending issuance of a Change Order, an
accurate written estimate of any increase or decrease in costs and of any
delay in the time of completion that will result from the proposed change.
The estimate shall indicate the quantity and unit price of each item of
materials and the number of hours of work and hourly rate for each class of
labor, as well as the description and amounts of all other costs and
sources of delay.
ARTICLE 8 - TIME
Insert the following:
8.1.3 The date of Substantial Completion is the date established in
accordance with Paragraph 9.8.
ARTICLE 9 - PAYMENTS AND COMPLETION
Add the following to 9.3.1:
The form of application for payment shall be AIA Document G702,
"Application and Certification for Payment", supported by AIA Document G73,
"Continuation Sheet". Two copies of the Application for Payment shall be
submitted and sworn before a notary public.
Without limitation of the foregoing, each Application for Payment shall be
accompanied by:
(i) a certificate from Contractor itemizing all claims for
extras for which no Change Order has been processed, and
listing all Change Orders that have been processed that
affect the Contract Sum;
(ii) Such other certifications or evidence supporting
Contractor's right to payment as the Owner's landlord may
require;
(iii) an affidavit of Contractor that all amounts owed to
Subcontractors, to suppliers of materials, and to laborers
for work and materials, furnished for the purpose of the
performance of the Work or otherwise related to
6
<PAGE>
such Work for which payment is made have been paid in full,
and waiving any claim for a mechanics or materialman's lien
on the Work;
(iv) a waiver and subordination of lien in form and substance
satisfactory to the Owner in accordance with California lien
law from each Subcontractor performing any portion of the
Work;
(v) if required by Owner or by its lender, other data and
evidence establishing payment or satisfaction of all such
obligations, such as receipts, releases, certificates,
affidavits and subordinations and/or waivers of liens
arising out of the Contract or the Work.
Payment by the Owner to the Contractor less retainage as hereinafter
provided, shall be made in accordance with the terms of this Agreement.
The Owner shall withhold from each monthly payment an amount equal to ten
percent (10%) on account of each Subcontractor's payment. At such time as
each Subcontractor's Work is fifty percent (50%) complete, no further
retainage will be withheld, provided, in the Owner's and Contractor's
opinions, the Subcontractor is performing satisfactorily. The Contractor
will be paid one hundred percent (100%) of its direct costs and fee earned
to the billing date. There will be no retainage, however, on the Design
Phase.
Add the following subparagraph to 9.3.3:
The submission of any Application for Payment shall, upon receipt of such
payment and to the fullest extent permitted by law, be conclusively deemed
to waive all liens with respect to such work, materials and labor to which
Contractor then may be entitled; provided, however, that in no event shall
such waiver of lien rights waive right to payment for such work, materials
and labor.
If a lien or notice of contract is filed or claimed against the Work by any
Subcontractor, Sub-Subcontractor, laborer or supplier of materials,
Contractor shall immediately bond such lien or cause such lien to be
discharged. Any payment due Contractor under the Contract Documents shall
be reduced by an amount up to two hundred percent (200%) of the amount of
any lien until such lien is removed as of record and/or bonded.
Insert the following:
9.4.2 An Application for Payment will constitute a representation by
Contractor to Owner that the Work has progressed to the point indicated and
that the quality of the Work is in accordance with the Contract Documents.
Insert the following at the beginning of Subparagraph 9.5.1:
"Owner may withhold payment in whole or in part, to the extent reasonably
necessary to protect Owner, if the representations in Subparagraph 9.4.2
cannot be made. The Owner may also withhold payment or, because of
subsequently discovered evidence, may nullify the whole or a part of a
payment previously issued, to such extent as necessary to protect the Owner
from loss for which the Contractor is responsible, including loss resulting
from acts and omissions described in Subparagraph 3.3.2 because of:"
Delete Subparagraph 9.7.1. Section 12.2 as revised in A191, Part 2 to govern
failure of payment.
7
<PAGE>
Insert the following:
9.8.1 The Date of Substantial Completion of the Work or any designated
portion thereof is the date when (i) the Project is available for occupancy
by Owner such that Owner can operate with a minimum of interference by
Contractor and is complete with the exception of punch list items of a
minor nature, and (ii) Contractor has supplied Owner with a certificate of
occupancy or an equivalent use or occupancy permit acceptable to Owner
issued by the building inspector within the municipality where the Project
is being constructed.
Add the following to the end of Subparagraph 9.8.5.
After the release of retainage, Owner shall retain 200% of the cost
necessary to complete any punch list items.
Add the following Subparagraph 9.9.4:
All trade discounts (unless resulting from Contractor's advance payment
before being compensated therefor by Owner), rebates and refunds, and all
returns from sale of surplus materials and equipment, shall be credited to
the Cost of the Project. In the event of a discount offered by a
subcontractor at the time of bid, Contractor shall inform and discuss with
Owner such discount opportunity.
Insert the following:
9.10.1 Upon receipt of written notice that the Work is ready for final
inspection and acceptance and upon receipt of a final Application for
Payment, the Owner will promptly make such inspection and when the Owner
finds the Work acceptable under the Contract Documents and the Contract
fully performed, the following Subparagraphs of this Paragraph 9.10.1 shall
apply.
ARTICLE 10
Insert the following:
10.3.2 If any hazardous substances, oils, asbestos or the like, as defined
by statute or otherwise, ("Hazardous Materials") are released in, on or
about the Project site by Contractor or any of its contractors, or their
respective employees, agents or representatives (without any fault on the
part of Owner, its separate contractors or their respective employees,
agents or representatives) in connection with Contractor's performance of
the Work hereunder, Contractor shall immediately take all steps necessary
to deal with the Hazardous Materials in accordance with all applicable laws
it being understood that Owner will have no obligation or liability
whatsoever with respect to the same. To the extent permitted by law,
Contractor shall indemnify and hold Owner harmless from and against all
costs, including, without limitation, reasonable attorneys' fees,
remediation costs and liability arising by virtue of such a release of
Hazardous Materials in any form on or about the Project site as a result of
the act, omission or neglect of Contractor or any of its contractors, or
their respective employees, agents and representatives (and without any
fault on the part of Owner, its separate contractors or their respective
employees, agents and representatives as aforesaid), which indemnity
obligations shall survive final payment and termination of this Contract.
In the 5th line of Subparagraph 10.2.5 delete "or Architect." In the 5th and
6th lines thereof, delete "either of them" and substitute "Owner" in both
places.
8
<PAGE>
ARTICLE 11 - INSURANCE AND BONDS
Add the following clause to 11.1:
11.1.1.9 Liability Insurance shall include all major divisions of coverage
and be on a comprehensive basis including:
1. Premises Operation (including X, C and U coverage as applicable).
2. Independent Contractor's Protective.
3. Products and Completed Operations.
4. Personal Injury Liability with Employment Exclusion deleted.
5. Contractual, including specified provision for Contractors.
6. Owned, Non-owned and Hired Motor Vehicles
7. Broad Form Property Damage including Completed Operations.
11.1.2.1 If the General Liability coverage is provided by a Commercial
General Liability Policy on a "claims-made" basis, the policy date shall
predate the Contract termination date of the policy or applicable extended
reporting period shall be no earlier than the termination date of coverage
required to be maintained after final payment certified in accordance with
Subparagraph 9.10..2.
11.1.2.2 The insurance required by Subparagraph 11.1.1 shall be written
for not less than the following, or greater if required by law:
1. Worker's Compensation:
a) State: Statutory
b) Applicable Federal: Statutory
c) Employer's Liability: $100,000.00
2. Comprehensive General Liability (including Premises-Operations, Protective,
Products and Completed Operations; Broad Form Property Damage):
a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Annual Aggregate
b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Annual Aggregate
c) Other Insurance: Owned, Non-owned and Hired Motor
Vehicles: $1,000,000.00 Single Limit
d) Additionally-named Insureds:
NaviSite, Inc.
CMGI, Inc.
CARRAMERICA REALTY CORPORATION
including employees, Consultants and agents of the
above parties.
9
<PAGE>
3. Contractual Liability:
a) Bodily Injury:
$1,000,000.00 Each Occurrence
$1,000,000.00 Annual Aggregate
b) Property Damage:
$1,000,000.00 Each Occurrence
$1,000,000.00 Annual Aggregate
4. Personal Injury with Employment Exclusion deleted:
$1,000,000.00 Each Person
$1,000,000.00 Annual Aggregate
5. Comprehensive Automobile Liability:
a) Bodily Injury:
$ 500,000.00 Each Person
$1,000,000.00 Annual Aggregate
b) Property Damage:
$1,000,000.00 Each Occurrence
6. Excess Umbrella Liability: $9,000,000.00 Annual Aggregate
7. Contractor shall provide adequate Fire and Extended Coverage Insurance to
cover equipment, tools, etc. owned or rented by it, its subcontractors; the
capital value of which is not included in the Work, and those materials
stored on the site for which payment by Owner has not been approved. Such
coverage shall include an endorsement to the effect that the underwriter
waive its rights of subrogation against Owner.
8. Contractor shall secure and protect itself, and shall secure and indemnify
Owner and its representatives or employees from any claim of liability,
expense, cause of action, loss or damage whatsoever for any injury,
including death, to any person or property in the performance of this
Contract; it being the intent of this Contract to protect and indemnify
Owner and such representatives and employees from any and all loss arising
out of or in connection with the Work performed under this Contract.
11.1.4 Contractor's liability insurance must be maintained until final
certificate of payment is issued pursuant to Paragraph 9.10.2 and completed
Operators Insurance is in effect.
11.1.5 Certificates of insurance must be submitted on AIA Document G715
Certificate of Insurance, or such other form as acceptable to Owner.
Delete Subparagraph 11.3.3.
10
<PAGE>
Insert the following at the end of Subparagraph 11.4.1.3:
except to the extent that the applicable loss arises from the negligence or
intentional misconduct of Contractor or any of its Subcontractors of any
tier, or the employees or agents of any of them, in which event Contractor
shall be liable for such deductible amounts.
ARTICLE 12 - UNCOVERING AND CORRECTION OF WORK
Add the following to the end of Subparagraph 12.1.2:
and any cost, loss or damage suffered by Owner as a result of such defect
or failure shall be borne by Contractor. This obligation shall survive
termination of the Contract.
Add to Subparagraph 12.2.1.1 in the first line after the word "promptly" the
words "but in all events within thirty (30) days".
Insert the following:
12.2.2.3 The one year period for correction of Work shall be extended by
corrective Work performed by Contractor pursuant to this Paragraph 12.2 for
a period of one year after the date of completion of such corrective Work,
but only with respect to the item or portion of Work so corrected. In no
event shall the period of correction for any portion of the Work be
extended to a date beyond the date that is two (2) years after the date of
Substantial Completion.
ARTICLE 13 - MISCELLANEOUS PROVISIONS
Add the following to Paragraph 13.2.2:
Owner shall have the right, at any time, to assign its rights under this
Contract to any person or entity, without consent of Contractor and shall
have the further right to assign any moneys due or to become due hereunder
upon written notice to Contractor.
Insert the following:
13.3.1 Written notice shall be delivered by hand or shall be mailed by
registered or certified mail, return receipt requested, or sent by a
recognized overnight mail courier (e.g. Federal Express, DHL) addressed to
the party for whom it was intended at its address appearing on the Owner-
Contractor Agreement or to any other address that any such party may
designate by like notice to the others. Any such notice shall be deemed
duly given when so hand delivered or when deposited with the U.S. Postal
Service or with such overnight courier service. Copies of all notices to
Owner must also be sent to: Mr. Joel Rosen, Chief Executive Officer,
NaviSite, Inc., 100 Brickstone Square, Andover, MA 01810.
Add the following new Subparagraph 13.7.2:
13.7.2 Notwithstanding any provision of Subparagraph 13.7.1 to the
contrary, no applicable statute of limitations shall be deemed to have
commenced with respect to any portion of the Work that is not in accordance
with the requirements of the Contract Documents, that would not be visible
or apparent upon conducting a reasonable investigation, and that is not
discovered by the Owner until after the date that, but for this
Subparagraph 13.7.2, would be the date of commencement of the applicable
statute of limitations. The applicable statute of limitations instead
shall be deemed to have commenced on the date of such discovery by the
Owner.
11
<PAGE>
Add the following new Paragraph 13.8:
13.8 Notwithstanding any provision of this Contract to the contrary,
neither Owner nor any member, partner, officer, director, shareholder,
employee, or agent of Owner, or any of their respective successors or
assigns shall have any personal liability for the payment or performance of
any obligation of Owner hereunder.
Add the following new Subparagraph 13.9:
13.9 Each party shall deliver to the other, within ten days after written
request, a certificate as to (i) the date through which payments due to
Contractor hereunder have been made, (ii) the remaining balance of the
Contract Sum due to Contractor hereunder, (iii) whether there have been any
amendments or modifications to the Contract, (iv) whether the certifying
party is in default of any obligation of the certifying party under the
Contract, (v) whether to the best of the certifying party's knowledge, the
requesting party is in default of any obligation of the requesting party
under the Contract, (vi) such other matters as to which the requesting
party may reasonably request certification.
Add the following new Subparagraph 13.10
The employees of Contractor listed on Schedule 13.10 attached hereto shall
be dedicated to the Work and shall not be removed or replaced from the Work
without Owner's prior written consent.
The Project Manager identified on Schedule 13.10 shall be Contractor's
representative under the Contract Documents (the "Contractor's
Representative"), and shall be authorized to take all actions and make all
decisions to be made or taken by Contractor under the Contract Documents,
and all such actions and decisions of Contractor's Representative shall be
binding upon Contractor under the Contract Documents.
ARTICLE 14 - TERMINATION OR SUSPENSION OF CONTRACT
Insert the following:
14.2.1: Owner may terminate the Contract if Contractor:
.1 refuses or fails to supply enough properly skilled workers or
proper materials and such refusal or failure is not cured
within seven (7) days after notice from Owner;
.2 fails to make payment to Subcontractors for materials or labor
in accordance with the respective agreements between
Contractor and such Subcontractors;
.3 violates any applicable law, code, rule, regulation or order
of a public authority having jurisdiction, which violation is
not cured within the grace period, if any, provided under such
law, code, rule, regulation or order;
.4 breaches any other provision of the Contract Documents and
such breach is not cured within seven (7) days after notice
from Owner;
.5 files a petition or consents to the filing of a petition,
under any federal or state law concerning bankruptcy,
reorganization, insolvency or relief from creditors;
.6 has filed against without its consent, a petition under any
federal or state law concerning bankruptcy, reorganization,
insolvency or relief from creditors which is not dismissed
within sixty (60) days:
12
<PAGE>
.7 becomes insolvent;
.8 consents to the appointment of a receiver, trustee,
liquidator, custodian or the like of all or any substantial
portion of its assets;
.9 without its consent, has a receiver, trustee, liquidator,
custodian or the like appointed with respect to it or any
receiver, trustee, liquidator, or the like take possession of
all or any substantial portion of its assets and such
appointment or possession is not terminated within sixty (60)
days; or
.10 makes an assignment for the benefit of creditors.
Insert the following new Paragraph 14.4 after Paragraph 14.3:
14.4.1 Owner may, at its option, terminate the Contract without cause
upon ten (10) days' notice to Contractor, upon which termination
Owner shall: (i) pay Contractor for the portion of the
Contractor's Fee earned as of the date of termination, (ii) pay
for all Costs of the Work properly incurred as of the date of
termination, and (iii) reimburse Contractor for any proven loss or
damages from any supplier or Subcontractor engaged on the Work
(with Owner's approval) arising from such termination.
ADD THE FOLLOWING ARTICLES
ARTICLE 15 - CERTIFIED GUARANTEE AND WARRANTY TO OWNER
15.6 Contractor shall provide a project Guarantee/Warranty, on its
letterhead, in the general format shown on the following page.
ARTICLE 16 - MISCELLANEOUS
16.1 If a dispute or claim arises out of or relates to this Contract or its
breach, except for claims that have been waived by the making or acceptance of
final payment, the parties will endeavor to settle the dispute first through
direct discussions.
16.2 Contractor hereby represents that any computer software, hardware,
documentation, data, services, and other related items ("Procured Products")
provided by Contractor pursuant to this Agreement, or any component part
thereof, shall not with respect to any date data that the Procured Products uses
in any manner and any system date that the Procured Product uses as its current
date, malfunction, cease to function, generate incorrect data, or produce
incorrect results. Contractor further represents that, in connection with
providing date data to and accepting date data from other automated,
computerized, and/or software systems and users via user interfaces, electronic
interfaces, and data storage, the Procured Product represents dates without
ambiguity as to century. If the Procured Product is century noncompliant in any
respect, Contractor shall, at no cost to Owner, within thirty (30) days, correct
the noncompliance and provide the corrected compliant Procured Product to Owner.
With respect to all obligations of Contractor set forth in this subparagraph
("Y2000 Obligations"), Contractor shall contractually impose all such Y2000
Obligations on Subcontractors and suppliers.
13
<PAGE>
ARTICLE 17
The following provisions are inserted in lieu of Article 9 of AIA Document A191
Part 1 and Article 13 of AIA Document A191 Part 2:
Contractor's Fee
- ----------------
17.1 In consideration of the performance of the Contract, the Owner shall pay
the Contractor in current funds as compensation for his services a Contractor's
Fee as set forth in Subparagraphs 17.1.1 and 17.1.2. The Contractor's Fee is
part of the Contract Sum.
17.1.1 For the performance of the Design Phase services, the Contractor's Fee
shall be $75,000.00.
17.1.2 For the performance of Construction Phase services, the Contractor's Fee
shall be $150,000, which shall be paid proportionately to the ratio that the
monthly payment for the Cost of the Project bears to the estimated cost of the
Project, as set forth in the Project Budget, as the same may be adjusted from
time to time upon approval by Owner. Any balance of this fee shall be paid at
the time of final payment.
17.2 Adjustments in fee shall be made as per Article 17.2.1 only if the
parameters of the scope of the Work expand beyond that which is outlined in
Exhibit A and/or if circumstances beyond the control of the Contractor require
an extension of Contractor service beyond the date of November 1, 1999.
17.2.1 For changes in the Project Schedule as provided for in Article 7, the
Contractor's Fee shall be adjusted by an amount equal to $1.55 per each $1.00 of
Contractor direct labor cost of project manager and superintendent only.
17.2.2 For delays in the Project not the responsibility of the Contractor as
defined in the Agreement there will be an equitable adjustment in the fee and
general conditions costs to compensate the Contractor for its increased
expenses, if any.
17.3 Included in the Contractor's Fee are the following:
17.3.1 Salaries or other compensation of the Contractor's employees at the
principal office except the time of Mario Wijtman dedicated to the Project as
set froth in Exhibit B.
17.3.2 General operating expenses of the Contractor's principal and branch
offices other than the field office.
17.3.3 Any part of the Contractor's capital expenses, including interest on the
Contractor's capital employed for the Project.
17.3.4 Overhead or general expenses of any kind, except as may be expressly
included in Article 18.
ARTICLE 18
Cost of the Project
- -------------------
18. The term Cost of the Project shall mean charges for services provided by
the Contractor and costs necessarily incurred in the Project during either the
Design or Construction Phase, and paid by the Contractor. The Cost of the
Project is part of the Contract Sum.
18.1 The Owner shall pay the Contractor for the Cost of the Project as defined
in this Article 18. Such payment shall be in addition to the Contractor's Fee
stipulated in Article 17.
18.2 Cost Items
14
<PAGE>
18.2.1 Charges for services provided by the Contractor's employees based on:
18.2.1.1 Direct Personnel Expense (as defined in 18.2.1.2) of those employees
stationed at the field office, in whatever capacity employed, as per Exhibit B.
18.2.1.2 Direct Personnel Expense is defined as the direct salaries of the
Contractor's employees engaged in performing the services under this Agreement
as described in Subparagraph 18.2.1.1 and the cost of all employee fringe
benefits, including, without limitation, medical and workers' compensation
insurance, allowed absences, vacations, pension and/or profit sharing, all in
accordance with the Contractor's standard personnel policy, and taxes for such
items as unemployment compensation and social security, as per Exhibit B.
18.2.2 Reasonable transportation, traveling, moving, temporary subsistence and
hotel expenses of the Contractor or of its officers or employees incurred in
discharge of duties connected with the Project, all in accordance with the
Contractor's standard personnel policy; provided that such expenses are approved
in advance by Owner.
18.2.3 Cost of all materials, supplies and equipment incorporated in the
Project, including costs of transportation and storage thereof.
18.2.4 Payments made by the Contractor to Subcontractors for their Work
performed pursuant to contract under this Agreement, including the cost of any
Subcontractor payment and performance bonds required by Owner or any applicable
government authority.
18.2.5 Cost, including transportation and maintenance, of all materials,
supplies, equipment, vehicles, and temporary facilities, that are employed and
consumed in the performance of the Work, and cost less salvage value on such
items used but not consumed that remain the property of the Contractor.
18.2.6 Rental charges of all necessary machinery and equipment, exclusive of
hand tools, used at the site of the Project, whether rented from the Contractor
or others, including installation, repairs and replacements, dismantling,
removal, costs of lubrication, transportation and delivery costs thereof, at
rental charges consistent with those prevailing in the area.
18.2.7 Cost of the premiums for all insurance and bonds which the Contractor is
required to procure by this Agreement or is deemed necessary by the Contractor
and approved by Owner.
18.2.8 Sales, use, gross receipts or similar taxes related to the Project
imposed by any governmental authority, and for which the Contractor is liable.
18.2.9 The Contractor shall not indemnify for patent infringement as may be
caused by the design documents of the Architect/Engineer, except to the extent
that Contractor knew that the applicable material, equipment or technique
infringed upon the patent rights of any third party and failed to notify Owner
and Architect/Engineer prior to the installation or procurement thereof.
18.2.10 Losses, expenses or damages to the extent not compensated by insurance
or otherwise, including settlement of trade contractor claims or suits with
prior Owner approval. written approval.
18.2.11 Project expenses such as telegrams, long-distance telephone calls,
telephone service at the site, expressage, printing, reproduction and similar
items, as per Exhibit B.
18.2.12 Cost of removal of all debris.
15
<PAGE>
18.2.13 Cost incurred due to an emergency affecting the safety of persons and
property except to the extent such emergency is caused by the negligence of the
Contractor.
18.2.14 Cost of supplies for job site computer.
18.2.15 Legal costs reasonably and properly incurred by the Contractor in the
discharge of its duties under this Agreement with prior Owner written approval.
18.2.16 All costs directly incurred in the performance of the Project and not
included in the Contractor's Fee as set forth in Paragraph 17.3, subject to
Owner's prior written approval, which shall not be unreasonably withheld.
18.2.17 Fines, penalties, sanctions or impositions assessed or imposed by any
governmental body, instrumentality or tribunal to the extent arising as a result
of Contractor proceeding with the Work at the specific direction of Owner
provided that (a) Contractor has informed Owner in writing that proceeding
without a specified permit or other authorization could result in the imposition
of fines, penalties, sanctions or impositions (collectively, "Fines"), (b)
Contractor informs Owner in writing as to the magnitude and scope of such Fines
and other possible ramifications, and (c) Owner directs Contractor to proceed
with the Work so affected.
