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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 22, 2000
NAVISITE, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-27597 52-2137343
(Commission File Number) (I.R.S. Employer Identification Number)
400 Minuteman Road
Andover, Massachusetts 01810
(Address of Principal Executive Offices) (Zip Code)
(978) 682-8300
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(Registrant's Telephone Number, Including Area Code)
100 Brickstone Square, 5th Floor
Andover, Massachusetts 01810
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2: Acquisition or Disposition of Assets
On February 22, 2000, NaviSite, Inc., a Delaware corporation
("Registrant"), acquired ClickHear, Inc., a Nevada corporation ("ClickHear"), a
provider of streaming media professional services. Registrant, CMGI, Inc., a
Delaware corporation ("CMGI"), ClickHear and the stockholders of ClickHear (the
"Stockholders") executed a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of February 16, 2000.
Pursuant to the Stock Purchase Agreement CMGI acquired all the outstanding
capital stock of ClickHear from the Stockholders for an aggregate of
approximately $5,000,000 of CMGI's common stock.
On February 22, CMGI contributed all of the outstanding capital stock of
ClickHear to Registrant in exchange for approximately $5,000,000 of Registrant's
common stock, and Registrant announced the acquisition. As of February 22, 2000
ClickHear became a wholly-owned subsidiary of Registrant.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited financial statements of ClickHear, and the notes thereto, required
by this Item will be filed by amendment to this Form 8-K not later than
May 8, 2000.
(b) Pro Forma Financial Information
The pro forma financial information required by this Item will be filed
by amendment to this Form 8-K not later than May 8, 2000.
(c) Exhibits
99.1 Stock Purchase Agreement, dated February 16, 2000, by and among CMGI,
Inc., NaviSite, Inc., ClickHear, Inc. and the Stockholders of ClickHear, Inc.
FILED HEREWITH.
99.2 Inter-Company Agreement, dated February 22, 2000, between CMGI, Inc.
and NaviSite, Inc. FILED HEREWITH.
2
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 8, 2000 NaviSite, Inc.
(Registrant)
By: /s/ Joel Rosen
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Joel Rosen
Chief Executive Officer
3
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Exhibit Index
Exhibit
Number Description
- ------ -----------
99.1 Stock Purchase Agreement, dated February 16, 2000, by and
among CMGI, Inc., NaviSite, Inc., ClickHear, Inc. and the
Stockholders of ClickHear, Inc.
99.2 Inter-Company Agreement, dated February 22, 2000, between
CMGI, Inc. and NaviSite, Inc.
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EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
CMGI, INC.,
NAVISITE, INC.,
ClickHear, Inc.
AND
THE STOCKHOLDERS OF CLICKHEAR, INC.
February 16, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I - PURCHASE AND SALE.......................................... 1
1.1 Purchase of Company Shares................................. 1
1.2 Further Assurances......................................... 1
1.3 The Closing................................................ 2
1.4 Actions at the Closing..................................... 2
1.5 Purchase Price............................................. 2
1.6 Escrow..................................................... 3
1.7 Fractional Shares.......................................... 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
STOCKHOLDERS........................................................... 3
2.1 Organization, Qualification and Corporate Power............ 4
2.2 Capitalization............................................. 4
2.3 Authorization of Transaction............................... 4
2.4 Noncontravention........................................... 5
2.5 Subsidiaries............................................... 5
2.6 Financial Statements....................................... 5
2.7 Absence of Certain Changes................................. 6
2.8 Undisclosed Liabilities.................................... 6
2.9 Tax Matters................................................ 6
2.10 Assets..................................................... 7
2.11 Intellectual Property...................................... 8
2.12 Inventory.................................................. 9
2.13 Real Property and Leases................................... 9
2.14 Contracts.................................................. 10
2.15 Accounts Receivable........................................ 11
2.16 Bank Accounts; Powers of Attorney.......................... 11
2.17 Insurance.................................................. 11