18.2.18 The Cost of the Project shall not include:
.1 Cost due to the negligence of Contractor or to the failure of
Contractor to fulfill a specific responsibility to Owner set forth in the
Contract Documents.
.2 Except as provided in Subparagraph 18.2.17 above, fines, penalties,
sanctions or impositions assessed or imposed by any governmental body,
instrumentality or tribunal to the extent arising from any act or omission of
Contractor or any Subcontractor.
.3 Costs of accelerating the Work to the extent caused by the negligence
or default of Contractor.
.4 Costs resulting from the failure of Contractor or any Subcontractor to
procure and maintain insurance as required by the Contract Documents.
.5 Overtime required to the extent caused by the negligence or fault of
Contractor.
.6 Project incentive bonuses, except as approved in advance by Owner in
writing.
.7 Cost of bonding or securing liens or defending claims filed by any
Subcontractor or supplier arising from any default by Contractor in making any
payment due to any such Subcontractor or supplier, unless such default by
Contractor is due to a default by Owner in making progress payments to
Contractor hereunder.
.8 Losses or expenses for which Contractor is compensated by insurance.
16
<PAGE>
18.3 All costs directly or indirectly incurred in the performance of the
Project and not included in the Contractor's Fee as set forth in Article 17 are
subject to Owner's prior written approval.
[RFA]
OWNER: CONTRACTOR:
NAVISITE, INC. XL CONSTRUCTION
By: By:
-------------------------------- -------------------------------
Name: Name:
------------------------- -----------------------
Title: Title:
------------------------- -----------------------
17
<PAGE>
(CONTRACTOR'S LETTERHEAD)
NAME AND ADDRESS OF OWNER Date:
----------------------------
Re:
----------------------------
(Name of Project)
Gentlemen:
The undersigned guarantees Owner that it will be responsible for faulty
materials, equipment and workmanship and that it will remedy all defects due
thereto and pay for all damages to other work resulting therefrom that shall
appear within a period of one (1) year from the date at which Substantial
Completion of the work is acknowledged in writing by Owner.
During this period, upon written notice, the undersigned will proceed with due
diligence at the undersigned's expense to replace properly all defective
materials and equipment and perform all labor necessary to correct all defects
in the work.
In case the undersigned fails upon reasonable notice to remedy such defects,
Owner may, in addition to and without limitation of any other rights or remedies
Owner may have, furnish such materials or labor as are necessary to do so, and
the undersigned shall reimburse Owner fully and promptly upon demand.
Guarantees from Contractor shall be supported by individual guarantees from each
trade or subcontractor and manufacturer or supplier covering work performed and
material and equipment.
All materials, fixtures, appliances, equipment and other items requiring
excessive servicing during the guarantee period will be considered defective and
shall be made good, replaced and/or corrected to the satisfaction of Owner,
under the terms of this letter.
Owner shall have the right to assign its rights and remedies under this
guarantee to any successor owner of the Project.
The furnishing of the above guarantee and all other special guarantees required
by the Contract Documents shall be a condition precedent to payment of
retainage.
-----------------------------------
Signature of Contractor
-----------------------------------
(Notarized)
18
<PAGE>
GUARANTY
--------
CMGI, Inc. hereby guarantees the payment and performance by Tenant of its
obligations under the foregoing Contract, subject to, and in accordance with,
the terms and provisions thereof.
Notwithstanding anything to the contrary contained herein, this Guaranty and all
of Guarantor's obligations and agreements hereunder shall terminate and be of no
further force or effect immediately upon the closing of the sale of shares of
common stock of NaviSite, Inc. in a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended.
CMGI, INC.
By:
----------------------------------
Name:
Title:
19
<PAGE>
Schedule 13.10
Dedicated employees of Contractor:
Project Manager: Craig DeBrine
Project Superintendent: Kevin Brittner
Project Executive: Mario Wijtman
General Superintendent: Jeffe Fyffe
Project Engineer: Neil Netzer
20
<PAGE>
GUARANTY
--------
Reference is hereby made to that certain Construction Agreement dated as of
June 14, 1999 by and between XL Construction ("Design/Builder") and NaviSite,
Inc. ("Owner") (the "Agreement"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings ascribed to such terms in
the Agreement.
CMGI, Inc. ("Guarantor") hereby guarantees the payment and performance by
Owner of its obligations under the Agreement, subject to, and in accordance
with, the terms and provisions thereof.
Notwithstanding anything to the contrary contained herein, this Guaranty
and all of Guarantor's obligations and agreements hereunder and under the
Agreement shall terminate and be of no further force or effect immediately upon
the closing of the initial public offering of shares of common stock of Owner
pursuant to an effective registration statement under the Securities Act of
1933, as amended.
CMGI, INC.
By:
---------------------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 PRECONSTRUCTION 119d Mon 4/26/99 Tue 10/12/99
- -------------------------------------------------------------------------------------------------------------------
2 PLANNING DEPARTMENT SUBMISSIONS 22d Mon 5/24/99 Wed 6/23/99
- -------------------------------------------------------------------------------------------------------------------
3 Equipment Yard 22d Mon 5/24/99 Wed 6/23/99
- -------------------------------------------------------------------------------------------------------------------
4 DGA Prepare Equipment Yard Submission Package 7d Mon 5/24/99 Wed 6/2/99 92
- -------------------------------------------------------------------------------------------------------------------
5 Planning Department Review 5d Thu 6/3/99 Wed 6/9/99 4
- -------------------------------------------------------------------------------------------------------------------
6 DGA Respond to Comments/Re-Submit 10d Thu 6/10/99 Wed 6/23/99 5
- -------------------------------------------------------------------------------------------------------------------
7 Planning Department Approval 0d Wed 6/23/99 Wed 6/23/99 6
- -------------------------------------------------------------------------------------------------------------------
8 PERMIT AND BID PACKAGE DOCUMENT DEVELOPMENT 75d Wed 4/28/99 Thu 8/12/99
- -------------------------------------------------------------------------------------------------------------------
9 PACKAGE #1: STRUCTURAL & UNDERSLAB MEP 61d Thu 4/29/99 Mon 7/26/99
- -------------------------------------------------------------------------------------------------------------------
10 Seismic Upgrade 22d Thu 4/29/99 Fri 5/28/99
- -------------------------------------------------------------------------------------------------------------------
11 SEI Perform Seismic Upgrade Conceptual Analysis 9d Thu 4/29/99 Tue 5/11/99
- -------------------------------------------------------------------------------------------------------------------
12 XL Prepare Conceptual Budgets 1d Wed 5/12/99 Wed 5/12/99 11
- -------------------------------------------------------------------------------------------------------------------
13 NaviSite Review/Approve 1.25 Importance Factor 2d Thu 5/13/99 Fri 5/14/99 12
- -------------------------------------------------------------------------------------------------------------------
14 SEI Develop Seismic Upgrade Design 10d Mon 5/17/99 Fri 5/28/99 13
- -------------------------------------------------------------------------------------------------------------------
15 MEP & Elevator Driven Structural Design 37d Mon 5/3/99 Wed 6/23/99
- -------------------------------------------------------------------------------------------------------------------
16 XL Provide Preliminary Elevator Dimensions 1d Mon 5/3/99 Mon 5/3/99 174
- -------------------------------------------------------------------------------------------------------------------
17 CEI Size Ductbank Footing Penetration 1d Tue 5/4/99 Tue 5/4/99 53
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
18 Therma Provide Preliminary Rooftop Equipment Weight & 1d Wed 6/9/99 Wed 6/9/99 63FS-4d,
F 64FS-4d
- -------------------------------------------------------------------------------------------------------------------
19 SEI Develop Structural Designs 14d Fri 6/4/99 Wed6/23/99 17,18FS-4d,
16
- -------------------------------------------------------------------------------------------------------------------
20 Underslab MEP 45d Fri 5/21/99 Mon7/26/99
- -------------------------------------------------------------------------------------------------------------------
21 CEI Prepare Underslab Conduit Plan 7d Mon 5/24/99 Wed 6/2/99 31,92
- -------------------------------------------------------------------------------------------------------------------
22 Therma/DGA Prepare Bathroom Fixture Layout 5d Fri 5/21/99 Thu 5/27/99 33FS-8d
- -------------------------------------------------------------------------------------------------------------------
23 NaviSite Review & Approve Bathroom Fixture Layout 2d Fri 5/28/99 Tue 6/1/99 22
- -------------------------------------------------------------------------------------------------------------------
24 Therma Prepare Underslab Plumbing Plan 5d Wed 6/2/99 Tue 6/8/99 23
- -------------------------------------------------------------------------------------------------------------------
25 Team Issue Structural & Underslab Permit Docs 0d Wed 6/23/99 Wed 6/23/99 14,19,24,
21
- -------------------------------------------------------------------------------------------------------------------
26 Team Issue Structural & Underslab CD's 0d Mon 7/26/99 Mon 7/26/99 102
- -------------------------------------------------------------------------------------------------------------------
27 PACKAGE #2: INTERIOR TI BUILDOUT 69D Wed 4/28/99 Wed 8/4/99
- -------------------------------------------------------------------------------------------------------------------
28 Interior Architectural Design 55d Wed 4/28/99 Thu 7/15/99
- -------------------------------------------------------------------------------------------------------------------
29 Data Center (First Floor) 55d Wed 4/28/99 Thu 7/15/99
- -------------------------------------------------------------------------------------------------------------------
30 NaviSite Provide Raised Floor Load Requirements 5d Wed 4/28/99 Tue 5/4/99
- -------------------------------------------------------------------------------------------------------------------
31 CEI Prepare Preliminary Battery & Electrical Room Lay 12d Thu 4/29/99 Fri 5/14/99
- -------------------------------------------------------------------------------------------------------------------
32 Visnick & Caulfield Prepare Schematic Floor Plan 12d Thu 4/29/99 Fri 5/14/99
- -------------------------------------------------------------------------------------------------------------------
33 NaviSite Review & Approve Schematic Floor Plan
- -------------------------------------------------------------------------------------------------------------------
34 NOC Programming/Schematic Design 5w Mon 5/10/99 Mon 6/14/99
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
35 DGA Prepare Access Floor Layout & Specs for Bid 2d Tue 6/8/99 Wed 6/9/99 33FS+3d,30
F+5
- -------------------------------------------------------------------------------------------------------------------
36 Finalize & Detail NOC Design 2.5w Tue 6/15/99 Thu 7/1/99 34
- -------------------------------------------------------------------------------------------------------------------
37 DGA Prepare DD Docs 10d Wed 5/26/99 Wed 6/9/99 33FS-
10d,34FS-1
- -------------------------------------------------------------------------------------------------------------------
38 DD Fly Spec Document Review 1d Thu 6/10/99 Thu 6/10/99 37
- -------------------------------------------------------------------------------------------------------------------
39 DGA Prepare Permit Docs 11d Fri 6/11/99 Fri 6/25/99 38
- -------------------------------------------------------------------------------------------------------------------
40 DGA Complete CD's 7d Mon 6/28/99 Wed 7/7/99 39
- -------------------------------------------------------------------------------------------------------------------
41 CD Fly Speck Document Review 1d Thu 7/8/99 Thu 7/8/99 40
- -------------------------------------------------------------------------------------------------------------------
42 DGA Incorporate Fly Speck Comments 5d Fri 7/9/99 Thu 7/15/99 41
- -------------------------------------------------------------------------------------------------------------------
43 Administrative Spaces (Second Floor) 54d Thu 4/29/99 Thu 7/15/99
- -------------------------------------------------------------------------------------------------------------------
44 Visnick & Caulfield Prepare Schematic Floor Plan 18d Thu 4/29/99 Mon 5/24/99
- -------------------------------------------------------------------------------------------------------------------
45 NaviSite Review & Approve Schematic Floor Plan 6d Tue 5/25/99 Wed 6/2/99 44
- -------------------------------------------------------------------------------------------------------------------
46 DGA Prepare DD Docs 10d Wed 5/26/99 Wed 6/9/99 45FS-5d
- -------------------------------------------------------------------------------------------------------------------
47 DD Fly Spec Document Review 1d Thu 6/10/99 Thu 6/10/99 46,77
- -------------------------------------------------------------------------------------------------------------------
48 DGA Prepare Permit Docs 10d Fri 6/11/99 Thu 6/25/99 47
- -------------------------------------------------------------------------------------------------------------------
49 CD Fly Speck Document Review 1d Thu 7/8/99 Thu 7/8/99 48,78,41SS
- -------------------------------------------------------------------------------------------------------------------
50 DGA Incorporate Fly Speck Comments 5d Fri 7/9/99 Thu 7/15/99 49
- -------------------------------------------------------------------------------------------------------------------
51 MEP Design 68d Thu 4/29/99 Wed 8/4/99
- -------------------------------------------------------------------------------------------------------------------
52 Electrical Equipment Selection 41d Thu 4/29/99 4/25/99
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
53 CEI Prepare Schematic Electrical Design Concepts 3d Thu 4/29/99 Mon 5/3/99
- -------------------------------------------------------------------------------------------------------------------
54 NaviSite Review & Approve 3d Tue 5/4/99 Thu 5/6/99 53
- -------------------------------------------------------------------------------------------------------------------
55 CEI Prepare Specifications & Equipment Bid Packages 5d Fri 5/7/99 Thu 5/13/99 54
- -------------------------------------------------------------------------------------------------------------------
56 Electrical Equipment Bid Period 1w Fri 5/14/99 Thu 5/20/99 55
- -------------------------------------------------------------------------------------------------------------------
57 CEI Review & Analyze Equipment Bids 3d Fri 5/21/99 Tue 5/25/99 56
- -------------------------------------------------------------------------------------------------------------------
58 Fuel Oil Storage Tanks/Pumps Bid Period 3w Fri 5/28/99 Fri 6/18/99 54FS+3w
- -------------------------------------------------------------------------------------------------------------------
59 CEI Review & Analyze Fuel Oil Bids 5d Mon 6/21/99 Fri 6/25/99 58
- -------------------------------------------------------------------------------------------------------------------
60 Mechanical Equipment Selection 40d Thu 4/29/99 Fri 6/25/99
- -------------------------------------------------------------------------------------------------------------------
61 Therma Prepare Admin. Space Mechanical Concepts 30d Mon 5/3/99 Mon 6/14/99
- -------------------------------------------------------------------------------------------------------------------
62 NaviSite Review & Select Admin. Space Design Conce 20d Mon 5/24/99 Mon 6/21/99 61FS-15d
- -------------------------------------------------------------------------------------------------------------------
63 Therma Size & Specify Computer Room HVAC Units 15d Fri 4/30/99 Thu 5/20/99
- -------------------------------------------------------------------------------------------------------------------
64 Therma Size Admin. Space Equipment & Prepare Spec 5d Tue 6/8/99 Mon 6/14/99 62FS-10d
- -------------------------------------------------------------------------------------------------------------------
65 Computer Room Units Bid Period 1w Fri 5/21/99 Thu 5/27/99 63
- -------------------------------------------------------------------------------------------------------------------
66 Therma Review & Analyze Computer Room HVAC Unit 15d Fri 5/28/99 Fri 6/18/99 65
- -------------------------------------------------------------------------------------------------------------------
67 Admin. Space Equipment Bid Period 1w Tue 6/15/99 Mon 6/21/99 64
- -------------------------------------------------------------------------------------------------------------------
68 Therma Review & Analyze admin. Space Equipment Bid 4d Tue 6/22/99 Fri 6/25/99 67
- -------------------------------------------------------------------------------------------------------------------
69 Data Center MEP Design (First Floor) 54d Thu 4/29/99 Thu 7/15/99
- -------------------------------------------------------------------------------------------------------------------
70 Therma/CEI Prepare Schematic Plan & RCP Drawing: 10d Thu 4/29/99 Wed 5/12/99
- -------------------------------------------------------------------------------------------------------------------
71 NaviSite Review & Approve 3d Thu 5/13/99 Mon 5/17/99 70
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
72 Therma/CEI Prepare DD Docs 7d Tue 6/1/99 Wed 6/9/99 71,37FF
- -------------------------------------------------------------------------------------------------------------------
73 DD Fly Speck Document Review 1d Thu 6/10/99 Thu 6/10/99 38SS,72
- -------------------------------------------------------------------------------------------------------------------
74 Therma/CEI Prepare Permit Docs 10d Fri 6/11/99 Thu 6/24/99 73
- -------------------------------------------------------------------------------------------------------------------
75 Therma/CEI Incorporate Fly-Speck Comments 5d Fri 7/9/99 Thu 7/15/99 41
- -------------------------------------------------------------------------------------------------------------------
76 Administrative Spaces (Second Floor) 54d Thu 4/29/99 Thu 7/15/99
- -------------------------------------------------------------------------------------------------------------------
77 Therma/CEI Prepare DD Docs 5d Thu 6/3/99 Wed 6/9/99 45,46FF
- -------------------------------------------------------------------------------------------------------------------
78 Therma/CEI Prepare Permit Docs 5d Fri 6/11/99 Thu 6/17/99 47
- -------------------------------------------------------------------------------------------------------------------
79 Team Issue Interior TI Buildout Permit Docs 0d Fri 6/25/99 Fri 6/25/99 39,48,74,78
- -------------------------------------------------------------------------------------------------------------------
80 Therma/CEI Incorporate Fly-Speck Comments 5d Fri 7/9/99 Thu 7/15/99 49
- -------------------------------------------------------------------------------------------------------------------
81 Team Issue Interior TI Buildout Permit CD's 0d Wed 8/4/99 Wed. 8/4/99 42,50,75,80,
107
- -------------------------------------------------------------------------------------------------------------------
82 PACKAGE #3: SITE (Includes Equipment Yard) 75d Wed 4/28/99 Thu 8/12/99
- -------------------------------------------------------------------------------------------------------------------
83 Site Utilities 52d Thu 4/29/99 Tue 7/13/99
- -------------------------------------------------------------------------------------------------------------------
84 CEI Prepare Site Electrical Plan 7d Thu 4/29/99 Fri 5/7/99
- -------------------------------------------------------------------------------------------------------------------
85 CEI Obtain P.G.&E. Approval 35d Mon 5/10/99 Mon 6/28/99 84
- -------------------------------------------------------------------------------------------------------------------
86 Therma/CEI Identify Conflicts w/Existing UG Natural Gas 1d Tue 7/6/99 Tue 7/6/99 95
- -------------------------------------------------------------------------------------------------------------------
87 Allied/CEI Identify Conflicts w/Existing Site Fire Loop 1d Tue 7/6/99 Tue 7/6/99 95
- -------------------------------------------------------------------------------------------------------------------
88 Therma Prepare Revised Natural Gas Plan 5d Wed 7/7/99 Tue 7/13/99 86
- -------------------------------------------------------------------------------------------------------------------
89 Allied Prepare Revised Site Fire Loop Plan 5d Wed 7/7/99 Tue 7/13/99 87
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
90 Equipment Yard 75d Wed 4/28/99 Thu 8/12/99
- -------------------------------------------------------------------------------------------------------------------
91 Team Prepare Preliminary Configuration and Location for E 3d Wed 4/28/99 Fri 4/30/99
- -------------------------------------------------------------------------------------------------------------------
92 CEI/Therma prepare Preliminary Yard Layout 15d Mon 5/3/99 Fri 5/12/99 91
- -------------------------------------------------------------------------------------------------------------------
93 NaviSite Review & Approve 3d Mon 5/24/99 Wed 5/26/99 92
- -------------------------------------------------------------------------------------------------------------------
94 DGA/CEI Develop Slab & Enclosure Design 20d Mon 5/24/99 Mon 6/21/99 92
- -------------------------------------------------------------------------------------------------------------------
95 CEI/Therma Finalize Equipment & Piping Layout 5d Mon 6/28/99 Tue 7/2/99 93,197,204,
211,2
- -------------------------------------------------------------------------------------------------------------------
96 Team Issue Site Permit Docs 0d Tue 7/13/99 Tue 7/13/99 85,88,89,94,
95
- -------------------------------------------------------------------------------------------------------------------
97 Team Issue Site CD's 0d Thu 8/12/99 Thu 8/12/99 112
- -------------------------------------------------------------------------------------------------------------------
98 PERMITS 35d Wed 6/23/99 Thu 8/12/99
- -------------------------------------------------------------------------------------------------------------------
99 Package #1 - STRUCTURAL AND UNDERSLAB MEP PERMIT 22d Wed 6/23/99 Mon 7/26/99
- -------------------------------------------------------------------------------------------------------------------
100 Submit Permit Docs to the City 0d Wed 6/23/99 Wed 6/23/99 25
- -------------------------------------------------------------------------------------------------------------------
101 City Review 15d Thu 6/24/99 Thu 7/15/99 100
- -------------------------------------------------------------------------------------------------------------------
102 Design Team Respond to Comments & Re-Submit 7d Fri 7/16/99 Mon 7/26/99 101
- -------------------------------------------------------------------------------------------------------------------
103 Structural & Underslab MEP Permit Issued 0d Mon 7/26/99 Mon 7/26/99 102
- -------------------------------------------------------------------------------------------------------------------
104 Package #2 - INTERIOR TI BUILDOUT PERMIT 27d Fri 6/25/99 Wed 8/4/99
- -------------------------------------------------------------------------------------------------------------------
105 Submit Permit Docs to the City 0d Wed 6/25/99 Fri 6/25/99 79
- -------------------------------------------------------------------------------------------------------------------
106 City Review 20d Mon 6/28/99 Mon 7/26/99 105
- -------------------------------------------------------------------------------------------------------------------
107 Design Team Respond to Comments & Re-Submit 7d Tue 7/27/99 Wed 8/4/99 106
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
108 Interior Permit Issued 0d Wed 8/4/99 Wed 8/4/99 107
- -------------------------------------------------------------------------------------------------------------------
109 Package #3 - SITE (Including Equipment Yard) PERMIT 22d Tue 7/13/99 Thu 8/12/99
- -------------------------------------------------------------------------------------------------------------------
110 Submit Permit Docs to the City 0d Tue 7/13/99 Tue 7/13/99 96
- -------------------------------------------------------------------------------------------------------------------
111 City Review 15d Wed 7/14/99 Tue 8/3/99 110
- -------------------------------------------------------------------------------------------------------------------
112 Design Team Respond to Comments & Re-Submit 7d Wed 8/4/99 Thu 8/12/99 111
- -------------------------------------------------------------------------------------------------------------------
113 Interior Permit Issued 0d Thu 8/12/99 Thu 8/12/99 112
- -------------------------------------------------------------------------------------------------------------------
114 BUDGET AND GMP DEVELOPMENT 64d Tue 6/22/99 Tue 9/21/99
- -------------------------------------------------------------------------------------------------------------------
115 CONCEPTUAL BUDGET 8d Tue 6/22/99 Thu 7/1/99
- -------------------------------------------------------------------------------------------------------------------
116 XL Prepare and Submit Conceptual Budget 5d Tue 6/22/99 Mon 6/28/99 13,19FS-
10d,84,9
- -------------------------------------------------------------------------------------------------------------------
117 NaviSite Review and Approve Conceptual Budget 4d Tue 6/29/99 Thu 7/1/99 116
- -------------------------------------------------------------------------------------------------------------------
118 D.D. BUDGET 9d Fri 6/25/99 Thu 7/8/99
- -------------------------------------------------------------------------------------------------------------------
119 XL Prepare and Submit D.D. Budget 5d Fri 6/25/99 Thu 7/1/99
- -------------------------------------------------------------------------------------------------------------------