2.18 Litigation................................................. 11
2.19 Employees.................................................. 12
2.20 Employee Benefits.......................................... 12
2.21 Environmental Matters...................................... 15
2.22 Legal Compliance........................................... 16
2.23 Permits.................................................... 16
2.24 Certain Business Relationships With Affiliates............. 16
2.25 Brokers' Fees.............................................. 16
2.26 Books and Records.......................................... 16
2.27 Year 2000 Compliance....................................... 16
2.28 Customers, Distributors and Suppliers...................... 17
2.29 Authority to Execute and Perform Agreements................ 17
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2.30 Title to Shares............................................ 18
2.31 EB Media................................................... 18
2.32 Equity Ownership........................................... 18
2.33 Disclosure................................................. 18
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER.............. 18
ARTICLE IV - ARTICLE IV - SURVIVAL; INDEMNIFICATION.................... 20
4.1 Survival of Obligations.................................... 20
4.2 Stockholder Obligation to Indemnify........................ 20
4.3 Limitations on Stockholder Indemnification................. 21
4.4 Procedures Relating to Indemnification..................... 21
4.5 Stockholder Representative................................. 23
ARTICLE V - COVENANTS AND AGREEMENTS................................... 24
5.1 Investment Representation and Lock-Up Agreements........... 24
5.2 Stock Restriction Agreements............................... 24
5.3 Non-Competition............................................ 24
5.4 Opinion of Counsel......................................... 24
5.5 Resignations............................................... 25
5.6 Retention.................................................. 25
5.7 Streaming Revenue.......................................... 25
5.8 Non-Disclosure and Developments............................ 26
5.9 Audited Financial Statements............................... 26
5.10 Slik Technology............................................ 26
ARTICLE VI - DEFINITIONS............................................... 26
ARTICLE VII - MISCELLANEOUS............................................ 28
7.1 Press Releases and Announcements........................... 28
7.2 No Third Party Beneficiaries............................... 28
7.3 Entire Agreement........................................... 28
7.4 Succession and Assignment.................................. 28
7.5 Counterparts............................................... 28
7.6 Headings................................................... 28
7.7 Notices.................................................... 28
7.8 Governing Law.............................................. 29
7.9 Severability............................................... 29
7.10 Expenses................................................... 30
7.11 Specific Performance....................................... 30
7.12 Submission to Jurisdiction................................. 30
7.13 Construction............................................... 30
7.14 Incorporation of Exhibits and Schedules.................... 31
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Exhibits
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Exhibit A - Escrow Agreement
Exhibit B - Investment Representation and Lock-Up Agreement
Exhibit C - Stock Restriction Agreement
Exhibit D - Non-Competition and Non-Solicitation Agreement
Exhibit E - Form of Opinion of Counsel to the Company and Company Stockholders
Exhibit F - Non-Disclosure and Developments Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") entered into as of
February 16, 2000 is by and among CMGI, Inc., a Delaware corporation with its
principal offices at 100 Brickstone Square, Andover, Massachusetts 01810 (the
"Buyer"), NaviSite, Inc., a Delaware corporation with its principal offices at
400 Minuteman Road, Andover, Massachusetts 01810 and a majority-owned subsidiary
of the Buyer ("NaviSite"), ClickHear, Inc., a Nevada corporation with its
principal offices at 4822 Santa Monica Avenue, Suite 220, San Diego, California
92107 (the "Company"), and the holders of capital stock of the Company party
hereto (each individually, a "Company Stockholder" and collectively, the
"Company Stockholders"), who together own all of the issued and outstanding
capital stock of the Company. The Buyer, NaviSite, the Company and the Company
Stockholders are referred to collectively herein as the "Parties."