120 NaviSite Review and Approve D.D. Budget 4d Fri 7/2/99 Thu 7/8/99 119
- -------------------------------------------------------------------------------------------------------------------
121 Cost-Plus Budget 40d Tue 7/27/99 Tue 9/2199
- -------------------------------------------------------------------------------------------------------------------
122 XL Prepare Bid package #1 (Struct./UG) Bid Documents 5d Tue 7/27/99 Mon 8/2/99 26
- -------------------------------------------------------------------------------------------------------------------
123 Bid Package #1 Bid Period 2w Tue 8/3/99 Mon 8/16/99 122
- -------------------------------------------------------------------------------------------------------------------
124 XL/NaviSite Review and Approve Low Bidders 2d Tue 8/1799 Wed 8/18/99 123
- -------------------------------------------------------------------------------------------------------------------
125 XL Prepare Bid package #2 (Interior TI) Bid Documents 5d Thu 8/5/99 Wed 8/11/99 81
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
126 Bid Package #2 Bid Period 2w Thu 8/12/99 Wed 8/25/99 125
- -------------------------------------------------------------------------------------------------------------------
127 XL/NaviSite Review & Approve Low Bidders 2d Thu 8/26799 Fri 8/27/99 126
- -------------------------------------------------------------------------------------------------------------------
128 XL Prepare Bid package #3 (Site) Bid Documents 5d Fri 8/13/99 Thu 8/19/99 97
- -------------------------------------------------------------------------------------------------------------------
129 Bid Package #3 Bid Period 2w Fri 8/20/99 Thu 9/2/99 128
- -------------------------------------------------------------------------------------------------------------------
130 XL/NaviSite Review and Approve Low Bidders 2d Fri 9/3799 Tue 9/7/99 129
- -------------------------------------------------------------------------------------------------------------------
131 XL Prepare & Submit GMP 5d Wed 9/8/99 Tue 9/14/99 124,130,127
- -------------------------------------------------------------------------------------------------------------------
132 XL/NaviSite Review & Approve GMP 5d Wed 9/15799 Tue 9/21/99 131
- -------------------------------------------------------------------------------------------------------------------
133 LONG LEAD PROCUREMENT 119d Mon 4/26/99 Tue 10/12/99
- -------------------------------------------------------------------------------------------------------------------
134 FM - 200 FIRE PROTECTION SYSTEM 64d Mon 5/3/99 Mon 8/2/99
- -------------------------------------------------------------------------------------------------------------------
135 XL Prepare FM-200 System Contractor Bid Analysis Package 15d Mon 5/3/99 Fri 5/21/99
- -------------------------------------------------------------------------------------------------------------------
136 NaviSite Review & Approve FM-200 Bid Analysis Package 3d Mon 5/2499 Wed 5/26/99 135
- -------------------------------------------------------------------------------------------------------------------
137 XL Issue FM-200 Subcontract 3d Thu 5/27/99 Tue 6/1/99 136
- -------------------------------------------------------------------------------------------------------------------
138 FM-200 Vendor Submittal Preparation & Design 2w Wed 6/2/99 Tue 6/15/99 137
- -------------------------------------------------------------------------------------------------------------------
139 Design Team Review & Approve 3d Wed 6/16799 Fri 6/18/99 138
- -------------------------------------------------------------------------------------------------------------------
140 Procurement of FM-200/Preaction System Equipment 6w Mon 6/21/99 Mon 8/2/99 139
- -------------------------------------------------------------------------------------------------------------------
141 RAISED ACCESS FLOOR 51d Thu 6/10/99 Fri 8/20/99
- -------------------------------------------------------------------------------------------------------------------
142 XL Bid Raised Access Floor 8d Thu 6/10/99 Mon 6/21/99 35
- -------------------------------------------------------------------------------------------------------------------
143 XL Submit Raised Floor Bid Analysis Package 0d Mon 6/21/99 Mon 6/21/99 142
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144 NaviSite Review & Approve Raised Floor Bid Analysis Package 2d Tue 6/22799 Wed 6/23/99 143
- -------------------------------------------------------------------------------------------------------------------
145 XL Release Raised Floor Subcontractor 1d Thu 6/24/99 Thu 6/24/99 144
- -------------------------------------------------------------------------------------------------------------------
146 Vendor Submittal Preparation 1w Fri 6/25/99 Thu 7/1/99 145
- -------------------------------------------------------------------------------------------------------------------
147 DGA Review & Approve Raised Floor Product Data 1w Fri 7/2/99 Fri 7/9/99 146
- -------------------------------------------------------------------------------------------------------------------
148 Delivery of Raised Floor Material 6w Mon 7/12/99 Fri 8/20/99 147
- -------------------------------------------------------------------------------------------------------------------
149 PACKAGED AIR HANDLING UNITS (Admin. Space) 45d Fri 6/25/99 Mon 8/30/99
- -------------------------------------------------------------------------------------------------------------------
150 Therma Submit A.H.U. Package for Approval 0d Fri 6/25/99 Fri 6/25/99 68
- -------------------------------------------------------------------------------------------------------------------
151 NaviSite Review & Approve A.H.U. Bid Analysis Package 2d Mon 6/28/99 Tue 6/29/99 150
- -------------------------------------------------------------------------------------------------------------------
152 Therma Issue P.O. for A.H.U.'s 1d Wed 6/30/99 Wed 6/30/99 151
- -------------------------------------------------------------------------------------------------------------------
153 Vendor Submittal Preparation 2w Thu 7/1/99 Thu 7/15/99 152
- -------------------------------------------------------------------------------------------------------------------
154 CEI/NaviSite Review & Approve 2d Fri 7/16/99 Mon. 7/19/99 153
- -------------------------------------------------------------------------------------------------------------------
155 Fabrication and Delivery of A.H.U.'s 6w Tue 7/20/99 Mon. 8/30/99 154
- -------------------------------------------------------------------------------------------------------------------
156 OFFICE FURNITURE AND PARTITIONS 68d Mon 5/10/99 Fri 8/13/99
- -------------------------------------------------------------------------------------------------------------------
157 NaviSite Solicit Proposals & Select Vendor 3w Mon 5/10/99 Fri 5/28/99
- -------------------------------------------------------------------------------------------------------------------
158 Vendor Product Data & Floor Plan Layout Preparation 2w Tue 6/1/99 Mon 6/14/99 157
- -------------------------------------------------------------------------------------------------------------------
159 NaviSite Review & Approve 3d Tue 6/15/99 Thu 6/17/99 158
- -------------------------------------------------------------------------------------------------------------------
160 Fabrication & Delivery 8w Fri 6/18/99 Mon. 8/13/99 159
- -------------------------------------------------------------------------------------------------------------------
161 UPS & PDU'S 63d Tue 5/25/99 Tue 5/24/99
- -------------------------------------------------------------------------------------------------------------------
162 C.E.I. Submit Equipment Package for Approval 0d Tue 5/25/99 Tue 5/25/99 57
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- ----------------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
163 NaviSite Review & Approve Equipment Bid Analysis Package 2d Wed 5/26/99 Thu 5/27/99 162
- ----------------------------------------------------------------------------------------------------------------------------
164 C.E.I. Issue P.O. for Equipment 1d Fri 5/28/99 Fri 5/28/99 163
- ----------------------------------------------------------------------------------------------------------------------------
165 Vendor Submittal Preparation 2w Tue 6/1/99 Mon 6/14/99 164
- ----------------------------------------------------------------------------------------------------------------------------
166 CEI/NaviSite Review & Approve 2d Tue 6/15/99 Wed 6/16/99 165
- ----------------------------------------------------------------------------------------------------------------------------
167 Fabrication & Delivery of Equipment 12w Tue 6/1/99 Tue 8/24/99 164
- ----------------------------------------------------------------------------------------------------------------------------
168 NOC EQUIPMENT 65d Thur 7/1/99 Mon 10/4/99
- ----------------------------------------------------------------------------------------------------------------------------
169 XL Solicit Proposals from NOC Equipment Vendors/Award 2.5w Thu 7/1/99 Tue 7/20/99 36
- ----------------------------------------------------------------------------------------------------------------------------
170 Vendor Product Data & Shop Drawing Preparation & Approval 2.5w Wed 7/21/99 Fri 8/6/99 169
- ----------------------------------------------------------------------------------------------------------------------------
171 "Big Screen" Wall Monitor Fabrication & Delivery 8w Fri 8/6/99 Mon 10/4/99 170
- ----------------------------------------------------------------------------------------------------------------------------
172 Console Fabrication & Delivery 8w Fri 8/6/99 Mon 10/4/99 170
- ----------------------------------------------------------------------------------------------------------------------------
173 ELEVATORS 91.5d Mon 4/26/99 Thu 9/2/99
- ----------------------------------------------------------------------------------------------------------------------------
174 XL Solicit Elevator Cost & Technical Data 5d Mon 4/26/99 Fri 4/30/99
- ----------------------------------------------------------------------------------------------------------------------------
175 XL Submit Elevator Approval Package 1d Mon 5/3/99 Mon 5/3/99 174
- ----------------------------------------------------------------------------------------------------------------------------
176 DGA/VCA Review Elevator Technical Data 2d Tue 5/4/99 Wed 5/5/99 175
- ----------------------------------------------------------------------------------------------------------------------------
177 NaviSite Review & Approve Elevator Approval Package 2d Tue 5/4/99 Wed 5/5/99 175
- ----------------------------------------------------------------------------------------------------------------------------
178 XL Release Elevator Subcontract 1d Thu 5/6/99 Thu 5/6/99 176,177
- ----------------------------------------------------------------------------------------------------------------------------
179 Elevator Shop Drawings 2w Fri 5/7/99 Thu 5/20/99 178
- ----------------------------------------------------------------------------------------------------------------------------
180 DGA Review & Approve Elevator Show Drawings 5d Fri 5/21/99 Thu 5/27/99 179
- ----------------------------------------------------------------------------------------------------------------------------
181 Fabrication and Delivery of Elevator 13.5w Fri 5/28/99 Thu 9/2/99 180
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- ----------------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
182 FUEL OIL SYSTEM 33d Fri 6/25/99 Thu 8/12/99
- ----------------------------------------------------------------------------------------------------------------------------
183 CEI Submit Fuel Oil Package for Approval 0d Fri 6/25/99 Fri 6/25/99 59
- ----------------------------------------------------------------------------------------------------------------------------
184 NaviSite Review & Approve Fuel Oil Bid Analysis Package 2d Mon 6/28/99 Tue 6/29/99 183
- ----------------------------------------------------------------------------------------------------------------------------
185 CEI Issue P.O. for Fuel Oil System 1d Wed 6/30/99 Wed 6/30/99 184
- ----------------------------------------------------------------------------------------------------------------------------
186 Vendor Submittal Preparation 2w Thu 7/1/99 Thu 7/15/99 185
- ----------------------------------------------------------------------------------------------------------------------------
187 CEI/NaviSite Review & Approve 2d Fri 7/16/99 Mon 7/19/99 186
- ----------------------------------------------------------------------------------------------------------------------------
188 Fabrication & Delivery of Main Fuel Tanks 6w Thu 7/1/99 Thu 8/12/99 185
- ----------------------------------------------------------------------------------------------------------------------------
189 Fabrication & Delivery of Fuel Oil Pumps 6w Thu 7/1/99 Thu 8/12/99 185
- ----------------------------------------------------------------------------------------------------------------------------
190 Fabrication & Delivery of Day Tanks 6w Thu 7/1/99 Thu 8/12/99 185
- ----------------------------------------------------------------------------------------------------------------------------
191 Delivery of Leak Detection Panel & Materials 6w Thu 7/1/99 Thu 8/12/99 185
- ----------------------------------------------------------------------------------------------------------------------------
192 GENERATORS 73d Tue 5/25/99 Wed 9/8/99
- ----------------------------------------------------------------------------------------------------------------------------
193 C.E.I. Submit Equipment Package for Approval 0d Tue 5/25/99 Tue 5/25/99 57
- ----------------------------------------------------------------------------------------------------------------------------
194 NaviSite Review & Approve Equipment Bid Analysis Package 2d Wed 5/26/99 Thu 5/27/99 193
- ----------------------------------------------------------------------------------------------------------------------------
195 C.E.I. Issue P.O. for Equipment 1d Fri 5/28/99 Fri 5/28/99 193,194
- ----------------------------------------------------------------------------------------------------------------------------
196 Vendor Submittal Preparation 2w Tue 6/1/99 Mon 6/14/99 195
- ----------------------------------------------------------------------------------------------------------------------------
197 CEI/NaviSite Review & Approve 2d Tue 6/15/99 Wed 6/16/99 196
- ----------------------------------------------------------------------------------------------------------------------------
198 Fabrication & Delivery of Equipment 14w Tue 6/1/99 Wed 9/8/99 195
- ----------------------------------------------------------------------------------------------------------------------------
199 DOUBLE-ENDED SUBSTATION 73d Tue 5/25/99 Wed 9/8/99
- ----------------------------------------------------------------------------------------------------------------------------
200 C.E.I. Submit Equipment Package for Approval 0d Tue 5/25/99 Tue 5/25/99 57
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- ----------------------------------------------------------------------------------------------------------------------------
ID Task Name Dura- Start Finish Predecessors
tion
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
201 NaviSite Review & Approve Equipment Bid Analysis Package 2d Wed 5/26/99 Thu 5/27/99 200
- ----------------------------------------------------------------------------------------------------------------------------
202 C.E.I. Issue P.O. for Equipment 1d Fri 5/28/99 Fri 5/28/99 201
- ----------------------------------------------------------------------------------------------------------------------------
203 Vendor Submittal Preparation 2w Tue 6/1/99 Mon 6/14/99 202
- ----------------------------------------------------------------------------------------------------------------------------
204 CEI/NaviSite Review & Approve 3d Tue 6/15/99 Thu 6/17/99 203
- ----------------------------------------------------------------------------------------------------------------------------
205 Fabrication & Delivery of Equipment 14w Tue 6/1/99 Wed 9/8/99 202
- ----------------------------------------------------------------------------------------------------------------------------
206 21KV TO F80V TRANSFORMERS 73d Tue 5/25/99 Wed 9/8/99
- ----------------------------------------------------------------------------------------------------------------------------
207 C.E.I. Submit Equipment Package for Approval 0d Tue 5/25/99 Tue 5/25/99 57
- ----------------------------------------------------------------------------------------------------------------------------
208 NaviSite Review & Approve Equipment Bid Analysis Package 2d Wed 5/26/99 Thu 5/27/99 207
- ----------------------------------------------------------------------------------------------------------------------------
209 C.E.I. Issue P.O. for Equipment 1d Fri 5/28/99 Fri 5/28/99 208
- ----------------------------------------------------------------------------------------------------------------------------
210 Vendor Submittal Preparation 2w Tue 6/1/99 Mon 6/14/99 209
- ----------------------------------------------------------------------------------------------------------------------------
211 CEI/NaviSite Review & Approve 3d Tue 6/15/99 Thu 6/17/99 210
- ----------------------------------------------------------------------------------------------------------------------------
212 Fabrication & Delivery of Equipment 14w Tue 6/1/99 Wed 9/8/99 209
- ----------------------------------------------------------------------------------------------------------------------------
213 PARALLELING GEAR & ATS' 73d Tue 5/25/99 Wed 9/8/99
- ----------------------------------------------------------------------------------------------------------------------------
214 C.E.I. Submit Equipment Package for Approval 0d Tue 5/25/99 Tue 5/25/99 57
- ----------------------------------------------------------------------------------------------------------------------------
215 NaviSite Review & Approve Equipment Bid Analysis Package 1d Wed 5/26/99 Thu 5/26/99 214
- ----------------------------------------------------------------------------------------------------------------------------
216 C.E.I. Issue P.O. for Equipment 2d Fri 5/27/99 Fri 5/28/99 215
- ----------------------------------------------------------------------------------------------------------------------------
217 Vendor Submittal Preparation 2w Tue 6/1/99 Mon 6/14/99 216
- ----------------------------------------------------------------------------------------------------------------------------
218 CEI/NaviSite Review & Approve 3d Tue 6/15/99 Thu 6/17/99 217
- ----------------------------------------------------------------------------------------------------------------------------
219 Fabrication & Delivery of Equipment 14w Tue 6/1/99 Wed 9/8/99 216
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish Predecessors
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
220 COMPUTER ROOM UNITS 75d Fri 6/25/99 Tue 10/12/99
- -------------------------------------------------------------------------------------------------------------------
221 Therma Submit Computer Room Units Package for Approval 0d Fri 6/25/99 Fri 6/25/99 68
- -------------------------------------------------------------------------------------------------------------------
222 NaviSite Review & Approve Computer Room Unit Bid Analysis 2d Mon 6/28/99 Tue 6/29/99 221
Package
- -------------------------------------------------------------------------------------------------------------------
223 Therma Issue P.O. for Computer Room Unit 1d Wed 6/30/99 Wed 6/30/99 222
- -------------------------------------------------------------------------------------------------------------------
224 Vendor Submittal Preparation 2w Thu 7/1/99 Thu 7/15/99 223
- -------------------------------------------------------------------------------------------------------------------
225 CEI/NaviSite Review & Approve 2d Fri 7/16/99 Mon 7/19/99 224
- -------------------------------------------------------------------------------------------------------------------
226 Fabrication & Delivery of Equipment 12w Tue 7/20/99 Tue 10/12/99 225
- -------------------------------------------------------------------------------------------------------------------
227 DOORS/FRAMES/HARDWARE 50.5d Fri 7/16/99 Mon 9/27/99
- -------------------------------------------------------------------------------------------------------------------
228 XL Solicit D/F/H/Bids 1.5w Fri 7/16/99 Tue 7/27/99 42,50
- -------------------------------------------------------------------------------------------------------------------
229 Award D/F/H 3d Tue 7/27/99 Fri 7/30/99 228
- -------------------------------------------------------------------------------------------------------------------
230 D/F/H Submittal Preparation, Review, & Approval 2w Fri 7/30/99 Fri 8/13/99 229
- -------------------------------------------------------------------------------------------------------------------
231 D/F/H Delivery (Aluminum Frames) 6w Fri 8/13/99 Mon 9/27/99 230
- -------------------------------------------------------------------------------------------------------------------
232
- -------------------------------------------------------------------------------------------------------------------
233 CONSTRUCTION 87d Wed 6/30/99 Mon 11/1/99
- -------------------------------------------------------------------------------------------------------------------
234 SEISMIC UPGRADE 20d Wed 6/30/99 Wed 7/28/99
- -------------------------------------------------------------------------------------------------------------------
235 Complete Seismic Upgrade Work to Existing Bldg. 20d Wed 6/30/99 Wed 7/28/99 14FS+5d,10
3FS-
- -------------------------------------------------------------------------------------------------------------------
236 OWNER EQUIPMENT INSTALLATION 2d Thu Mon10/18/99 193
10/14/99
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish Predecessors
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
237 NaviSite Begin Racks and Cabling at Data Rooms 0d Mon Mon 10/18/99 285FF
10/18/99
- -------------------------------------------------------------------------------------------------------------------
238 Second Floor Available For Office Furniture Installation 0d Thu Thu 10/14/99 268
10/14/99
- -------------------------------------------------------------------------------------------------------------------
239 EQUIPMENT YARDS 66d Mon 7/12/99 Tue 10/12/99
- -------------------------------------------------------------------------------------------------------------------
240 Generator & Fuel Oil Enclosure 62d Wed 7/14/99 Fri 10/8/99
- -------------------------------------------------------------------------------------------------------------------
241 Layout & Demo Existing AC Paving 2d Wed 7/14/99 Thu 7/15/99 254
- -------------------------------------------------------------------------------------------------------------------
242 Underground Conduits/Re-Route Existing Utilities 15d Fri 7/16/99 Thu 8/5/99 241,96
- -------------------------------------------------------------------------------------------------------------------
243 Foundations/S.O.G./Hskpng. Pads at Equip. Area 15d Fri 8/13/99 Thu 9/2/99 242,113
- -------------------------------------------------------------------------------------------------------------------
244 Set & Anchor Generators & Fuel Tanks 5d Mon 9/13/99 Fri 9/17/99 243FS+5d,1
88,18
- -------------------------------------------------------------------------------------------------------------------
245 Erect & Coat CMU Wall 15d Fri 9/3/99 Mon 9/24/99 243
- -------------------------------------------------------------------------------------------------------------------
246 Termination @ Generators 5d Mon 9/30/99 Fri 9/24/99 244
- -------------------------------------------------------------------------------------------------------------------
247 Complete Fuel Oil Piping 5d Mon 9/20/99 Fri 9/24/99 244
- -------------------------------------------------------------------------------------------------------------------
248 Patch Paving (throughout) 3d Mon 9/27/99 Wed 9/29/99 245,258
- -------------------------------------------------------------------------------------------------------------------
249 HiPot/ETI Test 3d Mon 9/27/99 Wed 9/29/99 246
- -------------------------------------------------------------------------------------------------------------------
250 Fill & Startup Fuel Oil System 5d Mon 9/27/99 Fri 10/1/99 247
- -------------------------------------------------------------------------------------------------------------------
251 Generator Start-Up 3d Mon 10/4/99 Wed 10/6/99 250,246
- -------------------------------------------------------------------------------------------------------------------
252 Gates/Misc. Painting/Pavement Striping 7d Thu 9/30/99 Fri 10/8/99 248,247,245
- -------------------------------------------------------------------------------------------------------------------
253 Switchgear and Transformer Enclosure 66d Mon 7/12/99 Tue 10/12/99
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- -------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish Predecessors
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
254 Layout & Demo Existing AC Paving 2d Mon 7/12/99 Wed 7/14/99 255SF
- -------------------------------------------------------------------------------------------------------------------
255 Underground Conduits/Re-Route Existing Utilities 15d Wed 7/14/99 Tue 8/3/99 96
- -------------------------------------------------------------------------------------------------------------------
256 Foundations/S.O.G./Hskpng. Pads at Equip. Area 15d Fri 8/13/99 Thu 9/2/99 255,113
- -------------------------------------------------------------------------------------------------------------------
257 Set & Anchor Equipment 5d Mon 9/13/99 Fri 9/17/99 256FS+5d,2
05,21
- -------------------------------------------------------------------------------------------------------------------
258 Erect & Coat CMU Wall 15d Fri 9/3/99 Fri 9/24/99 256
- -------------------------------------------------------------------------------------------------------------------
259 Terminations 10d Mon 9/20/99 Fri 10/1/99 257
- -------------------------------------------------------------------------------------------------------------------
260 Megger/HiPot/ETI Test 5d Mon 10/4/99 Fri 10/8/99 259
- -------------------------------------------------------------------------------------------------------------------
261 Energize 2d Mon Tue 10/12/99 260
10/11/99
- -------------------------------------------------------------------------------------------------------------------
262 OFFICE SPACE - SECOND FLOOR 60d Thu 8/5/99 Thu 10/28/99
- -------------------------------------------------------------------------------------------------------------------
263 Complete M.E.P. Overhead Rough-In 10d Thu 8/5/99 Wed 8/18/99 235FS-
15d,81,10
- -------------------------------------------------------------------------------------------------------------------
264 Install Framing and Drywall 15d Thu 8/12/99 Wed 9/1/99 263 FS-5d
- -------------------------------------------------------------------------------------------------------------------
265 Install Elevator Rails and Cabs 20d Thu 8/19/99 Thu 8/16/99 263
- -------------------------------------------------------------------------------------------------------------------
266 Install Ceiling Grid, Fixtures and Diffusers 10d Thu 9/2/99 Thu 9/16/99 264
- -------------------------------------------------------------------------------------------------------------------
267 Install Flooring 10d Fri 9/17/99 Thu 9/30/99 266
- -------------------------------------------------------------------------------------------------------------------
268 Complete Office Space Finishes 10d Fri 10/1/99 Thu 10/14/99 267,265FF,2
31
- -------------------------------------------------------------------------------------------------------------------
269 Start-Up, Test and Balance Office Areas 10d Fri 10/15/99 Thu 10/28/99 266,261FS+
2d
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- ----------------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish Predecessors
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
270 DATA CENTER - FIRST FLOOR 71D Thu 7/22/99 Fri 10/29/99
- ----------------------------------------------------------------------------------------------------------------------------
271 Complete Excavation and Install U/G Utilities 10d Thu 7/22/99 Wed 8/4/99 26FS-3d,103FS-5
- ----------------------------------------------------------------------------------------------------------------------------
272 Complete M.E.P. Overhead Rough-In & Preaction System 10d Mon 8/2/99 Fri 8/13/99 235FS-15d,271FS
- ----------------------------------------------------------------------------------------------------------------------------
273 FM-200 Rough-In 10d Mon 8/2/99 Fri 8/13/99 272FF
- ----------------------------------------------------------------------------------------------------------------------------
274 Metal Stud Wall Framing 10d Mon 8/9/99 Fri. 8/20/99 272FS-5d
- ----------------------------------------------------------------------------------------------------------------------------
275 In-Wall Rough-Ins 12d Thu 8/12/99 Fri 8/27/99 274FS-7d
- ----------------------------------------------------------------------------------------------------------------------------
276 Rock & Tape 12d Thu 8/19/99 Fri 9/3/99 275FS-7d
- ----------------------------------------------------------------------------------------------------------------------------
277 Paint 10d Fri 8/27/99 Fri 9/10/99 276FS-6d
- ----------------------------------------------------------------------------------------------------------------------------
278 Epoxy Floor Coating at Battery Room 6d Fri 9/3/99 Mon 9/13/99 277FS-5d
- ----------------------------------------------------------------------------------------------------------------------------
279 Install Ceiling Grid, Fixtures and Diffusers 10d Fri 9/3/99 Fri 9/17/99 277FS-5d
- ----------------------------------------------------------------------------------------------------------------------------
280 Layout and Install Raised Floor Pedestals 2w Mon 9/13/99 Fri 9/24/99 279FS-5d,148
- ----------------------------------------------------------------------------------------------------------------------------
281 Underfloor MEP Rough-Ins 2w Mon 9/20/99 Fri 10/1/99 280FS-1w
- ----------------------------------------------------------------------------------------------------------------------------
282 Set Raised Floor Panels 1w Thu 9/30/99 Wed 10/6/99 281FS-2d
- ----------------------------------------------------------------------------------------------------------------------------
283 NOC Interior Buildout & AV Equipment Installation 3w Mon 10/4/99 Mon 10/25/99 277FS+5d,171,17
- ----------------------------------------------------------------------------------------------------------------------------
284 Set and Connect Computer Room AC Units 10d Tue 10/5/99 Mon 10/18/99 282FS-2d
- ----------------------------------------------------------------------------------------------------------------------------
285 Complete Server Room Finishes 8d Thu 10/7/99 Mon 10/18/99 278,282
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NaviSite General Conditions
Exhibit "B"
7/9/99
- -----------------------------------------------------------------------------------------------------------------------------------
XL DIRECT WORK
- -----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION LABOR MATERIAL/EQUIPMENT TOTAL
- -------------------------------------------------------------------------------------------------------------
UPS TASK HR QTY UNIT RATE SUBTOTAL QTY UNIT RATE SUBTOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SITE FACILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
1200 Jobsite Office Trailers 0 40 HR $ 38 $ 1,520 5 MO $460 $ 2,300 $ 3,820
- -----------------------------------------------------------------------------------------------------------------------------------
1205 Storage Sheds 0 $ 0 $ 0 4 MO $200 $ 800 $ 800
- -----------------------------------------------------------------------------------------------------------------------------------
1210 Phones (Usage Only) 0 $ 0 $ 0 5 MO $800 $ 4,000 $ 4,000
- -----------------------------------------------------------------------------------------------------------------------------------
1210 Phones - set-up 0 $ 0 $ 0 LS $700 $ 700 $ 700
- -----------------------------------------------------------------------------------------------------------------------------------
1220 Jobsite Radios 0 $ 0 $ 0 15 MO $ 65 $ 975 $ 975
- -----------------------------------------------------------------------------------------------------------------------------------
1230 Utilities Usage 0 $ 0 $ 0 BY OWNER $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
1240 Water and Sewer 0 $ 0 $ 0 BY OWNER $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
1250 Copier and Fax 0 $ 0 $ 0 5 MC $550 $ 2,750 $ 2,750
- -----------------------------------------------------------------------------------------------------------------------------------
1260 Computers and Printers 0 $ 0 $ 0 IN RATES $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Reproductions (SHOP DWGS
1270 ONLY) 0 $ 0 $ 0 4 MO $250 $ 1,000 $ 1,000
- -----------------------------------------------------------------------------------------------------------------------------------
1280 Postage and Courier 0 $ 0 $ 0 4 MO $500 $ 2,000 $ 2,000
- -----------------------------------------------------------------------------------------------------------------------------------
1290 Office Supplies 0 $ 0 $ 0 4 MO $350 $ 1,400 $ 1,400
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,520 $15,925 $ 17,445
- -----------------------------------------------------------------------------------------------------------------------------------
SUPERVISION/PROJECT MANAGEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
1300 Project Executive-WILTMAN 0 20 WK $ 1,680 $33,600 0 $ 0 $ 0 $ 33,600
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
XL CONSTRUCTION NaviSite San Jose Data Center June 22, 1999
JOB #2031 Design and Construction Schedule Exhibit "C" Rev. 4
- ----------------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish Predecessors
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
286 Start-Up & Check-Out Computer Room AC Units 1.5w Thu 10/19/99 Thu 10/28/99 284,261FS+2d,25
- ----------------------------------------------------------------------------------------------------------------------------
287 Functional Testing - Server Rooms & Electrical Systems 16d Fri 10/8/99 Fri 10/29/99 251,261FS-3d
- ----------------------------------------------------------------------------------------------------------------------------
288 AGENCY APPROVALS 10d Tue 10/19/99 Mon 11/1/99
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
1310 Project Manager-DEBRINE 0 20 WK $2,400 $ 48,000 0 $ 0 $ 0 $ 48,000
- ------------------------------------------------------------------------------------------------------------
1320 Project Engineer-NETZER 0 22 WK $1,600 $ 35,200 0 $ 0 $ 0 $ 35,200
- ------------------------------------------------------------------------------------------------------------
1330 Project Coordinator-FULLTIME 0 20 WK $1,200 $ 24,000 0 $ 0 $ 0 $ 24,000
- ------------------------------------------------------------------------------------------------------------
1350 General Supt. dy/wk - FYFFE 0 17 WK $ 480 $ 8,160 0 $ 0 $ 0 $ 8,160
- ------------------------------------------------------------------------------------------------------------
1350 General Superintendent-BRITTNER - 17 WK $2,080 $ 35,360 0 $ 0 $ 0 $ 35,360
- ------------------------------------------------------------------------------------------------------------
TOTAL $184,320 $ 0 $184,320
- ------------------------------------------------------------------------------------------------------------
SAFETY
- ------------------------------------------------------------------------------------------------------------
1400 Safety Engineer 0 4 TRPS $ 300 $ 1,200 0 $ 0 $ 0 $ 1,200
- ------------------------------------------------------------------------------------------------------------
1410 Safety Coordinator 0 17 WK $ 608 $10,336 4 MO $600 $ 2,400 $ 12,736
- ------------------------------------------------------------------------------------------------------------
1420 0 $ 50 $ 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
TOTAL $ 11,536 $ 2,400 $ 13,936
- ------------------------------------------------------------------------------------------------------------
DEBRIS REMOVAL
- ------------------------------------------------------------------------------------------------------------
1500 Interim Cleaning 0 COST OF WORK $ 32 $ 0 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
1510 Debris Boxes 0 COST OF WORK $ 32 $ 0 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
TOTAL $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
TEMPORARY FACILITIES
- ------------------------------------------------------------------------------------------------------------
1600 Temporary Toilets 0 $ 38 $ 0 20 MC $200 $ 4,000 $ 4,000
- ------------------------------------------------------------------------------------------------------------
1610 Temporary Fence 0 COST OF WORK $ 38 $ 0 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
1620 Temporary Power & Lighting 0 BY OB $ 38 $ 0 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
NOT
1630 Winter Weather 0 REQ $ 38 $ 0 0 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
TOTAL $ 0 $ 4,000 $ 4,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
BONDS
- -------------------------------------------------------------------------------------------------------------
NOT
1700 Bonds 0 REQ $ 0 $ 0 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
INSURANCE
- -------------------------------------------------------------------------------------------------------------
1800 Liability Insurance 0 COST OF WORK $ 0 $ 0 0 $0.0075 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
1800 Builders Risk Insurance 0 COST OF WORK $ 0 $ 0 0 $ 0.000 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
TOTAL $ 0 $ 0 $
- -------------------------------------------------------------------------------------------------------------
TOTAL OF ALL "GC" COSTS ABOVE $219,701
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.20
COST PLUS FEE
STANDARD FORM OF AGREEMENT
BETWEEN TENANT AND
CONSTRUCTION MANAGER
AGREEMENT Made as of the 12th day of April in the year Nineteen Hundred and
Ninety Nine between NaviSite, Inc., 100 Brickstone Square, Andover, MA 01810
(the "Tenant") and Gilbane Building Company, 7 Jackson Walkway, Providence,
------
Rhode Island, (the "Construction Manager"), for services in connection with the
--------------------
project described on Exhibit - A attached hereto (the "Project"), including,
----------- -------
without limitation, the following: Tenant fit up of the first floor data Center
and MEP support space and with associated infrastructure (rooftop equipment,
generators located at concrete pads on grade, etc.) at 400 Minuteman Drive,
Andover, MA 01810, a building of approximately 150 thousand square feet and
presently under construction, owned by 400 River Limited Partnership, 2101
Rosecrans Boulevard, Suite 5252, El Segundo, CA 90245, hereinafter referred to
as the "Landlord".
--------
The Tenant and the Construction Manager agree as set forth below:
The General Conditions estimate for the project is as per the attached Exhibit -
---------
B dated 4/12/99 (the "General Conditions Estimate").
- - ---------------------------
The Architect/Engineer for the Project are:
? Tenant Architect, Visnick & Caulfield, 334 Boylston Street, Boston, MA
02116
? Architect of Record, Burt Hill Kosar Rittleman Associates, 650
Smithfield Street, Suite 2600, Pittsburgh, PA 15222-3907
? Engineer, HF Lenz Company, 1407 Scalp Avenue, Jonestown, PA 15904-3329
1
<PAGE>
ARTICLE 1
- ---------
The Construction Team and Extent of Agreement
- ---------------------------------------------
The CONSTRUCTION MANAGER accepts the relationship of trust and confidence
established between him and the Tenant by this Agreement. He covenants with the
Tenant to furnish his best skill and judgment and to cooperate with the
Architect/Engineer in furthering the interests of the Tenant. He agrees to
furnish efficient business administration and superintendence and to use his
best efforts to complete the Project in an expeditious and economical manner
consistent with the interest of the Tenant.
1.1 The Construction Team: The Construction Manager and the Tenant, and the
Architect/Engineer called the "Construction Team" shall work from the beginning
of design through construction completion. The Construction Manager shall
provide leadership to the Construction Team on all matters relating to
construction.
1.2 Extent of Agreement: This Agreement represents the entire agreement
between the Tenant and the Construction Manager and supersedes all prior
negotiations, representations or agreements. When Drawings and Specifications
are complete, they shall be incorporated herein by amendment to this Agreement.
This Agreement shall not be superseded by any provisions of the plans and
specifications and may be amended only by written instrument signed by both the
Tenant and the Construction Manager.
1.3 Definitions: The Project is the total tenant fit out and associated
infrastructure and improvements to be performed under this Agreement. The Work
is that part of the Project that a particular Trade Contractor (or Construction
Manager's own forces) is to perform. The term "day" shall mean calendar day
unless otherwise specifically designated.
1.4 Contract Documents. The Contract Documents consist of this Agreement,
Drawings, Specifications, addenda issued prior to execution of this Agreement,
the other documents listed in this Agreement and written modifications issued
after execution after this Agreement. In the event of a conflict among the
Contract Documents, the Contract Documents shall be construed according to the
following priorities:
First: Modifications
Second: This Agreement
Third: Addenda
Fourth: Drawings - As per attached Exhibit A
Fifth: Specifications
ARTICLE 2
- ---------
Construction Manager's Services
- -------------------------------
The Construction Manager will perform the following services under this
Agreement in each of the two phases described below.
2.1 Design Phase (A part of the Construction Phase as pertains to Gilbane cost
outlined in Exhibit B).
2.1.1 Consultation During Project Development: Schedule and attend regular
meetings with the Architect/Engineer during the development of conceptual and
preliminary design to advise on site use and improvements, selection of
materials, building systems and equipment. Provide recommendations on
construction feasibility, availability of materials and labor, time requirements
for installation and construction, and factors related to cost, including costs
of alternative designs or materials, preliminary budgets and possible economies.
2.1.2 Scheduling: Develop a Project Time Schedule that coordinates and
integrates the Architect's/Engineer's design efforts with construction
schedules. Update the Project Time schedule on a monthly basis, incorporating a
detailed schedule for the construction operations of the Project, including
realistic activity sequences and durations, allocation of labor and materials,
processing of shop drawings
2
<PAGE>
and samples, and delivery of products requiring long lead time procurement.
Include the Tenant's occupancy requirements showing portions of the Project
having occupancy priority.
2.1.3 Project Construction Budget: Prepare a Project budget as soon as major
Project requirements have been identified, and update periodically for the
Tenant's approval. Update and refine the budget on a monthly basis for the
Tenant's approval and advise the Tenant if it appears that the Project
Construction budget will not be met and make recommendations for corrective
action. The Construction Manager will evidence a good faith effort to provide
his service within the budget outlined in Exhibit B.
2.1.4 Coordination of Construction Documents: Review the Drawings and
Specifications as they are being prepared, recommending alternative solutions
whenever design details affect construction feasibility or schedule without,
however, assuming any of the Architect/Engineer's responsibilities for design.
2.1.5 Construction Planning: Recommend for purchase and expedite the
procurement of long lead items to ensure their delivery by the required date
2.1.5.1 Make recommendations to the Tenant and the Architect/Engineer regarding
the division of Work in the Drawings and Specifications to facilitate the
bidding and awarding of Trade Contracts, allowing for phased construction and
taking into consideration such factors as time of performance, availability of
labor, overlapping trade jurisdictions, and provisions of temporary utilities.
2.1.5.2 Review the Drawings and Specifications with the Architect/Engineer to
eliminate areas of conflict and overlapping in the Work to be performed by the
various Trade Contractors and prepare pre-qualification criteria for bidders.
2.1.5.3 Develop Trade Contractor interest in the Project and as working
Drawings and Specifications are completed, take competitive bids on the Work of
the various Trade Contractors. After analyzing the bids, recommend to the
Tenant that such contracts be awarded after Tenant approval. Exceptions to the
Bid process may be required so as to meet the Project schedule via negotiation
with key Trade Contractors.
2.1.6 Equal Employment Opportunity: Determine applicable requirements for
equal employment opportunity programs for inclusion in the bidding documents.
2.2 Construction Phase
------------------
2.2.1 Project Control: Monitor the Work of the Trade Contractors and
coordinate the Work with the activities and responsibilities of the Tenant,
Architect/Engineer, and Construction Manager to complete the Project in
accordance with the Tenant's objectives of cost, time and quality.
2.2.1.1 Maintain a competent full-time staff at the Project site to coordinate
and provide general direction of the Work and progress of the Trade Contractors
on the Project.
2.2.1.2 Establish on-site organization and lines of authority in order to carry
out the overall plans of the Construction Team.
2.2.1.3 Establish procedures for coordination among the Tenant, Landlord,
Architect/Engineer, Trade Contractors and Construction Manager with respect to
all aspects of the Project and implement such procedures.
2.2.1.4 Schedule and conduct weekly progress meetings at which Trade
Contractors, Tenant, Landlord, Architect/Engineer and Construction Manager can
discuss jointly such matters as procedures, progress, problems and scheduling.
Construction Manager shall publish meeting minutes and distribute copies of same
to all applicable parties.
2.2.1.5 Provide regular weekly monitoring of the schedule as construction
progresses. Identify potential variances between scheduled and probable
completion dates. Review schedule for Work not started or incomplete and
recommend to the Tenant and Trade Contractors adjustments in the schedule to
meet the
3
<PAGE>
probable completion date. Provide summary reports of each monitoring and
document all changes in schedule.
2.2.1.6 Determine the adequacy of the Trade Contractors' personnel and
equipment and the availability of materials and supplies to meet the schedule.
Recommend courses of action to the Tenant when requirements of a Trade Contract
are not being met.
2.2.2 Physical Construction: Provide all labor, materials, construction
equipment, tools and subcontract items which are necessary for the completion of
the Project which are not provided by either the Trade Contractors or the
Tenant. Construction Manager shall supervise the Work of all Trade Contractors
and Construction Manager's own forces, and shall use good faith efforts to
coordinate such Work with the work of any of Tenant's separate contractors, so
as to complete the Project in a manner which will meet the Project Schedule and
the Project Budget.
2.2.3 Cost Control: Develop and monitor an effective system of Project cost
control. Revise and refine the initially approved Project Construction Budget,
incorporate approved changes as they occur, and develop cash flow reports and
forecasts as needed. Identify variances between actual and budgeted or
estimated costs on a monthly basis, and advise Tenant whenever projected cost
exceeds budgets or estimates.
2.2.3.1 Maintain cost accounting records on authorized Work performed under
unit costs, actual costs for labor and material, or other bases requiring
accounting records. Afford the Tenant access to these records and preserve them
for a period of three (3) years after final payment.
2.2.4 Change Orders: Develop and implement a system for the preparation,
review and processing of Change Orders reasonably acceptable to Tenant.
Recommend necessary or desirable changes to the Tenant and the
Architect/Engineer, review requests for changes, submit recommendations to the
Tenant and the Architect/Engineer and assist in negotiating Change Orders.
2.2.5 Payments to Trade Contractors: Develop and implement a procedure
reasonably acceptable to Tenant for the review, processing and payment of
applications by Trade Contractors for progress and final payments.
2.2.6 Permits and Fees: Assist the Tenant and Architect/Engineer in
obtaining all permits and approvals pertinent to the construction of the
Project, including, without limitation, building permits and certificates of
occupancy, but excluding permits for inspection or temporary facilities required
to be obtained directly by the various Trade Contractors. Assist in obtaining
permits and approvals from all the authorities having jurisdiction.
2.2.7 Tenant's Consultants: If required, assist the Tenant in selecting and
retaining professional services of a surveyor, testing laboratories and special
consultants, and coordinate these services, without assuming any responsibility
or liability of or for these consultants.
2.2.8 Inspection: Inspect the Work of Trade Contractors for defects and
deficiencies in the Work without assuming any of the Architect/Engineer's
responsibilities for inspection under the Architect/Engineer's contracts with
Tenant.
2.2.8.1 Review the safety programs of each of the Trade Contractors and make
appropriate recommendations. In making such recommendations and carrying out
such reviews, he shall not be required to make exhaustive or continuous
inspections to check safety precautions and programs in connection with the
Project. The performance of such services by the Construction Manager shall not
relieve the Trade Contractors of their responsibilities for the safety of
persons and property, and for compliance with all federal, state and local
statutes, rules, regulations and orders applicable to the conduct of the Work.
2.2.9 Document Interpretation: Refer all questions for interpretation of the
documents prepared by the Architect/Engineer to the Architect/Engineer.
4
<PAGE>
2.2.10 Shop Drawings and Samples: In collaboration with the
Architect/Engineer, establish and implement procedures for expediting the
processing and Architect/Engineer approval of shop drawings, samples, and other
submittals. Receive from the Trade Contractors and review all such submittals,
coordinate them with the information contained in related documents, and
transmit them to the Architect/Engineer for its approval.
2.2.11 Reports and Project Site Documents: Record the progress of the
Project. Submit written progress reports to the Tenant, on a monthly basis,
including information on the Trade Contractors' Work, and the percentage of
completion. Keep a daily log available to the Tenant.
2.2.11.1 Maintain at the Project site, on a current basis: records of all
necessary Contracts, Drawings, samples, purchases, materials, equipment,
maintenance and operating manuals and instructions, and other construction
related documents, including all revisions. Obtain data from Trade Contractors
and maintain a current set of record Drawings, Specifications and operating
manuals. At the completion of the Project, deliver all such records to the
Tenant.
2.2.12 Substantial Completion: Upon Substantial Completion of the Work or
designated portions thereof, as determined by Architect/Engineer, determine and
prepare for the Tenant a list of incomplete or unsatisfactory items and a
schedule for their completion and a schedule of values for the cost to complete
each such item. Construction Manager shall assist Tenant and Architect/Engineer
in determining the date of Substantial Completion of the Work or designated
portions thereof.
2.2.13 Start-Up: With the Tenant's maintenance personnel, direct the checkout
of utilities, operations systems and equipment for readiness and assist in their
initial startup and testing by the Trade Contractors.
2.2.14 Final Completion: Provide written notice to the Tenant that the Work
is ready for final inspection and assist Tenant and Architect/Engineer in
determining the date of final completion of the Project. Secure and transmit to
the Tenant all guarantees, warranties, affidavits, releases, bonds and waivers
required by the Contract Documents, applicable law or Tenant. Turn over to the
Tenant all keys, manuals, record drawings, and maintenance stocks.