WHEREAS, each of the Company Stockholders owns the number of issued and
outstanding shares (collectively, the "Company Shares") of the common stock,
$0.01 par value per share (the "Company Common Stock"), of the Company set forth
opposite his name on Section 2.2 of the Disclosure Schedule attached hereto,
which Company Shares in the aggregate represent all of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, the Buyer desires to purchase, and the Company Stockholders desire
to sell, the Company Shares for the consideration set forth below, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties and covenants hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 Purchase of Company Shares. Subject to and upon the terms and
conditions of this Agreement, at the closing of the transactions contemplated by
this Agreement (the "Closing"), each Company Stockholder shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall purchase, acquire
and accept from each Company Stockholder, all the Company Shares owned by such
Company Stockholder, as set forth opposite such Company Stockholder's name on
Section 2.2 of the Disclosure Schedule. At the Closing each Company Stockholder
shall deliver to the Buyer certificates evidencing the Shares owned by such
Company Stockholder duly endorsed in blank or with stock powers duly executed by
such Company Stockholder.
1.2 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, each of the
Company Stockholders shall promptly execute and deliver such instruments of
sale, transfer, conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, more
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effectively to transfer, convey and assign to the Buyer, and to confirm the
Buyer's title to, all of the Company Shares owned by such Company Stockholder,
to put the Buyer in actual possession and operating control of the assets,
properties and business of the Company and the Subsidiaries (as defined in
Section 2.5 hereof), to assist the Buyer in exercising all rights with respect
thereto and to carry out the purpose and intent of this Agreement.
1.3 The Closing. The Closing shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, commencing at 9:00 a.m.
local time on the date hereof (the "Closing Date").
1.4 Actions at the Closing. At the Closing, (a) the Company Stockholders
shall deliver the certificates for the Company Shares to the Buyer, duly
endorsed for transfer, (b) the Buyer shall deliver a certificate for the Initial
Shares (as defined below) to each Company Stockholder and (c) the Buyer,
NaviSite, the Stockholder Representatives (as defined therein), the Company
Stockholders and the Escrow Agent (as defined therein) shall execute and deliver
the Escrow Agreement attached hereto as Exhibit A (the "Escrow Agreement") and
the Buyer shall deliver to the Escrow Agent a certificate for the Escrow Shares
(as defined below) being placed in escrow on the Closing Date pursuant to
Section 1.6.
1.5 Purchase Price. The purchase price to be paid by the Buyer for the
Company Shares shall be as follows:
(a) The Buyer shall issue and deliver to the Company Stockholders
(subject to the provisions of Section 1.6) in the aggregate, a number of shares
of common stock, $.01 par value per share, of the Buyer ("Buyer Common Stock")
determined by dividing (i) $5,000,000 by (ii) the average of the last reported
sale prices per share of the Buyer Common Stock on the Nasdaq National Market
over the five (5) consecutive trading days ending on February 11, 2000 (the
"Closing Price"). Such shares of Buyer Common Stock shall be allocated to the
holders of Company Shares according to each Company Stockholder's percentage
ownership of the Company immediately prior to the Closing determined by dividing
(i) the number of Company Shares held by such Company Stockholder as of the
Closing Date as set forth on Section 2.2 of the Disclosure Schedule by (ii) the
total number of Company Shares outstanding as of the Closing Date as set forth
on Section 2.2 of the Disclosure Schedule. Company Stockholders shall be
entitled to receive immediately 80% of the shares of Buyer Common Stock
allocated to each of them pursuant to this Section 1.5(a) (the "Initial
Shares"); the remaining 20% of the shares of Buyer Common Stock issued to each
of them pursuant to this Section 1.5(a) (the "Escrow Shares") shall be deposited
in escrow pursuant to Section 1.6 and shall be held and disposed of in
accordance with the terms of the Escrow Agreement. The Initial Shares and the
Escrow Shares shall together be referred to herein as the "Buyer Shares."
(b) Until one year after the Closing, no Company Stockholder shall
sell, transfer, pledge, sell any option or put for, enter into any hedging
transaction with respect to or otherwise dispose of any of the Buyer Shares, or
any interest thereon, except as required by the provisions of the Stock
Restriction Agreement or Escrow Agreement.
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(c) On the Closing Date, the Buyer shall contribute to NaviSite all of
the Company shares and NaviSite shall issue and deliver to Buyer that number of
shares of common stock, $.01 par value per share, of NaviSite (the "NaviSite
Common Stock") determined by dividing (i) $5,000,000 by (ii) the average of the
last reported sale prices per share of the NaviSite Common Stock on the Nasdaq
National Market over the five (5) consecutive trading days ending on the trading
day that is three trading days prior to the Closing Date.