2.2.15 Warranty: Where any Work is performed by the Construction Manager's own
forces or by Trade Contractors under contract with the Construction Manager, the
Construction Manager shall, and does hereby, warrant that all materials and
equipment included in such Work will be new, unless otherwise specified, and
that such Work will be of good quality, free from improper workmanship and
defective materials and in conformance with the Drawings and Specifications.
With respect to the same Work, the Construction Manager shall correct all Work
defective in material or workmanship for a period of one year from the Date of
Substantial Completion or for such longer periods of time as may be set forth
with respect to specific warranties contained in the trade sections of the
Specifications. If Construction Manager corrects (or causes any Trade Contractor
to correct) any defective Work, then the one year corrective work period
(specific to that area of defective Work or the specific defective part) shall
be extended for an additional one (1) year with respect to such Work from the
date of correction thereof; provided, however, that the corrective work period,
as so extended, shall not exceed two years from the Date of Substantial
Completion or such later date as may be set forth with respect to specific
warranties contained in the trade sections of the Specifications. The
Construction Manager shall collect and deliver to the Tenant any specific
written warranties given by others.
2.2.16 The Construction Manager shall not be responsible for the removal,
encapsulation, transportation, and disposal of any hazardous material, including
without limitation, any asbestos or asbestos-related products as may be required
in connection with the Project, except for any such hazardous materials as may
be brought onto the Project site by Construction Manager. Construction Manager
shall notify Tenant prior to Construction Manager or any Trade Contractor
bringing any such hazardous materials on to the Project site, and shall notify
Tenant immediately upon discovery of any such hazardous materials on the Project
site.
2.3 Additional Services
5
<PAGE>
2.3.1 At the request of the Tenant, the Construction Manager will provide the
following additional services upon written agreement between the Tenant and
Construction Manager defining the extent of such additional services and the
amount and manner in which the Construction Manager will be compensated for such
additional services.
2.3.2 Notwithstanding the provisions of this paragraph 2.3.2, there shall be
included in the basic services of a Construction Manager hereunder such
investigation, appraisal, or valuation of existing conditions, facilities or
equipment as would be reasonably expected of a construction manager who is
providing construction management services for the construction of the base
building for the Landlord, and no additional compensation (beyond the
Construction Manager's fee) shall be due or payable in connection therewith.
2.3.3 Services related to Tenant furnished equipment, furniture and furnishings
which are not a part of this Agreement
2.3.4 Services for Tenant or rental spaces not a part of this agreement.
2.3.5 Obtaining or training maintenance personnel or negotiation maintenance
service contracts.
ARTICLE 3
- ---------
Tenant's Responsibilities
- -------------------------
3.1 The Tenant shall provide full information regarding his requirements for
the Project.
3.2 The Tenant shall designate in writing a representative who shall be fully
acquainted with the Project and has authority to issue and approve Project
Construction Budgets, issue Change Orders, render decisions promptly and furnish
information expeditiously. Any limitations of the foregoing shall be indicated
to the Construction Manager in writing.
3.3 The Tenant shall retain an Architect/Engineer for design and to prepare
construction documents for the project. The Architect/Engineer's services,
duties and responsibilities are described in the agreement between the Tenant
and the Architect/'Engineer, a copy of which will be forwarded to the
Construction Manager.
3.4 Section Deleted.
3.5 The Tenant shall provide auditing services as he may require.
3.6 The Construction Manager will be furnished without charge all copies of
Drawings and Specifications reasonably necessary for the execution of the Work.
3.7 The Tenant shall provide the insurance for the Project as provided in
Paragraph 12.4, and shall bear the cost of any bonds required by Tenant or any
permit granting authority in connection with the Work of the Project.
3.8 The services, information, surveys and reports required by the above
paragraphs or otherwise to be furnished by other consultants employed by the
Tenant, shall be furnished with reasonable promptness at the Tenant's expense
and the Construction Manager shall be entitled to reasonably rely upon the
accuracy and completeness thereof.
3.9 If the Tenant becomes aware of any fault or defect in the Project or non-
conformance with the Drawings and Specifications, he shall give prompt written
notice thereof to the Construction Manager who shall promptly cure such defect.
3.10 It shall be a condition of Construction Manager's obligations hereunder
that:
(i) until such time as the closing of the sale of shares of common stock of
Tenant in a public
6
<PAGE>
offering pursuant to an effective registration statement under the
securities Act of 1933, as amended, shall have occurred (an "IPO"),
the Guaranty of CMGI, Inc. attached hereto shall remain in full force
and effect; and
(ii) from and after the date of the IPO, Tenant shall deliver a letter of
credit in form and substance reasonably satisfactory to Tenant and
Construction Manager in an amount equal to the amount which Tenant and
Construction Manager reasonably estimate to be necessary to complete
the Project (the "Estimated Contract Balance"). Tenant shall have
--------------------------
the right, from time to time, to reduce the amount of the letter of
credit as the work progresses and the estimated Contract Balance
declines, and to deliver replacement letters of credit in such reduced
amounts. Tenant shall also have the right to substitute other security
in lieu of a letter of credit, including, without limitation, a
guaranty from CMGI, Inc., provided that such security is satisfactory
to Construction Manager in its reasonable discretion.
3.11 The Tenant shall communicate with the Trade Contractors only through the
Construction Manager. This Article shall be void and of no force or effect upon
the termination of this Agreement in accordance with the terms hereof.
3.12 Tenant shall use good faith efforts to identify Gilbane as the
Construction Manager on all public statements and releases in connection with
the Project, including issuance of photographs, renderings, and the like for all
media, as and when appropriate.
ARTICLE 4
- ---------
Trade Contracts
- ----------------
4.1 All portions of the Project that the Construction Manager does not perform
with his own forces shall be performed under Trade Contracts. The Construction
Manager shall request and receive proposals from Trade Contractors and Trade
Contracts will be awarded after the proposals are reviewed by the Construction
Manager and approved by Tenant.
4.2 If the Tenant refuses to accept a Trade Contractor recommended by the
Construction Manager, the Construction Manager shall recommend an acceptable
substitute. The Construction Manager shall not be required to contract with
anyone to whom he has made a reasonable objection.
4.3 Trade Contracts will be between the Construction Manager and the Trade
Contractors. The form of the Trade Contracts including the General and
Supplementary Conditions shall be satisfactory to the Construction Manager and
Tenant, and copies of each Trade Contract shall be provided to the Tenant.
Without limitation of the foregoing, all Trade Contracts shall include a
provision pursuant to which the applicable Trade Contractor shall agree to
recognize Tenant as the "owner" thereunder upon written notice from Tenant that
Tenant has terminated this Agreement and elected to assume the applicable Trade
Contract.
4.4 The Construction Manager shall be responsible to the Tenant for the acts
and omissions of his agents and employees, Trade Contractors performing Work
under a contract with the Construction Manager, and such Trade Contractors'
agents and employees.
ARTICLE 5
- ---------
Schedule
- --------
5.1 The services to be provided under this Contract shall be in general
accordance with the following schedule:
<TABLE>
<S> <C> <C>
Design Phase: Commencing 4/12/99 Ending: on or about 6/15/99
- -------------
Construction Phase: Commencing on or about 6/15/99 Ending: on or about 1/7/00
- -------------------
</TABLE>
7
<PAGE>
5.2 Section Reserved
5.3 The Date of Substantial Completion of the Project or a designated portion
thereof is the date certified by Architect/Engineer when (i) construction is
sufficiently complete in accordance with the Drawings and Specifications so the
Tenant can occupy or utilize the Project or designated portion thereof for the
use for which it is intended with a minimum of interference by Construction
Manage and the Trade Contractors and is complete with the exception of punch
list items of a minor nature (having an aggregate value of less than $25,000)
and (ii) Construction Manager has supplied Tenant with a certificate of
occupancy or an equivalent use or occupancy permit issued by the building
inspector within the municipality where the Project is located. Guarantees and
warranties called for by this Agreement or by the Drawings and Specifications
shall commence on the Date of Substantial Completion of the Project or
designated portion thereof, or such later date as may be specified in the
Specifications with respect to any applicable Trade Contractor or supplier.
Should the Construction Manager be unable to secure the certificate of occupancy
due to acts or omissions of the Tenant or its Architect/Engineer which are not
cured within seven days after written notice from the Construction Manager
specifying such acts or omissions in reasonable detail, then such delay shall
entitle the Construction Manager to the benefits allowed under Subparagraphs 5.4
and 7.2.2.
5.4 Subject to the provisions of Section 9.2.1., if the Construction Manager
is delayed at any time in the progress of the Project by any act or neglect of
the Tenant or the Architect/Engineer or by any employee of either, or by any
separate contractor employed by the Tenant, or by changes ordered in the
Project, or by labor disputes, fire, unusual delay in transportation, adverse
weather conditions not reasonably anticipated, unavoidable casualties or any
causes beyond the Construction Manager's control, the Substantial Completion
Date shall be extended by a written modification signed by Tenant and
Construction Manager for a reasonable length of time.
ARTICLE 6
- ---------
Article Reserved
ARTICLE 7
- ---------
Construction Manager's Fee
- --------------------------
7.1 In consideration of the performance of the Contract, the Tenant agrees to
pay the Construction Manager in current funds as compensation for his services a
Construction Manager's Fee as set forth in Subparagraphs 7.1.1 and 7.1.2.
7.1.1 For the performance of the Design Phase services, the Construction
Manager's fee shall be included in the Construction Phase fee.
7.1.2 For work or services performed during the Design and Construction Phase,
a lump sum fee of $250,000 which shall be paid proportionately to the ratio
which the monthly payment for the Cost of the Project bears to the estimated
cost of the Project, as set forth in the Project Budget, as the same may be
adjusted from time to time upon approval by Tenant. Any balance of this fee
shall be paid at the time of final payment.
7.2 Adjustments in fee shall be made as per Article 7.2.1 only if the
parameters of the scope of the Work expand materially beyond that which is
outlined in, contemplated by or reasonably inferable from, Exhibit A by Change
Order and/or if circumstances which were not reasonably foreseeable and which
are beyond the control of the Construction Manager require an extension of the
Construction Manager's service beyond the date of 1/28/00 which is the date of
cost projection outlined in Exhibit B provided that the Construction Manager
gives Tenant notice of such circumstances within seven days after the occurrence
thereof. Notwithstanding the foregoing or any other provision of the Agreement,
Construction Manager shall not be entitled to any increase in Construction
Manager's Fee or payment for general conditions costs or other compensation
hereunder to the extent that additional time to complete the Project beyond
1/28/00, as adjusted pursuant to Paragraph 5.4, is required due to any
negligence or default of Construction Manager.
8
<PAGE>
7.2.1 For changes in the Project as provided for in Article 9, the
Construction Manager's fee shall be adjusted by an amount equal to $1.50 per
each $1.00 of Construction Manager's direct labor cost (both Regional Labor and
Field Labor), plus the total cost of any Regional Labor and Regional Support
cost(s) as may be required to administer the change. A sample calculation is
attached hereto as Schedule 7.2.1.
--------------
7.2.2 For delays in the Project not the responsibility of the Construction
Manager as defined in Paragraph 5.4, there will be an equitable adjustment in
the fee and general conditions costs to compensate the Construction Manager for
its increased expenses, if any.
7.3 Included in the Construction Manager's Fee are the following:
7.3.1 Salaries or other compensation of the Construction Manager's employees
at the principal office and branch offices, except employees listed in
Subparagraph 8.2.2.
7.3.2 General operating expenses of the Construction Manager's principal and
branch offices other than the field office.
7.3.3 Any part of the Construction Manager's capital expenses, including
interest on the Construction Manager's capital employed for the project.
7.3.4 Overhead or general expenses of any kind, except as may be expressly
included in Article 8.
7.3.5 Regional Labor and Regional Support as outlined in Exhibit B.
---------
ARTICLE 8
- ---------
Cost of the Project
- -------------------
8.1 The term Cost of the Project shall mean charges for services provided by
the Construction Manager and costs necessarily incurred in the Project during
either the Design or Construction Phase, and paid by the Construction Manager.
8.1.1 The Tenant agrees to pay the Construction Manager for the Cost of the
Project as defined in Article 8. Such payment shall be in addition to the
Construction Manager's Fee stipulated in Article 7.
8.2 Cost Items
8.2.1 Section Reserved.
8.2.2 Charges for services provided by the Construction Manager's employees
based on:
8.2.2.1 Direct Personnel Expense of those employees stationed at the field
office, in whatever capacity employed, as per Exhibit B.
---------
8.2.2.2 Section Reserved.
8.2.2.3 Direct Personnel Expense is defined as the direct salaries of the
Construction Manager's employees engaged in performing the services under this
Agreement as described in Subparagraphs 8.2.2.1 and the cost of all employee
fringe benefits, including, without limitation, medical and workers'
compensation insurance, absences, vacations, pension and/or profit sharing, all
in accordance with the Construction Manager's standard personnel policy, and
taxes for such items as unemployment compensation and social security, as per
Exhibit B.
- ---------
8.2.3 Section Reserved.
8.2.4 Reasonable transportation, traveling, moving, temporary subsistence and
hotel expenses of the Construction Manager or of his officers or employees
incurred in discharge of duties connected with the
9
<PAGE>
Project, all in accordance with the Construction Manager's standard personnel
policy; provided that such expenses are approved in advance by Tenant.
8.2.5 Cost of all materials, supplies and equipment incorporated in the
Project, including costs of transportation and storage thereof.
8.2.6 Payments made by the Construction Manager to Trade Contractors for their
Work performed pursuant to contract under this Agreement, including the cost of
any Trade Contractor payment and performance bonds.
8.2.7 Cost, including transportation and maintenance, of all materials,
supplies, equipment, vehicles, and temporary facilities, which are employed and
consumed in the performance of the Work, and cost less salvage value on such
items used but not consumed which remain the property of the Construction
Manager.
8.2.8 Rental charges of all necessary machinery and equipment, exclusive of
hand tools, used at the site of the Project, whether rented from the
Construction Manager or others, including installation, repairs and
replacements, dismantling, removal, costs of lubrication, transportation and
delivery costs thereof, at rental charges consistent with those prevailing in
the area.
8.2.9 Cost of the premiums for all insurance and bonds which the Construction
Manager is required to procure by this Agreement or is deemed necessary by the
Construction Manager and approved by Tenant.
8.2.10 Sales, use, gross receipts or similar taxes related to the Project
imposed by any governmental authority, and for which the Construction Manager is
liable.
8.2.11 The Construction Manager is not required to indemnify for patent
infringement as may be caused by the design documents of the Architect/Engineer,
except to the extent that Construction Manager knew that the applicable
material, equipment or technique infringed upon the patent rights of any third
party and failed to notify Tenant and Architect/Engineer prior to the
installation or procurement thereof.
8.2.12 Losses, expenses or damages to the extent not compensated by insurance
or otherwise, including settlement of Trade Contractor claims or suits with
prior Tenant written approval.
8.2.13 In repairing or correcting damaged or nonconforming Work executed by the
Construction Manager or the Construction Manager's Trade Contractors or
suppliers, provided that such damaged or nonconforming Work was not caused by
the negligence or failure to fulfill a specific responsibility to the Tenant set
forth in this Agreement of the Construction Manager or the Construction
Manager's foremen, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Construction Manager, or the
failure of the Construction Manager's personnel to supervise the Work of the
Trade Contractors or suppliers, and only to the extent that the cost of repair
or correction is not recoverable by the Construction Manager from insurance,
Trade Contractors or suppliers.
8.2.14 Project expenses such as telegrams, long-distance telephone calls,
telephone service at the site, expressage, printing, reproduction and similar
items, as per Exhibit B.
---------
8.2.15 Cost of removal of all debris.
8.2.16 Cost incurred due to an emergency affecting the safety of persons and
property except to the extent such emergency is caused by the negligence of the
Construction Manager.
8.2.17 Cost of supplies for job site computer.
8.2.18 Cost of corporate and regional data processing/MIS services billable at
an hourly rate of $2.00 per hour times the labor hours (jobsite only) expended
for the Project, as per Exhibit B.
---------
10
<PAGE>
8.2.19 Legal costs reasonably and properly incurred by the Construction Manager
in the discharge of its duties under this Agreement with prior Tenant written
approval which shall not be unreasonably withheld provided that such costs do
not arise from any default by the Construction Manager of its obligations
hereunder or under any contract or agreement with any Trade Contractor or
supplier, or any fault of Construction Manager relating to any permit or
approval.
8.2.20 Cost of storage of Project records beyond Project completion, as per
Exhibit B.
- ---------
8.2.21 Section Reserved.
8.2.22 All costs directly, reasonably and properly incurred in the performance
of the Project and not included in the Construction Manager's Fee as set forth
in Paragraph 7.3, subject to Tenant's prior written approval which shall not be
unreasonably withheld.
8.3 Section Reserved.
8.4 The Cost of the Project shall not include:
.1 Cost due to the negligence of Construction Manager or to the failure
of Construction Manager to fulfill a specific responsibility to
Tenant set forth in the Contract Documents.
.2 Fines, penalties, sanctions or impositions assessed or imposed by
any governmental body, instrumentality or tribunal to the extent
arising from any act or omission of Construction Manager or any
Trade Contractor.
.3 Costs associated with Construction Manager's failure to obtain any
and all permits in a timely manner, including without limitation,
the costs of any delays resulting therefrom, unless such failure is
due to the failure of the Drawings and Specifications to conform
with the laws and regulations applicable thereto.
.5 Costs of accelerating the Work to the extent caused by the
negligence or default of Construction Manager.
.6 Costs resulting from the failure of Construction Manager or any
Trade Contractor to procure and maintain insurance as required by
the Contract Documents.
.7 Overtime required to the extent caused by the negligence or fault of
Construction Manager.
.8 Project incentive bonuses, except as approved in advance by Tenant
in writing.
.9 Cost of bonding or securing liens or defending claims filed by any
Trade Contractor or supplier arising from any default by
Construction Manager in making any payment due to any such Trade
Contractor or supplier, unless such default by Construction Manager
is due to a default by Tenant in making progress payments to
Construction Manager hereunder.
.10 Losses or expenses for which Construction Manager is compensated by
insurance.
ARTICLE 9
- ---------
Changes in the Project
- ----------------------
9.1.1 The parties hereby acknowledge the Project is being designed and built
on a so-called "fast track" basis. As such, the Drawings and Specifications are
not complete as of the date hereof. The development of the Drawings and
Specifications may require multiple rounds of drafting, review, comments,
changes and modifications. The Project Construction Budget and the Project
Schedule (including the date of Substantial Completion) shall be subject to
adjustment in connection with such
11
<PAGE>
changes and modifications to the Drawings and Specifications. However, subject
to the provisions of Section 9.1.2 and 9.1.3 below, no such change or and
modification to the Drawings and Specifications shall constitute (or require) a
"Change Order" or entitle Construction Manager to any claim for an adjustment to
Construction Manager's fee, notwithstanding whether any such change or
modification requires alteration, removal, replacement or reperformance of Work
which has been completed provided the Work requested is within the parameters of
the scope of the Work outlined in, contemplated by or reasonably inferable from
Exhibit A and that the Work can be completed by the date of 1/28/00, which is
the date of cost projection outlined in Exhibit B and which date is subject to
extension to the extent not caused by or resulting from any negligence or
default of the Construction Manager. Should the "Change Order" be materially
different than the scope of Work outlined in, contemplated by or reasonably
inferable from Exhibit A and/or should the Change Order cause an extension of
Construction Manager service beyond the date of 1/28/00 (as the same may be
extended as aforesaid), but subject to the provisions of Section 7.2 hereof, the
Construction Manager will provide a revised Exhibit B for the cost of the
administration of the change with a fee calculation as per the terms of Article
7.2.1.
9.1.2 A "Change Order" is a written order to the Construction Manager signed by
the Tenant or his authorized agent issued after the execution of this Agreement
and the finalization of any applicable Drawings and Specifications, authorizing
a Change in the Project or the method or manner of performance and/or an
adjustment in the Project Construction Budget, the Construction Manager's fee or
the Substantial Completion Date. Trade Contractors shall be entitled to
adjustment of their fees and costs for Change Order work in accordance with the
terms of their respective Trade Contracts. The Construction Manager shall be
entitled to compensation for all Costs of the Project incurred by Construction
Manager in connection with the applicable Change Order work as per the
parameters outlined in Section 9.1.1 above.
9.1.3 Should (i) concealed conditions encountered in the performance of the
Work below the surface of the ground, or (ii) concealed or unknown conditions in
any existing structure which are at variance with the conditions indicated by
the Drawings, Specifications, or Tenant furnished information, or (iii) unknown
physical conditions below the surface of the ground or concealed or unknown
conditions in an existing structure which are of an unusual nature, differing
materially from those ordinarily encountered and generally recognized as
inherent in work of the character provided for in this Agreement be encountered,
then, to the extent that such conditions were not reasonably foreseeable by
Construction Manager, the Project Construction Budget and the Substantial
Completion Date shall be equitably adjusted by Change Order upon claim by either
party made within seven (7) days after the date of discovery of the applicable
condition (provided, however, that Construction Manager's fee shall not be
increased except to the extent that the applicable condition results in a delay
in the date of Substantial Completion, in which case Construction Manager's fee
shall be equitably adjusted). No such claim shall be valid unless so made. Any
change in the Project Construction Budget or the Substantial Completion Date or
Construction Manager's fee resulting from such claim shall be authorized only by
Change Order.
9.2 Claims for Additional Cost or Time
----------------------------------
9.2.1 If the Construction Manager wishes to make a claim for an extension in
the Substantial Completion Date, he shall give the Tenant written notice thereof
within seven (7) days time after the occurrence of the event giving rise to such
claim. This notice shall be given by the Construction Manager before proceeding
to execute any Work, except in an emergency endangering life or property in
which case the Construction Manager shall act, at his discretion, to prevent
threatened damage, injury or loss. Claims arising from delay shall be made
within seven (7) days time after the delay. No such claim shall be valid unless
so made. Any change in the Project Construction Budget or Substantial Completion
Date resulting from such claim shall be authorized by Change Order.
9.3 Minor Changes in the Project
----------------------------
9.3.1 The parties hereby acknowledge and agree that no Change Order shall be
valid or effective unless signed by Tenant.
9.4 Emergencies
-----------
12
<PAGE>
9.4.1 In any emergency affecting the safety of persons or property, the
Construction Manager shall act, at his discretion, to prevent threatened damage,
injury or loss. Any extension of time claimed by the Construction Manager on
account of emergency work shall be determined as provided in this Article.
ARTICLE 10
- ----------
Discounts
- ---------
All discounts for prompt payment shall accrue to the Tenant to the extent the
Cost of the Project is paid directly by the Tenant or from a fund made available
by the Tenant to the Construction Manager for such payments. All trade
discounts, rebates and refunds, and all returns from sale of surplus materials
and equipment, shall be credited to the Cost of the Project.
ARTICLE 11
- ----------
Payments to the Construction Manager
- ------------------------------------
11.1 The Construction Manager shall submit monthly to the Tenant and
Architect/Engineer a statement, sworn to if required, showing all moneys paid
out, costs accumulated or costs incurred on account of the Cost of the Project
during the previous month and the amount of the Construction Manager's Fee due
as provided in Article 7. Construction Manager shall coordinate monthly
requisition meetings and delivery of monthly requisitions with the meeting and
requisition schedule for the work being performed by Construction Manager for
Landlord. Each monthly requisition shall be accompanied by lien waivers from
each Trade Contractor and Construction Manager (for the previous months billing
except that final lien waivers shall be required for release of retainage and
final payment to any Trade Contractor or Construction Manager) in the statutory
form, and such other invoices, receipts and supporting documentation as Tenant
or Architect/Engineer may reasonably request. Payment by the Tenant to the
Construction Manager less retainage as hereinafter provided, shall be made
within thirty (30) days after it is submitted. The Tenant shall withhold from
each monthly payment an amount equal to ten percent (10%) on account of each
Trade Contractor's payment. At such time as each Trade Contractor's Work is
fifty percent (50%) complete, no further retainage will be withheld, provided,
in the Tenant's and the Construction Manager's opinions, the Trade Contractor is
performing satisfactorily. The Construction Manager will be paid one hundred
percent (100%) of its direct costs and fee earned to the billing date.
11.1.1 The Construction Manager shall maintain detailed statements, including
without limitation, payroll records, receipted invoices, check vouchers, and any
other evidence demonstrating costs incurred by the Construction Manager on
account of the Cost of the Project, which records shall be available for the
Tenant's examination during regular business hours.
11.2 Within thirty (30) days after the date of Substantial Completion of the
Work, Tenant shall release the retainage held by Tenant with respect to the Cost
of the Project, less an amount equal to 200% of the estimated cost of completing
any unfinished punchlist items, provided that said unfinished items are listed
separately and the estimated cost of completing any unfinished items likewise
listed separately. Thereafter, Tenant shall pay to Construction Manager, within
thirty (30) days of the Construction Manager's invoice, the amount retained for
incomplete items as each of said items is completed.
11.3 The Construction Manager shall pay all the amounts due Trade Contractors
or other persons with whom he has a contract within seven (7) days after receipt
of any payment from the Tenant, the application for which includes amounts due
such Trade Contractor or other persons. Before issuance of final payment, the
Construction Manager shall submit to Tenant satisfactory evidence that all
payrolls, materials bills and other indebtedness connected with the Project have
been paid or otherwise satisfied, together with final lien waivers from each
Trade Contractor and Supplier.
11.4 If the Tenant should fail to pay the Construction Manager within seven
(7) days after the time the payment of any amount becomes due, then the
Construction Manager may, upon seven (7) additional days' written notice to the
Tenant and the Architect/Engineer, stop the Project until payment of the amount
owing has been received.
13
<PAGE>
11.5 Payments due but unpaid shall bear interest at the rate of one percent
above the Fleet/Norstar Bank prime rate prevailing on the date payment was due.
11.6 In the event a lien or notice of contract is filed or claimed against the
Project site by any Trade Contractor, laborer or supplier of materials, the
Construction Manager shall immediately bond such lien or cause such lien to be
discharged. Any payment due Construction Manager hereunder shall be reduced by
an amount up to one hundred fifty percent (150%) of the amount of any such lien
until such lien is removed as of record and/or bonded.
ARTICLE 12
- ----------
Insurance, Indemnity and Waiver of Subrogation
- ----------------------------------------------
12.1 Indemnity
12.1.1 The Construction Manager agrees to indemnify and hold the Tenant and
the Landlord harmless from all claims for bodily injury and property damage
(other than the damage or loss to the Work itself and other property insured
under Paragraph 12.4) that may arise from the Construction Manager's or any
Trade Contractor's operations under this Agreement.
12.1.2 The Tenant shall cause any other contractor who may have a contract
with the Tenant to perform construction or installation work in the areas where
Work will be performed under this Agreement, to agree to indemnify the Tenant,
the Construction Manager and the Landlord and hold them harmless from all claims
for bodily injury and property damage (other than property insured under
Paragraph 12.4) that may arise from that contractor's operations. Such
provisions shall be in a form reasonably satisfactory to the Construction
Manager.
12.2 Construction Manager's Liability Insurance
------------------------------------------
12.2.1 The Construction Manager shall purchase and maintain such insurance as
will protect him from the claims set forth below which may arise out of or
result from the Construction Manager's operations under this Agreement whether
such operations be by himself or by any Trade Contractor or by anyone directly
or indirectly employed by any of them, or by anyone for whose acts any of them
may be liable.
12.2.1.1 Claims under workers' compensation, disability benefit and other
similar employee benefit acts which are applicable to the Work to be performed.
12.2.1.2 Claims for damages because of bodily injury, occupational sickness or
disease, or death of his employees under any applicable employer's liability
law.
12.2.1.3 Claims for damages because of bodily injury, death of any person other
than his employees.
12.2.1.4 Claims for damages insured by usual personal injury liability coverage
which are sustained (1) by any person as a result of an offense directly or
indirectly related to the employment of such person by the Construction Manager
or (2) by any other person.
12.2.1.5 Claims for damages, other than to the Work itself, because of injury to
or destruction of tangible property, including loss of use therefrom.
12.2.1.6 Claims for damages because of bodily injury or death of any person or
property damage arising out of the ownership, maintenance or use of any motor
vehicle.
12.2.2 The Construction Manager's Commercial General Liability Insurance shall
include premises -- operations (including explosion, collapse and underground
coverage) elevators, independent contractors, completed operations, and blanket
contractual liability on all written contracts, all including broad form
property damage coverage.
14
<PAGE>
12.2.3 The Construction Manager's Commercial General and Automobile Liability
Insurance, as required by Subparagraphs 12.2.1 and 12.2.2 shall be written for
not less than limits of liability as follows:
a. Commercial General Liability
1. General Liability $ 2,000,000 Aggregate
---------
b. Business Automobile Liability
1. Combined Single Limit $ 1,000,000
---------
c. Excess Umbrella Liability $75,000,000
12.2.4 Commercial General Liability Insurance may be arranged under a single
policy for the full limits required or by a combination of underlying policies
with the balance provided by an Excess or Umbrella Liability policy.
12.2.5 The foregoing policies shall contain a provision that coverage
afforded under the policies will not be cancelled or not renewed until at least
sixty (60) days' prior written notice has been given to the Tenant. All
liability insurance policies shall be written on an occurrence basis and shall
name Tenant and Landlord as additional insureds. Certificates of Insurance
showing such coverage to be in force shall be filed with the Tenant prior to
commencement of the Work.
12.2.6 In the event the Tenant elects to provide insurance coverage for the
Construction Manager and/or its Trade Contractors and Trade Subcontractors via a
Wrap-up Insurance Program or otherwise, and the Tenant's insurance program does
not afford the same coverage as stated herein above, the Construction Manager
may purchase a Difference in Conditions policy, the premium for which shall be
reimbursed to the Construction Manager as a Cost of the Project.
12.3 Tenant's Liability Insurance
----------------------------
12.3.1 The Tenant shall be responsible for purchasing and maintaining his own
liability insurance and, at his option, may purchase and maintain such insurance
as will protect him against claims which may arise from operations under this
Agreement.
12.4 Insurance to Protect Project
----------------------------
12.4.1 The Tenant shall purchase and maintain property insurance in a form
acceptable to the Construction Manager upon the entire Project for the full cost
of replacement as of the time of any loss. This insurance shall include as named
insured the Tenant, Landlord, the Construction Manager, Trade Contractors and
their Trade Subcontractors and shall insure against loss from the perils of
Fire, Extended Coverage, and shall include "All Risk" insurance for physical
loss or damage including, without duplication of coverage, at least theft,
vandalism, malicious mischief, transit, collapse, flood, and earthquake. The
Tenant will increase limits of coverage, if necessary, to reflect estimated
replacement cost. The Tenant will be responsible for any co-insurance penalties
or deductibles (provided, however, that Construction Manager shall pay the
amount of the one thousand dollar ($1,000) deductible to the extent that the
applicable loss or claim arises from any negligence of Construction Manager or
any Trade Contractor). If the Project covers an addition to or is adjacent to an
existing building, the Construction Manager, Trade Contractors and their Trade
Subcontractors shall be named as additional insurers under the Tenant's Property
Insurance covering such building and its contents.
12.4.1.1 If the Tenant finds it necessary to occupy or use a portion or
portions of the Project prior to Substantial Completion thereof, such occupancy
shall not commence prior to a time mutually agreed to by the Tenant and
Construction Manager and to which the insurance company or companies providing
the property insurance have consented by endorsement to the policy or policies.
This insurance shall not be cancelled or lapsed on account of such partial
occupancy. Consent of the Construction Manager and of the insurance company or
companies to such occupancy or use shall not be unreasonably withheld.
15
<PAGE>
12.4.2 The Tenant shall purchase and maintain such boiler and machinery
insurance as may be required or necessary. This insurance shall include the
interests of the Tenant, the Construction Manager, Trade Contractors and their
Trade Subcontractors in the Work.
12.4.3 The Tenant shall purchase and maintain such insurance as will protect
the Tenant, Landlord and Construction Manager against loss of use of Tenant's
and Landlord's property due to those perils insured pursuant to Subparagraph
12.4.1. Such policy will provide coverage for expediting expenses of materials,
continuing overhead of the Tenant, Landlord and Construction Manager, necessary
labor expense, including overtime, and other determined exposures approved by
Tenant. Exposures of the Tenant, Landlord and the Construction Manager shall be
determined by mutual agreement and separate limits of coverage fixed for each
item.
12.4.4 The Tenant shall file a copy of certificates for all such policies with
the Construction Manager before an exposure to loss may occur. Copies of any
subsequent endorsements will be furnished to the Construction Manager. The
Construction Manager will be given sixty (60) days notice of cancellation, non-
renewal, or any endorsements restricting or reducing coverage. If the Tenant
does not intend to purchase such insurance, he shall inform the Construction
Manager in writing prior to the commencement of the Work. The Construction
Manager may then effect insurance which will protect the interest of himself,
the Trade Contractors and their Trade Subcontractors in the Project, the cost of
which shall be a Cost of the Project pursuant to Article 8, and the Project
Construction Budget shall be increased accordingly. If the Construction Manager
is damaged by failure of the Tenant to purchase or maintain such insurance or to
so notify the Construction Manager, the Tenant shall bear all reasonable costs
properly attributable thereto.
12.5 Property Insurance Loss Adjustment
----------------------------------
12.5.1 Any insured loss shall be adjusted by the Tenant and/or the Landlord and
made payable to the Tenant and/or the Landlord as trustees for the insured, as
their interests may appear, subject to any applicable mortgagee clause.
12.5.2 Upon the occurrence of an insured loss, monies received will be
deposited in a separate account and the trustees shall make distribution in
accordance with the agreement of the parties in interest.
12.6 Waiver of Subrogation
---------------------
12.6.1 The Tenant and Construction Manager waive all rights against each other,
the Architect/Engineer, Trade Contractors, and their Trade Subcontractors for
damages caused by perils covered by insurance provided under Paragraph 12.4,
except such rights as they may have to the proceeds of such insurance held by
the Tenant and Construction Manager as trustees. The Construction Manager shall
require similar waivers from all Trade Contractors and their Trade
Subcontractors.
12.6.2 The Tenant and Construction Manager waive all rights against each other
and the Architect/Engineer, Trade Contractors and their Trade Subcontractors for
loss or damage to any equipment used in connection with the Project and covered
by any property insurance. The Construction Manager shall require similar
waivers from all Trade Contractors and their Trade Subcontractors.
12.6.3 The Tenant waives subrogation against the Construction Manager,
Engineer, Trade Contractors, and their Trade Subcontractors on all property and
consequential loss policies carried by the Tenant on adjacent properties and
under property and consequential loss policies purchased for the Project after
its completion.
12.6.4 If the policies of insurance referred to in this Paragraph require an
endorsement to provide for continued coverage where there is a waiver of
subrogation, the owners of such policies will cause them to be so endorsed.
12.6.5 The Construction Manager shall require all Trade Contractors to carry
and maintain until completion of such Trade Contractor's work insurance meeting
at least the following requirements: (i) worker's compensation having the
statutory coverage, (ii) comprehensive general liability insurance having
16
<PAGE>
coverage limits which are commercially reasonable for the applicable trades and
approved by Tenant, and (iii) owned, non-owned and hired motor vehicle insurance
having coverage limits which are commercially reasonable for the applicable
trades and approved by Tenant. Such policies of insurance shall name Tenant and
Landlord as additional insureds.
ARTICLE 13
- ----------
13.1 Termination by the Construction Manager
---------------------------------------
13.1.1 If the Project, in whole or substantial part, is stopped for a period of
thirty days under an order of any court or other public authority having
jurisdiction, or as a result of an act of government, such as a declaration of a
national emergency making materials unavailable, through no act or fault of the
Construction Manager, or if the Project should be stopped for a period of thirty
days by the Construction Manager for the Tenant's failure to make payment
thereon, then the Construction Manager may, upon seven days' written notice to
the Tenant, terminate this Agreement and recover from the Tenant payment for all
work executed, the Construction Manager's Fee earned to date (which shall be in
the same percentage as the percentage completion of the work of the Project as
of the date of termination), and for any proven loss sustained upon any
materials, equipment, tools, construction equipment and machinery, cancellation
charges on existing obligations of the Construction Manager.
13.2 Tenant's Right to Perform Construction Manager's Obligations and
----------------------------------------------------------------
Termination by the Tenant for Cause
- -----------------------------------
13.2.1 If the Construction Manager fails to perform any of his obligations
under this Agreement, including any obligation he assumes to perform Work with
his own forces, the Tenant shall have the right, but not the obligation, after
seven days' written notice during which period the Construction Manager fails to
perform such obligation, to make good such deficiencies and charge Construction
Manager for all costs incurred for the remedy of such deficiencies.
13.2.2 If the Construction Manager is adjudged a bankrupt, or if he makes a
general assignment for the benefit of his creditors, or if a receiver is
appointed on account of his insolvency, or if he refuses or fails, except in
cases for which extension of time is provided, to supply enough properly skilled
workmen or proper materials (and such default is not cured within seven (7) days
after notice from Tenant), or if he fails to make proper payment to Trade
Contractors or for materials or labor, or violates any laws, ordinances, rules,
regulations or orders of any public authority having jurisdiction, or otherwise
is guilty of a violation of any provision of this Agreement (and such default is
not cured within seven (7) days after notice from Tenant), then the Tenant may,
without prejudice to any right or remedy, upon giving the Construction Manager
and his surety, if any, written notice, terminate this Agreement and take
possession of the site and of all materials, equipment, tools, construction
equipment and machinery thereon owned by the Construction Manager and may finish
the Project by whatever method he may deem expedient. In such case, the
Construction Manager shall not be entitled to receive any further payment until
the Project is finished. The Construction Manager shall be responsible for
damages incurred by the Tenant arising as a direct result of the Construction
Manager's default hereunder.
13.2.3. The Tenant reserves the right to terminate this agreement for
convenience at any time. Tenant will provide seven (7) days written notice to
the Construction Manager and will pay all costs incurred to that point in time
subject to and in accordance with the terms and conditions of this Agreement,
together with a portion of Construction Manager's Fee (which shall be in the
same percentage as the percentage completion of the work of the Project as of
the date of termination).
ARTICLE 14
- ----------
Assignment and Governing Law
- ----------------------------
14.1 Neither the Tenant nor the Construction Manager shall assign his interest
in this Agreement without the written consent of the other except as to the
assignment of proceeds; provided, however, that (i) Tenant shall have the right
to assign its interest hereunder to any person or entity at any time prior to
17
<PAGE>
Substantial Completion of the Project with the consent of Construction Manager,
such consent not to be unreasonably withheld or delayed, (ii) notwithstanding
the foregoing, Tenant shall have the right to assign its interest hereunder to
any person or entity controlling, controlled by or under control with Tenant or
any of its shareholders, members or partners at any time without the consent of
Construction Manager, and (iii) notwithstanding the foregoing, Tenant shall have
the right to assign its interest hereunder to any person or entity at any time
from or after the date of Substantial Completion of the Project without the
consent of Construction Manager.
14.2 This Agreement shall be governed by the law of the place where the Project
is located.
ARTICLE 15
- ----------
Miscellaneous Provisions
- ------------------------
15.1 It is expressly understood that the Tenant shall be directly retaining the
services of an Architect/Engineer.
15.2 Notwithstanding anything contained herein, it is expressly understood that
the Construction Manager's Project Control Systems, including without limitation
estimating, scheduling, purchasing, cost reporting, and project engineering
systems, and all modifications, additions, or alterations thereto, are and shall
remain the sole property of the Construction Manager.
15.3 It is expressly understood that in the event the Construction Manager
incurs reasonable legal or other professional fees in the process of pursuing or
defending a claim, suit, or dispute with a Trade Contractor which is (i)
directly related to the Project, (ii) not caused by any negligent act or
omission or intentional misconduct of Construction Manager, and (iii) not caused
by any default by Construction Manager under its contract with the applicable
Trade Contractor, then such fees shall be reimbursable to the Construction
Manager as a Cost of the Project pursuant to Article 8 subject, however, to the
Guaranteed Maximum Price if one is established.
15.4 Notwithstanding the event of any claim, dispute, or other matter in
question arising out of or relating to this Agreement or the breach thereof, the
Construction Manager shall carry on the Work and the Tenant shall continue to
make payments in accordance with this Agreement.
15.5 Construction Manager shall cause all trade contracts with trade
contractors (including, without limitation, trade contractors, vendors and
consultants) and all purchase orders or supply agreements with all suppliers of
materials and equipment (including, without limitation, all electrical machinery
and appliances if such equipment contains any hardware, software or embedded
microchips) to contain the following representation, warranty and covenant:
"The (Trade Contractor or supplier, as the case may be) hereby
represents, warrants and covenants that all materials and equipment furnished by
(the applicable Trade Contractor or supplier) to be incorporated into or used in
connection with the Project, including, without limitation, all electrical
machinery and appliances if such equipment contains any hardware, software or
embedded microchips) shall be Year 2000 compliant (as such term is defined
below). (The Trade Contractor or supplier) hereby agrees that (Tenant) shall be
entitled to rely upon this representation, warranty and covenant and that (Trade
Contractor or Supplier) shall be liable to (Construction Manager) and (Tenant)
for any breach thereof. As used herein, the term "Year 2000 Compliant" means
that the equipment or materials, if containing or calling on a calendar function
including, without limitation, any functions indexed to the CPU clock, and any
function providing specific dates or days, or calculating spans of dates or
days: will record, store, process, calculate, present and where appropriate
insert true and accurate dates and calculations for calendar dates falling on or
after (and if applicable, spans of time including) January 1, 2000 and February
29, 2000, and will record, store, process, calculate and present any information
and/or data dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance as the equipment records,
stores, processes, calculates and presents calendar dates on or before December
31, 1999, and in such fashion as to eliminate all ambiguities as to the century
of concern, and correctly and accurately regards and processes data and
information with respect thereto such that such equipment will lose no
functionality (as determined in all material respects in accordance with the
substantive warranty provisions provided by the respective manufacturer.)
Without limitation of
18
<PAGE>
the foregoing, the Construction Manager shall use commercially reasonable
efforts to ensure that all material and equipment incorporated in the Project is
Year 2000 compliant.
15.6 Construction Manager hereby agrees that the employees of Construction
Manager listed on Schedule 15.6 attached hereto shall be dedicated to the
-------------
Project and shall not be removed or replaced from the Project without Tenant's
prior written consent.
15.7 Notwithstanding any provision hereof or of any of the Contract Documents
to the contrary, disputes under this Agreement shall not be subject to
arbitration or mediation, but shall be decided by a court of competent
jurisdiction in Boston, Massachusetts. All references in this Agreement or to
any of the Contract Documents shall be deemed to mean and refer to litigation in
a court of competent jurisdiction in Boston, Massachusetts.
15.8 Estoppel Certificates. Each party hereby agrees to deliver to the other,
---------------------
within ten (10) days after any written request thereof, a certificate certifying
(i) the amount that has been paid to Construction Manager by Tenant hereunder as
of the date of such certificate, (ii) that there are not defaults by the
certifying party or, to the best of the certifying parties' knowledge, the
requesting party, under this Agreement, except as set forth in such certificate,
(iii) that this Agreement is in full force and effect and has not been modified
or amended, except to set forth in such certificate, and (iv) such other matters
as the requesting party may reasonably request.
19
<PAGE>
This Agreement executed the day and year first written above.
ATTEST: TENANT:
______________________________ NaviSite, Inc.
By: ______________________________
Title: _____________________________
ATTEST: CONSTRUCTION MANAGER:
______________________________ GILBANE BUILDING COMPANY
By: ________________________________
Title: _______________________________
20
<PAGE>
Exhibits and Schedules
----------------------
Exhibit Description
------- -----------
A Description of Project
B General Conditions Estimate
Schedule Description
-------- -----------
7.2.1 Example of added fee calculation.
15.6 Key Personnel
21
<PAGE>
GUARANTY
--------
Reference is hereby made to that certain Construction Agreement dated as of
April 12, 1999 by and between Gilbane Building Company and NaviSite, Inc.
("Tenant") (the "Agreement"). Capitalized terms used herein and not otherwise
defined shall have the respective meanings ascribed to such terms in the
Agreement.
CMGI, Inc. ("Guarantor") hereby guarantees the payment and performance by
Tenant of its obligations under the Agreement, subject to, and in accordance
with, the terms and provisions thereof.
Notwithstanding anything to the contrary contained herein, this Guaranty
and all of Guarantor's obligations and agreements hereunder and under the
Agreement shall terminate and be of no further force or effect immediately upon
the closing of the initial public offering of shares of common stock of Tenant
pursuant to an effective registration statement under the Securities Act of
1933, as amended.
CMGI, INC.
By: _______________________________
Name:
Title:
22
<PAGE>
Exhibit A - Note That This Drawing List Represents The Entirety Of The Scope Of
The 400 Minuteman Drive Project for the Landlord As Well As The Fit-Out Work Of
The Tenant. The Documents (In Some Cases) Contain A Blend Of The Work For Both
And The Comments Column Will Attempt To Define The Specific Work Contained On
That Drawing For the Tenant.
Gilbane
400 Minuteman/Navisite Grouped by Discipline
GBCo Job #2695/2728 Date Range: All Dates
400 Minuteman Printed on: 10/15/99
1776 Drive
Andover, MA 01810
Architectural
<TABLE>
<S> <C> <C> <C> <C>
A001 2 General Notes, Partition Types, Door 7/30/99 Tenant responsibility as pertains to First Floor only.
Types, Details
A201 2 First Floor Plan 7/30/99 All Work from inside face of ext. wall is by Tenant.
Stair towers, lobby, toilet rooms and loading dock is
by Landlord.
A202 2 Second Floor Plan 7/30/99 Landlord provided.
A203 2 Roof Plan 7/30/99 Landlord provided.
A301 2 Reflected Ceiling Plan 7/30/99 Landlord provided (Lobby).
A401 2 Floor Finish Plans 7/30/99 Landlord provided (Lobby & Toilet rooms).
A501 Enlarged Stair Plans, Sections, and Details 7/30/99 Landlord provided.
A502 2 Enlarged Stair Plans, Sections, and Details 7/30/99 Landlord provided.
A503 2 Enlarged Toilet Room Plans & Details 7/30/99 Landlord provided.
A504 2 Enlarged Lobby Plans 7/30/99 Landlord provided.
A700 2 Elevations 7/30/99 Landlord provided.
A701 2 Enlarged Elevations 7/29/99 Landlord provided.
A710 2 Wall Sections, Detail Elevations & Plans 7/30/99 Notations "By Others" are by Tenant. Also, Bentonite
waterproofing at below grade ext. foundations is by
Tenant.
A711 2 Lobby Cross Sections 7/30/99 Landlord provided.
A713 2 Wall Sections, 7/30/99 Landlord provided.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
A714 2 Lobby Longitudinal Sections 7/30/99 Landlord provided.
I-201 2 Partial Second Floor Partition Plan 7/29/99 Landlord provided except for fabric wall
panels to be by Tenant.
I-202 2 Partial Second Floor Partition Plan 7/29/99 Landlord provided except for operable wall
which is by Tenant.
I-203 2 Partial Second Floor Finish Plan 7/29/99 Landlord provided except for areas receiving
fabric wall covering which is by Tenant.
I-204 2 Partial Second Floor Finish Plan 7/29/99 Landlord provided.
I-205 2 Partial Second Floor Furniture Plan 7/29/99 All furniture and workstations shown are by
Tenant.
I-206 2 Partial Second Floor Furniture Plan 7/29/99 All furniture and workstations shown are by
Tenant.
I-207 2 Partial Second Floor Reflected Ceiling 7/29/99 Landlord provided.
Plan
I-208 2 Partial Second Floor Reflected Ceiling 7/29/99 Landlord provided.
Plan
I-301 2 Interior Elevations 7/29/99 NOC areas are by Tenant, Breakroom is by
Landlord, Conf. Room(s) are by Landlord.
I-401 2 Interior Details 7/29/99 Landlord provided except for Moveable
Partition by Tenant.
I-501 2 Door Elevations 7/29/99 Landlord provided except security hardware by
Tenant.
</TABLE>
ARCHITECTURAL - NAVISITE
<TABLE>
<S> <C> <C> <C> <C>
I-000 2 Title Sheet 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-101 2 Partial First Floor Partition Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided
I-102 2 Partial First Floor Partition Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-103 2 Partial First Floor Finish Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-104 2 Partial First Floor Finish Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-105 2 Partial First Floor Furniture Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-106 2 Partial First Floor Furniture Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-107 2 Partial First Floor Reflected Ceiling Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-108 2 Partial First Floor Reflected Ceiling Plan 7/29/99 Tenant provided except shaded areas are
Landlord provided.
I-502 2 Door Schedule 7/29/99 Tenant provided.
</TABLE>
24
<PAGE>
Civil
<TABLE>
<S> <C> <C> <C> <C>
AL-3 Proposed Grading Plan 4/20/99 Superseded by L-3 5/17/99. Landlord provided.
AL-4 Proposed Drainage & Utilities Plan 4/20/99 Supersede by L-4 5/17/99. Landlord provided.
AL-6 Planting Plan 4/20/99 Superseded by L-5, 5/17/99. Landlord provided.
L-1 Existing Conditions Plan 5/17/99 Landlord provided.
L-10 Details 5/17/99 Landlord provided.
L-2 Existing Conditions Plan 5/17/99 Landlord provided.
L-3 Proposed Grading Plan 5/17/99 Landlord provided.
L-4 Proposed Drainage & Utilities Plan 5/17/99 Landlord provided except for added waterline cost per RFA 25.
L-5 Proposed layout Plan 5/17/99 Landlord provided with exception of implied generator pads
by Tenant.
L-6 SKL-14 Planting - Plan 8/20/99 Landlord provided.
L-7 Details 5/17/99 Landlord provided.
L-8 Details 5/17/99 Landlord provided.
L-9 Details 5/17/99 Landlord provided.
LSC01 NONE 5/17/99 Landlord provided.
</TABLE>
Electrical
<TABLE>
<S> <C> <C> <C> <C>
E-0 1 Electrical Symbols, Abbreviations and 7/30/99 Landlord provided.
Details
E-1 1 Partial First Floor South - Power Plan 7/19/99 Landlord provided.
E-10 2 Roof Plan - North - Electrical Plan 8/ 6/99 Landlord provided.
E-11 1 Mechanical Connections Power Plan 8/ 6/99 Landlord provided.
E-12 Electrical Riser Diagram 7/ 7/99 Landlord provided.
E-13 Electrical Details 7/ 7/99 Landlord provided.
E-14 2 Electrical Details 7/30/99 Landlord provided.
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
E-15 Electrical Details 7/ 7/99 Landlord provided.
E-16 2 Electrical Panel Schedules 8/ 6/99 Landlord provided.
E-17 2 Electrical Panel Schedules 8/ 6/99 Landlord provided.
E-2 2 Partial First Floor North - Power Plan 7/30/99 Landlord provided.
E-3 1 Partial First Floor South - Lighting Plan 7/30/99 Landlord provided.
E-4 1 Partial First Floor North - Lighting Plan 7/30/99 Landlord provided.
E-5 1 Partial Second Floor South - Power Plan 7/19/99 Landlord provided except for UPS wiring shown.
E-6 1 Partial Second Floor North - Power Plan 7/19/99 Landlord provided except for UPS wiring shown.
E-7 1 Partial Second Floor South - Lighting Plan 7/30/99 Landlord provided.
E-8 Partial Second Floor North - Lighting Plan 7/ 7/99 Landlord provided.
E-9 2 Roof Plan - South - Electrical Plan 8/ 6/99 Landlord provided.
ESL-1 2 Electrical Site Lighting and Utility Plan 7/30/99 Landlord provided except for 50% cost
to Tenant for incoming telephone, 100% of cost
for incoming electrical from Generators and 100%
cost for Emergency Intercom Stations.
</TABLE>
Electrical - Navisite
<TABLE>
<S> <C> <C> <C> <C>
E-0/ N 1 Electrical Symbols, Abbreviations and 7/19/99 Tenant provided.
Details
E-1/ N 3 Partial First Floor South - Power Plan 8/ 6/99 Tenant provided.
E-10/ N 2 Electrical Panel Schedules 8/ 6/99 Tenant provided.
E-11/N 1 Electrical Panel Schedules 7/30/99 Tenant provided.
E-12/N Details - Power Distribution Units 7/30/99 Tenant provided.
E-13/N Roof Plan - Security Camera Locations 7/30/99 Tenant provided.
E-14/N 1 2nd Floor Plan Leak Detection Equipment 8/ 6/99 Tenant provided.
Plan
E-2/ N 2 Partial First Floor North - Power Plan 7/30/99 Tenant provided.
E-3/ N Partial First Floor South - Lighting Plan 7/ 7/99 Tenant provided.
E-4/ N Partial First Floor North - Lighting Plan 7/ 7/99 Tenant provided.
E-5/ N 2 Mechanical/ Electrical Room Power Plan 7/30/99 Tenant provided.
E-6/ N 2 Penthouse Area Power and Lighting Plan 8/ 6/99 Tenant provided.
E-7/ N Mechanical/ Electrical Room Duct Bank Plan 7/ 7/99 Tenant provided.
and Details
E-8/ N 1 One Line Diagram 7/19/99 Tenant provided.
E-9/ N 2 Electrical Riser Diagram 8/ 6/99 Tenant provided.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C> <C>
UGC-1/N Underground Conduit 7/ 7/99 Tenant provided.
</TABLE>
Fire Protection
<TABLE>
<S> <C> <C> <C>
FP-1 Partial Second Floor South - Fire 7/ 7/99 Landlord provided.
Protection Plan
FP-2 Partial Second Floor North - Fire 7/ 7/99 Landlord provided.
Protection Plan
FP-3 Penthouse Floor - Fire 7/ 7/99 Landlord provided.
Protection Plan
FP-4 Fire Protection Notes, Symbols, and 7/ 7/99 Landlord provided.
Abbreviations and Details
FP-5 Fire Service Schematic and Schedules 7/ 7/99 Landlord provided.
</TABLE>
Fire Protection - Navisite
<TABLE>
<S> <C> <C> <C> <C>
CS01 2 Cover Sheet 7/30/99 Tenant provided.
FP-1/ N Partial First Floor South - Fire Protection 7/ 7/99 Tenant provided except for FP at Lobby
Plan Zone 5, Stair Towers and Loading Dock.
FP-2/ N Partial First Floor North - Fire Protection 7/ 7/99 Tenant provided except for FP at Lobby
Plan Zone 5, Stair Towers and Loading Dock.
</TABLE>
Mechanical
<TABLE>
<S> <C> <C> <C> <C>
M-0 Symbols, Abbreviations and Notes 7/ 7/99 Landlord provided.
M-1 Partial First Floor South- HVAC Plan 7/ 7/99 Landlord provided.
M-2 1 Partial First Floor North - HVAC Plan 7/30/99 Landlord provided.
M-3 1 Partial Second Floor South - HVAC Plan 7/30/99 Landlord provided.
M-4 1 Partial Second Floor North - HVAC Plan 7/30/99 Landlord provided.
M-5 Roof Plan - South - HVAC Plan 7/ 7/99 Landlord provided.
M-6 Roof Plan - North - HVAC Plan 7/ 7/99 Landlord provided.
M-7 1 Details 7/30/99 Landlord provided.
M-8 Details 7/ 7/99 Landlord provided.
M-9 1 Schedules 7/30/99 Landlord provided with exception of
Tenant shared cost on RTU's/AHU per
RFA 19.
</TABLE>
Mechanical - Navisite
<TABLE>
<S> <C> <C> <C>
M-0 /N Symbols, Abbreviations and Notes 7/ 7/99 Tenant provided.
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
M-1/ N 1 Partial First Floor South - HVAC Plan 7/30/99 Tenant provided.
M-10/ N 2 Details 8/ 6/99 Tenant provided.
M-11/ N 1 Details 7/30/99 Tenant provided.
M-12/ N 1 Schedules 7/30/99 Tenant provided.
M-2/ N Partial First Floor North - HVAC Plan 7/ 7/99 Tenant provided.
M-3/ N Roof - South - HVAC Plan 7/ 7/99 Tenant provided.
M-4/ N Roof - North - HVAC Plan 7/ 7/99 Tenant provided.
M-5/ N 1 Mechanical Room Plan 7/30/99 Tenant provided.
M-6/ N 1 Mechanical Room Sections 7/30/99 Tenant provided.
M-7/ N 1 Mechanical Room Perspective 7/30/99 Tenant provided.
M-8/ N 1 Condenser Water Flow Diagram 7/30/99 Tenant provided.
M-9/ N Chilled Water Flow Diagram 7/ 7/99 Tenant provided.
</TABLE>
Plumbing
<TABLE>
<S> <C> <C> <C> <C>
P1 2 First Floor Plumbing 7/15/99 Landlord provided.
P2 2 Second Floor Plumbing 7/15/99 Landlord provided.
P3 1 Roof Plan Plumbing 5/24/99 Landlord provided.
P4 2 Plumbing 1/4" Scale Toilet Rooms & 7/ 8/99 Landlord provided.
Water/Fire Service Room
P5 1 Plumbing Details & General Notes 5/24/99 Landlord provided.
P6 1 Plumbing Details 5/24/99 Landlord provided.
</TABLE>
Plumbing - Navisite
<TABLE>
<S> <C> <C> <C> <C>
P-1/ N Symbols, Abbreviations and Details 7/ 7/99 Tenant provided.
P-2/ N Partial First Floor South - Plumbing Plan 7/ 7/99 Tenant provided.
P-3/ N Partial First Floor North - Plumbing Plan 7/ 7/99 Tenant provided.
P-4/ N Partial Second Floor South - Plumbing Plan 7/ 7/99 Tenant provided.
P-5/ N Partial Second Floor North - Plumbing Plan 7/ 7/99 Tenant provided.
P-6/ N Roof Plan - Plumbing 7/ 7/99 Tenant provided except drains by Landlord.
P-7/ N 1 Mechanical Room Plan 7/30/99 Tenant provided.
</TABLE>
28
<PAGE>
Structural
<TABLE>
<S> <C> <C> <C> <C>
S100 2 Foundation Plan Area A 5/ 7/99 Landlord provided.
S101 2 Foundation Plan Area B 5/ 7/99 Landlord provided.
S200 2 Second Floor Framing Plan Area A 5/ 7/99 Landlord provided.
S201 2 Second Floor Framing Plan Area B 5/ 7/99 Landlord provided.
S300 3 Roof Framing Plan Area A 6/30/99 By Landlord except for increase steel at
chillers. Also, steel pipe & flashing at 12
locations (RFA 21&45).
S301 2 Roof Framing Plan Area B 5/ 7/99 Landlord provided.
S302 3 High Roof Framing Plan 7/ 1/99 Landlord provided except for steel pipe &
flashing at 12 locations (RFA 21 & 45)
S400 2 Column Schedule 5/ 7/99 Landlord provided.
S401 2 Column Schedule & Typical Details 5/ 7/99 Landlord provided.
S402 2 Lateral Bracing Elevations 5/ 7/99 Landlord provided.
S500 2 Sections & Details 5/ 7/99 Landlord provided.
S600 2 Sections & Details 5/ 7/99 Landlord provided.
S700 3 Sections & Details 7/ 1/99 Landlord provided.
</TABLE>
Structural - Navisite
<TABLE>
<S> <C> <C> <C>
SP-1 Slab On Grade Plan 7/23/99 Tenant provided.
SP-2 Slab On Grade Plan 7/23/99 Tenant provided.
SP-3 Typical Details 7/23/99 Tenant provided.
</TABLE>
29
<PAGE>
Organizational Chart - Schedule 15.6
<TABLE>
<CAPTION>
--------------------
NaviSite
--------------------
GILBANE
Regional Project
Executive
Kevin Unsworth
--------------------
GILBANE
Local Project
Executive
Dave Deforest
(part time)
-----------------------------------------------------------------------
Regional Services Field Staff
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gilbane Gilbane Gilbane Gilbane Gilbane *
Chief Estimator Sr. Purchasing Cost Accounting Project Manager Tenant/MEP
Don Michaels Agent Joe Loiselle Jim Driscoll Coordinator
Gene Oakland Bob Vierra
- ----------------------------------------------------------------------------------------------------------------------------------
Gilbane Gilbane Gilbane *
Architecture Area Data Center
Estimator Superintendant Consultant
Joe McCoy Mick Owens Scott Good
[Text Deleted]
- --------------- -------------------------------------------
Gilbane Gilbane Gilbane *
Mechanical Project Engineer Assistant
Estimator Neil Benner Superintendent
Ashvin Kapadia (part time) Al Choulnerd
[Text Deleted]
- --------------- -------------------------------------------
Gilbane Gilbane *
Plumbing Asst. Project.
Estimator Engr.
John Morenzi Laura C
[Text Deleted]
to 8-12-98
[Text Deleted]
- --------------- -------------------------------------------
Gilbane Gilbane *
Elec. Estimator Technical Assistant
Ron Dupont Jeff Mattson
(part time)
- --------------- -------------------------------------------
Gilbane *
Prj. Accountant
Alan Burns
(part time)
- --------------- -------------------------------------------
</TABLE>
*As per Exhibit B, represents only those whose charges are billed direct and
thus pertinent to the terms of Article 15.6.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
GENERAL CONDITIONS SUMMARY
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Estimate Type: GMP Saft: 50,000
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
BUDGET: $0
PRECON SCHEDULE: Through 0.00 MONTHS
CONSTR. SCHEDULE: 8/2/99 Through 1/28/00 5.97 MONTHS
====================================================================================================================================
TOTALS DIRECT LABOR OH & BURDEN DIRECT COST TOTALS
- ------------------------------------------------------------------------------------------------------------------------------------
PRECONSTRUCTION
BP 902 Regional Labor $0 $0 $0
BP 900 Field Labor $0 $0 $0
BP 908 Regional Support $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PRECONSTRUCTION $0 $0 $0 $0
Percent of Budget #DIV/0!
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION
BP 922 Regional Labor $26,917 $32,301 $ 59,218
BP 920 Field Labor $113,228 $53,840 $167,068
BP 928 Regional Support $3,536 $ 3,536
BP 925 Field Office Operations $65,020 $ 65,020
BP 926 Field Office Support $55,300 $ 55,300
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CONSTRUCTION $140,145 $86,140 $123,856 $350,141
Percent of Budget
TOTAL GENERAL CONDITIONS $140,145 $86,140 $123,856 $350,141
Percent of Budget
BOND REQUIRED? Yes $0 Calculates from budget above $0
BUILDER'S RISK INSUR. 0 $0 " $0
BUILDING PERMIT 0 $0 " $0
STATE SALES TAX 0 $0 $0
PROFESSIONAL LIAB 0 $0 .00186 up to $1mil $0
GENERAL LIABILITY 0.00416 $0 Get Quote if Prof Liab (greater than) $1 mil $0
TOTAL ALL COSTS $350,141
FEE ANALYSIS
Total Raw Labor $140,145
Excess OH $0
Base fee on Budget 0.00% $0
Base Fee Plus Excess Overhead $0
Less Non-reimbursables $62,754
NET FEE ($62,754)
ROL (0.45)
RATE TABLE
<CAPTION>
<S> <C> <C> <C>
Home Office Field Rates GBCo MIS = 2.00
Excess OH 0.00% Excess OH 0.00% NON REIMBURSABLE ITEMS
Fringes 44.00% Taxes 10.49% Precon discounting 0
Overhead 76.00% Work Cmp 10.10% ? 0
TOTAL 220.00% Maj Med 19.46% ? 0
Escalation Vacation 7.50% ? 0
Precon 0.00% TOTAL 47.55% ? 0
Const. 0.00% TOTAL 0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
B.P. 902 PRECONSTRUCTION - REGIONAL
LABOR
992110 R Project Executive $346 0 Dys 0 $0 yes $0
992200 R Scheduling $288 0 Dys 0 $0 yes $0
992300 R. Accounting Dept $210 0 Dys 0 $0 yes $0
992170 R Cost Accounting $262 0 Dys 0 $0 yes $0
992400 R Purchasing, Support In below
(Carry None) $0 Dys 0 $0 yes $0
992400 R Purchasing, PA 3.5 day per BP $212 0 Dys 0 $0 yes $0
992520 R Chief Estimator $365 0 Dys 0 $0 yes $0
992530 R Electrical Estimator $315 0 Dys 0 $0 yes $0
992540 R. Mechanical Estimator $297 0 Dys 0 $0 yes $0
992540 R Plumbing/FP Estimator $196 0 Dys 0 $0 yes $0
992550 R Architectural Estimator $212 0 Dys 0 $0 yes $0
992560 R Est Exec, Job Capt $288 0 Dys 0 $0 yes $0
Subtotal Regional Bare Labor 0 Dys 0 $0
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
982500 G Excess OH 0.00% $0 $0
000098 G. Fringes 44.00% $0 $0
000099 G Overhead 76.00% $0 $0
Subtotal Fringes & Overhead $0 $0
B.P. 900 PRECONSTRUCTION - FIELD LABOR
991001 P Project Execution $346 0 Dys 0 $0 yes $0
991010 P Project Manager $269 0 Dys 0 $0 yes $0
991500 P Project Engineer $173 0 Dys 0 $0 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
? P Est Exec $288 0 Dys 0 $0 yes $0
991630 P Project Estimator $212 0 0 $0 yes $0
Subtotal Field Bare Labor 0 0 $0 $0
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
982500 G Excess Overhead 0.00% $0 $0
981010 G Fed/State Taxes 10.49% $0 $0
981030 G Worker's Comp. 10.10% $0 $0
981050 G Major Medical 19.46% $0 $0
982300 G Accrued Vacation 7.50% $0 $0
Subtotal Field Burden $0 $0
Total Preconstruction Labor $0 $0
B.P. 908 PRECONSTRUCTION -
REGIONAL SUPPORT
992650 G Travel - Auto from ? ? 0 Trips $0 yes $0
992650 G Travel - Auto from ? ? 0 Trips $0 yes $0
992700 G Stationary/Supplies $0 0 MO $0 yes $0
992710 G Bid Document printing,
shipping ? 0 Sets $0 yes $0
992720 G MIS Services $2 MH $0 yes $0
992730 G Postage $25 0 MO $0 yes $0
992740 G Photocopy $25 0 MO $0 yes $0
992750 G Telephone $50 0 MO $0 yes $0
992755 G Miscellaneous out of pocket $0 0 LS $0 yes $0
Subtotal Preconstruction Support $0 $0
Total Preconstruction $0 $0
B.P. 922 CONST. - REGIONAL LABOR NON
RECOVERABLE
992112 R Principal $385 0 Dys 0 $0 no $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
992110 R. Project Executive - 8dy/wk $404 35 Dys 280 $14,140 no $14,140
992120 R Safety Engineer $288 0 Dys 0 $0 no $0
992300 R Accounting $210 15 Dys 120 $3,156 no $3,156
992170 R Cost Accountant - 1 dy/mo $262 10 Dys 80 $2,615 no $2,615
992200 R Scheduling, updates $288 0 Dys 0 $0 no $0
992400 R Purchasing Agent 3.5 day per
v BP $239 18 Dys 144 $4,302 no $4,302
992400 R Purchasing, Support $ 0 In above 0 $0 no $0
Dys
992185 R Technology Set-up $192 10 Dys 80 $1,920 no $1,920
992185 R Technology Support (2dy/month) $192 0 Dys 0 $0 no $0
992540 R Mechanical Estimator $297 0 Dys 0 $0 no $0
992540 R Plumbing, FP Estimator $196 0 Dys 0 $0 no $0
992530 R Electrical Estimator $315 0 Dys 0 $0 no $0
992550 R Architectural Estimator $212 0 Dys 0 $0 no $0
992560 R Est Exec, Job Captain $288 0 Dys 0 $0 no $0
Subtotal Regional Bare Labor 88 Dys 704 $26,133 $26,133
Escalation 3.00% $784 $784
Subtotal Escalation $784 $784
982500 G Excess OH 0.00% $0 $0
000098 G Fringes 44.00% $11,844 $11,844
000099 G Overhead 76.00% $20,457 $20,457
Subtotal Fringes & Overhead $32,301 $32,301
B.P. 920 CONSTRUCTION - FIELD LABOR 5.97 mnth - 25.85
weeks
If you change the duration
unit (weeks to days), change
man hour calc too.
991001 P Project Executive 0 Dys 0 $0 yes $0
991010 P Project Manager 0 Wks 0 $0 yes $0
925991720 P Completion Bonus, 9% PM, 12% 9.00% - 0 $0 yes $0
on site PX
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
991020 P Asst. Project Manager 0 Wks 0 $0 yes $0
991200 P General Superintendent 0 Wks 0 $0 yes $0
991210 P Asst. Superintendent 0 Wks 0 $0 yes $0
991220 P Area Superintendent 0 Wks 0 $0 yes $0
991240 P Mech Superintendent $1,346 35 Wks 1,400 $47,110 yes $0
991250 P Elect. Superintendent 0 Wks 0 $0 yes $0
991410 P Computer Consultant $308 35 Dys 280 $10,780 yes $0
991500 P Project Engineer 0 Wks 0 $0 yes $0
991510 P Asst. Project Engineer $1,000 35 Wks 1,400 $35,000 yes $0
991050 P Project Acct, 1 dy/wk. $193 35 Dys 280 $6,755 yes $0
991670 P Technical Asst. $121 85 Dys 680 $10,285 yes $0
991630 P Project Estimator 0 Wks 0 $0 yes $0
991650 P Project Scheduler 0 Wks 0 $0 yes $0
Subtotal Field Bare Labor 4,040 $109,930 $0
Escalation 3.00% $3,298 $0
Subtotal Escalation $3,298 $0
992500 G Excess Overhead 0.00% $0 $0
981010 G Fed/State Taxes 10.49% $11,878 $0
981030 G Worker's Comp. 10.10% $11,436 $0
981050 G Major Medical 19.46% $8,492 $0
982300 G Accrued Vacation 7.50% $8,492 $0
Subtotal Field Burden $53,840 $0
Total Construction Labor $226,285 $59,218
B.P. 928 CONST. - REGIONAL SUPPORT
NON RECOVERABLE
992650 G Travel - Auto from CT $56 38 Trips $2,128 no $2,128
992650 G Travel - Auto from Prov. ? 0 Trips $0 no $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
992700 G Stationary/Supplies 0 MO $0 no $0
992720 G MIS Charges - QBCo $2 704 MH $1,408 no $1,408
992740 G Photocopying - Rgnl $20 0 MO $0 no $0
992730 G Postage $25 0 MO $0 no $0
992750 G Telephone - Rgnl $0 0 MO $0 no $0
992755 G Miscellaneous, Out of pocket $0 0 LS $0 no $0
Subtotal Regional Support $3,536 $3,536
B.P. 925 CONSTRUCTION -
FIELD OFFICE OPERATIONS
991700 G Subsistence/Moving $25,000 1 Allow $25,000 yes $0
991710 G Relocation - Payroll $0 0 Wks $0 yes $0
991750 G Job Travel - Auto None 0 Trips $0 yes $0
991750 G Job Travel - Air None 0 Trips $0 yes $0
991751 G Site Vehicle Lease $600 0 MO $0 yes $0
991752 G Site Vehicle Fuel/Maintain $200 0 MO $0 yes $0
993005 G Setup/Demob Fld Office $500 0 LS $0 yes $0
993010 G Gilbane Fld Office Rent $300 0 MO $0 yes $0
993010 G Own/AE Fld Office None 0 MO $0 yes $0
993020 G Fld Office Furniture $500 0 EA $0 yes $0
993015 S Fld Office Janitor $40 0 MO $0 yes $0
994010 G Stationary/Supplies $500 0 LS $0 yes $0
994020 G Postage, Overnite $150 0 MO $0 yes $0
994030 G Misc Office Equip $0 0 EA $0 yes $0
994035 G Fax Machine $350 0 LS $0 yes $0
994040 G Telephone use $1 0 MO $0 yes $0
994050 G Phones and Radios $1 0 LS $0 yes $0
994055 G Trailer lap top Comp, Prolog,
MS of 1 set up $5,970 2 EA $11,940 yes $0
994055 G Office Desk top Comp.,
Prolog, MS Off., 1 ea $3,570 0 EA $0 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
994055 G Site Printer, 500 to 1500
range each $0 0 EA $0 yes $0
994055 G Site Primavera Lease $95 0 MO $0 yes $0
994056 G MIS Charges (field Only) $2 4,040 Hrs $8,080 yes $0
994060 G Site trailer Lighting $100 0 MO $0 yes $0
994070 G Site trailer Heat $100 0 MO $0 yes $0
994080 G Coffee/Water $75 0 MO $0 yes $0
994100 G First Aid $500 0 LS $0 yes $0
992710 G Bid Document printing,
shipping $20,000 1 Allow $20,000 yes $0
994210 G Shop Drawing Printing $ 1,000 0 LS $0 yes $0
994220 G Record Document Printing $0 0 Sets $0 yes $0
994240 G Photocopier rental $400 0 MO $0 yes $0
$0 $0
Subtotal Field Office Operation $65,020 $0
B.P. 926 CONSTRUCTION -
FIELD OFFICE SUPPORT
993025 G Storage Trailer None 0 MO $0 yes $0
993035 G Temporary Toilets,
2 each $130 0 MO $0 yes $0
993035 S Trailer Temp plumbing ? 0 LS $0 yes $0
993040 S Temporary Fencing $8 0 LF $0 yes $0
993050 G Project Signs,
(Main & Safety) $1,000 0 EA $0 yes $0
993060 S Sidewalk Overhead
Protection None 0 LF $0 yes $0
993070 S Safety rails, opening
protection None 0 LF $0 yes $0
993081 S Gang ladders,
temp stairs None 0 LF $0 yes $0
993080 S Safety Consultant By
regional 0 EACH $0 yes $0
993080 G Safety, misc. material,
incentives $500 0 LS $0 yes $0
993089 G Drug Testing Costs $50 0 EA $0 yes $0
995040 G Progress Photos $50 0 week $0 yes $0
995055 S Field Eng. Services Trades 0 Wks $0 yes $0
9950?? S Preconstruction Site Survey Trades 0 Wks $0 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
995060 S Pest Control Trades 0 MO $0 yes $0
995070 G Ceremonies None 0 LS $0 yes $0
995080 S Testing $0 0 ALLW $0 yes $0
995090 G Misc Advertising Costs $0 0 ALLW $0 yes $0
995100 G Dumpsters $550 56 LOAD $30,800 yes $0
995105 S Interim Clean $15,000 1 LS $15,000 yes $0
995110 S Final Cleanup $0 75000 SF $ 9,000 yes $0
995120 S Clean Glass Inc. Above 0 SF $0 yes $0
951151 S Chutes/Hoppers None 0 EA $0 yes $0
995220 S Gen. Weather Protection Trades 0 LS $0 yes $0
995250 S Snow Removal None 0 LS $0 yes $0
995670 G Survey Equipment None 0 LS $0 yes $0
995710 G Record Storage $500 1 LS $500 yes $0
995860 G Small Tools/Suppliers $1 0 LS $0 yes $0
995870 G Small Staff Gear $1 0 LS $0 yes $0
996220 G Water Consumption $25 0 MO $0 yes $0
996320 S Temporary Heat None 0 MO $0 yes $0
996420 S Temp. Electric Hookup $1,500 0 LS $0 yes $0
996420 G Temp Elec. Consumption $1 0 MO $0 yes $0
996510 S Watchmen/Security None 0 MO $0 yes $0
996600 G Temp Fire Extinguishers $40 0 EA $0 yes $0
Subtotal Field Office Support $55,300 $0
Construction Services $350,141 $62,754
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 7.2.1
Example of Added Fee Calculation
GENERAL CONDITIONS SUMMARY
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Estimate Type: Saft:
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
BUDGET: $0
PRECON SCHEDULE: Through 0.00 MONTHS
CONSTR. SCHEDULE: 1/31/00 Through 3/3/00 1.07 MONTHS
====================================================================================================================================
TOTALS DIRECT LABOR OH & BURDEN DIRECT COST TOTALS
- ------------------------------------------------------------------------------------------------------------------------------------
PRECONSTRUCTION
BP 902 Regional Labor $0 $0 $0
BP 900 Field Labor $0 $0 $0
BP 908 Regional Support $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL PRECONSTRUCTION $0 $0 $0 $0
Percent of Budget #DIV/0!
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION
BP 922 Regional Labor $2,228 $2,674 $4,901
BP 920 Field Labor $15,895 $7,558 $23,453
BP 928 Regional Support $365
BP 925 Field Office Operations $84,211 $8,421
BP 926 Field Office Support $0 $0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CONSTRUCTION $18,123 $10,231 $8,786 $37,140
Percent of Budget #DIV/0!
TOTAL GENERAL CONDITIONS $18,123 $10,231 $8,786 $37,140
Percent of Budget #DIV/0!
BOND REQUIRED? No $0 Calculates from budget above $0
BUILDER'S RISK INSUR. 0 $0 " $0
BUILDING PERMIT 0 $0 " $0
STATE SALES TAX 0 $0 $0
PROFESSIONAL LIAB. 0 $0 .00186 up to $1 mil $0
GENERAL LIABILITY 0.00416 $0 Get Quote if Prof Liab (greater than) $1 mil $0
TOTAL ALL COSTS $37,140
FEE ANALYSIS
Total Raw Labor $18,123
Excess OH $0
Base fee on Budget 0.00% $0
Base Fee Plus Excess Overhead $0
Less Non-reimbursables $5,266
NET FEE ($5,266)
ROL (0.29)
<CAPTION>
RATE TABLE
<S> <C> <C> <C> <C> <C>
Home Office Field Rates GBCo MIS = 2.00
Excess OH 0.00% Excess OH 0.00% NON REIMBURSABLE ITEMS
Fringes 44.00% Taxes 10.49% Precon discounting 0
Overhead 76.00% Work Cmp 10.10% ? 0
TOTAL 220.00% Maj Med 19.46% ? 0
Escalation Vacation 7.50% ? 0
Precon 0.00% TOTAL 47.55% ? 0
Const. 0.00% TOTAL 0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
B.P. 902 PRECONSTRUCTION -
REGIONAL LABOR
992110 R Project Executive $346 0 Dys 0 $0 yes $0
992200 R Scheduling $288 0 Dys 0 $0 yes $0
992300 R Accounting Dept $210 0 Dys 0 $0 yes $0
992170 R Cost Accounting $262 0 Dys 0 $0 yes $0
992400 R Purchasing, Support
(Carry None) $ 0 In below Dys 0 $0 yes $0
992400 R Purchasing, PA
3.5 day per BP $212 0 Dys 0 $0 yes $0
992520 R Chief Estimator $365 0 Dys 0 $0 yes $0
992530 R Electrical Estimator $315 0 Dys 0 $0 yes $0
992540 R Mechanical Estimator $297 0 Dys 0 $0 yes $0
992540 R Plumbing/FP Estimator $196 0 Dys 0 $0 yes $0
992550 R Architectural Estimator $212 0 Dys 0 $0 yes $0
992560 R Est Exec, Job Capt $288 0 Dys 0 $0 yes $0
Subtotal Regional Bare Labor 0 Dys 0 $0 $0
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
982500 G Excess OH 0.00% $0 $0
000098 G. Fringes 44.00% $0 $0
000099 G Overhead 76.00% $0 $0
Subtotal Fringes & Overhead $0 $0
B.P. 900 PRECONSTRUCTION - FIELD LABOR
991001 P Project Executive $346 0 Dys 0 $0 yes $0
991010 P Project Manager $269 0 Dys 0 $0 yes $0
991500 P Project Engineer $173 0 Dys 0 $0 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
? P Est Exec $288 0 Dys 0 $0 yes $0
991630 P Project Estimator $212 0 Dys 0 $0 yes $0
Subtotal Field Bare Labor 0 Dys 0 $0 $0
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
982500 G Excess Overhead 0.00% $0 $0
981010 G Fed/State Taxes 10.49% $0 $0
981030 G Worker's Comp. 10.10% $0 $0
981050 G Major Medical 19.46% $0 $0
982300 G Accrued Vacation 7.50% $0 $0
Subtotal Field Burden $0 $0
Total Preconstruction Labor $0 $0
B.P. 908 PRECONSTRUCTION -
REGIONAL SUPPORT
992650 G Travel - Auto from ? ? 0 Trips $0 yes $0
992650 G Travel - Auto from ? ? 0 Trips $0 yes $0
992700 G Stationary/Supplies $0 0 MO $0 yes $0
992710 G Bid Document printing, shipping ? 0 Sets $0 yes $0
992720 G MIS Services $2 MH $0 yes $0
992730 G Postage $25 0 MO $0 yes $0
992740 G Photocopy $25 0 MO $0 yes $0
992750 G Telephone $50 0 MO $0 yes $0
992755 G Miscellaneous out of pocket $0 0 LS $0 yes $0
Subtotal Preconstruction Support $0
Total Preconstruction $0 $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
B.P. 992 CONST. -
REGIONAL LABOR NON-RECOVERABLE
992112 R Principal $0 0 Dys 0 $0 no $0
992110 R Project Executive-8hrs/wk $439 4 Dys 32 $1,756 no $1,756
992120 R Safety Engineer $288 0 Dys 0 $0 no $0
992300 R Accounting $210 1 Dys 8 $210 no $210
992170 R Cost Accountant 1 dy/mo $262 1 Dys 8 $262 no $262
992200 R Scheduling, updates $288 0 Dys 0 $0 no $0
992400 R Purchasing Agent 3.5
day per BP $239 0 Dys 0 $0 no $0
992400 R Purchasing, Support $0 In 0 $0 no $0
above
Dys
992185 R Technology Set-up $192 0 Dys 0 $0 no $0
992185 R Technology Support (2dy/month) $192 0 Dys 0 $0 no $0
992540 R Mechanical Estimator $297 0 Dys 0 $0 no $0
992540 R Plumbing, FP Estimator $196 0 Dys 0 $0 no $0
992530 R Electrical Estimator $315 0 Dys 0 $0 no $0
992550 R Architectural Estimator $212 0 Dys 0 $0 no $0
992560 R Est Exec, Job Captain $288 0 Dys 0 $0 no $0
Subtotal Regional Bare Labor 6 Dys 4 $2,228 $2,228
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
982500 G Excess OH 0.00% $0 $0
000098 G Fringes 44.00% $ 980 $980
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
000099 G Overhead 76.00% $1,693 $1,693
Subtotal Fringes & Overhead $2,674 $2,674
</TABLE>
<TABLE>
<CAPTION>
B.P. 920 CONSTRUCTION - FIELD LABOR 1.07 mnth = 4.63 weeks
If you change the duration unit (weeks to days), change man hour calc. too.
<S> <C> <C> <C> <C> <C> <C>
991001 P Sr. Project
Manager-DeForest $360 6 Dys 48 $2,160 yes $0
991010 P Project Manager-Driscoll $1,346 4.63 Wks 185 $6,232 yes $0
P Completion Bonus, 9% PM,
12% on site PX 9.00% $820 yes $0
991020 P Asst. Project Manager 0 Wks 0 $0 yes $0
991200 P General Superintendent 0 Wks 0 $0 yes $0
991210 P Asst. Superintendent 0 Wks 0 $0 yes $0
991220 P Area Superintendent 0 Wks 0 $0 yes $0
991240 P Mech. Superintendent 0 Wks 0 $0 yes $0
991250 P Elect. Superintendent 0 Wks 0 $0 yes $0
991410 P Computer Consultant 0 Dys 0 $0 yes $0
991500 P Project Engineer 0 Wks 0 $0 yes $0
991510 P. Asst. Project Engineer $989 4.63 Wks 185 $4,579 yes $0
991050 P Project Acct, 1 dy/wk $193 4.63 day 37 $894 yes $0
991670 P Technical Asst. $121 10 Dys 80 $1,210 yes $0
991630 P Project Estimator 0 Wks 0 $0 yes $0
991650 P Project Scheduler 0 Wks 0 $0 yes $0
Subtotal Field Bare Labor 535 $15,895 $0
Escalation 0.00% $0 $0
Subtotal Escalation $0 $0
992500 G Excess Overhead 0.00% $0 $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
981010 G Fed/State Taxes 10.49% $1,667 $0
981030 G Worker's Comp. 10.10% $1,605 $0
981050 G Major Medical 19.46% $3,093 $0
982300 G Accrued Vacation 7.50% $1,192 $0
Subtotal Field Burden $7,558 $0
Total Construction Labor $28,354 $4,901
B.P. 928 CONST. -
REGIONAL SUPPORT NON RECOVERABLE
992650 G Travel - Auto from CT. $56 4 Trips $224 no $224
992650 G Travel - Auto from Prov. ? 0 Trips $0 no $0
992700 G Stationary/Supplies 0 MO $0 no $0
992720 G MIS Charges - GBCo $2.00 48 MH $96 no $96
992740 G Photocopying - Rgnl $20 1 MO $20 no $20
992730 G Postage $25 1 MO $25 no $25
992750 G Telephone - Rgnl $0 0 MO $0 no $0
992755 G Miscellaneous; Out of pocket $0 0 LS $0 no $0
Subtotal Regional Support $365 $365
B.P. 925 CONSTRUCTION - FIELD OFFICE
OPERATIONS
991700 G Subsistence/Moving $500 1 Allow $500 yes $0
991710 G Relocation Payroll $0 0 Wks $0 yes $0
991750 G Job Travel - Auto None 0 Trips $0 yes $0
991750 G Job Travel - Air None 0 Trips $0 yes $0
991751 G Site Vehicle Lease $600 2 MO $1,200 yes $0
991752 G Site Vehicle fuel/Maintain $200 2 MO $400 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
993005 G Setup/Demob Fld Office $500 1 LS $500 yes $0
993010 G Gilbane Fld Office Rent $400 2 MO $800 yes $0
993010 G Own/AE Fld Office None 0 MO $0 yes $0
993020 G Fld Office Furniture $500 0 EA $0 yes $0
993015 S Fld Office Janitor $40 0 MO $0 yes $0
994010 G Stationary/Supplies $500 0 LS $0 yes $0
994020 G Postage, Overnite $150 0 MO $0 yes $0
994030 G Misc Office Equip $0 0 EA $0 yes $0
994035 G Fax Machine $350 0 LS $0 yes $0
994040 G Telephone use $1,500 2 MO $3,000 yes $0
994050 G Phones and Radios $1 0 LS $0 yes $0
994055 G Trailer lap top Comp, Prolog, MS
of. 1 set up $5,970 0 EA $0 yes $0
994055 G Office Desk top Comp., Prolog,
MS Off., 1 ea $3,570 0 EA $0 yes $0
994055 G Sire Printer, 500 to 1500 range
each $0 0 EA $0 yes $0
994055 G Site Primavera Lease $95 0 MO $0 yes $0
994056 G MIS Charges (field Only) $2 535 Hrs $1,071 yes $0
994060 G Site trailer Lighting $100 0 MO $0 yes $0
994070 G Site trailer Heat $100 0 MO $0 yes $0
994080 G Coffee/Water $75 2 MO $150 yes $0
994100 G First Aid $500 0 LS $0 yes $0
992710 G Bid Document printing, shipping $0 0 Allow $0 yes $0
994210 G Shop Drawing Printing $1,000 0 LS $0 yes $0
994220 G Record Document Printing $0 0 Sets $0 yes $0
994240 G Photocopier rental $400 2 MO $800 yes $0
$0 $0
Subtotal Field Office Operations $8,421 $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
B.P. 926 CONSTRUCTION -
FIELD OFFICE SUPPORT
993025 G Storage Trailer None 0 MO $0 yes $0
993035 G Temporary Toilets, 2 each $130 0 MO $0 yes $0
993035 S Trailer Temp plumbing ? 0 LS $0 yes $0
993040 S Temporary Fencing $8 0 LF $0 yes $0
993050 G Project Signs, (Main & Safety) $1,000 0 EA $0 yes $0
993060 S Sidewalk Overhead Protection None 0 LF $0 yes $0
993070 S Safety rails, opening protection None 0 LF $0 yes $0
993081 S Gang ladders, temp stairs None 0 LF $0 yes $0
993080 S Safety Consultant By regional 0 EACH $0 yes $0
993080 G Safety, misc material, incentives $500 0 LS $0 yes $0
993089 G Drug Testing costs $50 0 EA $0 yes $0
995040 G Progress Photos $50 0 week $0 yes $0
995055 S Field Eng. Services Trades 0 Wks $0 yes $0
9950?? S Preconstruction Site Survey Trades 0 Wks $0 yes $0
995060 S Pest Control Trades 0 MO $0 yes $0
995070 G Ceremonies None 0 LS $0 yes $0
995080 S Testing $0 0 ALLW $0 yes $0
995090 G Misc advertising costs $0 0 ALLW $0 yes $0
995100 G Dumpsters $550 0 LOAD $0 yes $0
995105 S Interim Clean $15,000.00 0 LS $0 yes $0
995110 S Final Cleanup $0.12 0 SF $0 yes $0
995120 S Clean Glass Inc. Above 0 SF $0 yes $0
995115 S Chutes/Hoppers None 0 EA $0 yes $0
995220 S Gen. Weather Protection Trades 0 LS $0 yes $0
995250 S Snow Removal None 0 LS $0 yes $0
995670 G Survey Equipment None 0 LS $0 yes $0
</TABLE>
<PAGE>
GENERAL CONDITIONS DETAIL
Job Name: 400 Minuteman Drive - Tenant Work
Location: Andover, MA
Prepared by: WKU
State Job in: MA Duration: 5.97 Mnth Sqft: 10,000
[logo of Gilbane]
<TABLE>
<CAPTION>
Cost Description Unit Rate Quantity Man Hours Total Cost Reimbursable Total
Code yes or no Non-Reimbursable
<S> <C> <C> <C> <C> <C> <C>
995710 G Record Storage $500 0 LS $0 yes $0
995860 G Small Tools/Supplies $1 0 LS $0 yes $0
995870 G Small Staff Gear $1 0 LS $0 yes $0
996220 G Water Consumption $25 0 MO $0 yes $0
996320 S Temporary Heat None 0 MO $0 yes $0
996420 S Temp. Electric Hookup $1,500 0 LS $0 yes $0
996420 G Temp Elec. Consumption $1 0 MO $0 yes $0
996510 S Watchmen/Security None 0 MO $0 yes $0
996600 G Temp Fire Extinguishers $40 0 EA $0 yes $0
Subtotal Field Office Support $0 $0
TOTAL CONSTRUCTION SERVICES $37,140 $5,266
</TABLE>
<PAGE>
Exhibit 23.2
ACCOUNTANTS' CONSENT AND REPORT ON SCHEDULE
The Board of Directors
NaviSite, Inc.:
The audits referred to in our report dated August 27, 1999, except as to Note
14, which is as of October 8, 1999, included the related financial statement
schedule as of July 31, 1997, 1998 and 1999, and for each of the years in the
three year period ended July 31, 1999, included in the Registration Statement.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We consent to the inclusion of our report dated August 27, 1999, except as to
Note 14, which is as of October 8, 1999, with respect to the consolidated
balance sheets of NaviSite, Inc., as of July 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the years in the three year period ended July 31,
1999, which report appears in this Registration Statement, and to the
references to our firm under the headings "Selected Consolidated Financial
Data," and "Experts" in this Registration Statement.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
October 20, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Members
Servercast Communications, L.L.C.:
We consent to the inclusion of our report on Servercast Communications,
L.L.C. dated May 28, 1999 in the prospectus constituting part of this
Registration Statement on Form S-1 of NaviSite, Inc. and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
KPMG LLP
Boston, Massachusetts
October 20, 1999