1.6 Escrow. On the Closing Date, the Buyer shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5(a), for the purpose
of securing the indemnification obligations of the Company Stockholders set
forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow Shares
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes and in accordance with the
terms of the Escrow Agreement.
1.7 Fractional Shares. No certificates or scrip representing fractional
Buyer Shares shall be issued to the Company Stockholders upon the surrender for
exchange of certificates representing Company Shares, and such Company
Stockholders shall not be entitled to any voting rights, rights to receive any
dividends or distributions or other rights as a shareholder of the Buyer with
respect to any fractional Buyer Shares that would have otherwise been issued to
such Company Stockholders. In lieu of any fractional Buyer Shares that would
have otherwise been issued, each Company Stockholder that would have been
entitled to receive a fractional Buyer Share shall, upon proper surrender of
such person's certificates, receive such whole number of Buyer Shares as is
equal to the precise number of Buyer Shares to which such person would be
entitled, rounded up or down to the nearest whole number (with a fractional
interest equal to .5 rounded to the nearest odd number); provided that each
Company Stockholder shall receive at least one Buyer Share.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY STOCKHOLDERS
Each of the Company Stockholders represents and warrants to the Buyer that
the statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule attached hereto (the "Disclosure Schedule").
The Disclosure Schedule shall be initialed by the Parties and shall be arranged
in sections corresponding to the numbered and lettered contained in this Article
II, and the disclosures in any Section of the Disclosure Schedule shall qualify
only the corresponding Section in this Article II.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the state of its incorporation. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification. Section 2.1
of the
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Disclosure Schedule sets forth each of such states. The Company has all
requisite corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. The Company
has furnished to the Buyer true and complete copies of its Articles of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under or in violation of any provision of its
Articles of Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the Company consists
of 1,500 Company Shares, of which 607 shares are issued and outstanding and no
shares are held in the treasury of the Company. Section 2.2 of the Disclosure
Schedule sets forth a complete and accurate list of all stockholders of the
Company, indicating the number of Company Shares held by each stockholder. All
of the issued and outstanding Company Shares are, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. There are
no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition or acquisition of any of its
capital stock or any other equity interest of any kind whatsoever. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company. There are no agreements, voting trusts, proxies, or
understandings with respect to the voting, or registration under the Securities
Act of 1933, as amended (the "Securities Act"), of any Company Shares. All of
the issued and outstanding Company Shares were issued in compliance with
applicable federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement, the performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate and stockholder action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such obligations may be
limited by laws affecting rights of creditors generally and general principles
of equitable relief.
2.4 Noncontravention. Neither the execution and delivery of this Agreement
by the Company and the Company Stockholders, nor the consummation by the Company
and the Company Stockholders of the transactions contemplated hereby, will (a)
conflict with or violate any provision of the charter or By-laws of the Company,
(b) require on the part of the Company or any Subsidiary any filing with, or any
permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"), (c) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to which
the Company or any Company
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Stockholder is a party or by which the Company or any Company Stockholder is
bound or to which any of their assets is subject, (d) result in the imposition
of any Security Interest upon any assets of the Company or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of their properties or assets. For purposes of this Agreement,
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge, or other lien (whether arising by contract or by operation of law),
other than (i) mechanic's, materialmen's, and similar liens, (ii) liens arising
under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, and (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in the
ordinary course of business consistent with past custom and practice (including
with respect to frequency and amount) ("Ordinary Course of Business") of the
Company and not material to the Company.
2.5 Subsidiaries. The Company has no Subsidiaries. As used in this
Agreement, "Subsidiary" means any corporation or other legal entity of which the
Company or any Subsidiary owns, directly or indirectly, any stock or other
equity interests. The Company is not a party to a partnership or joint venture
with any other person.
2.6 Financial Statements. The Company has previously delivered to the
Buyer true and complete copies of (i) its unaudited consolidated balance sheet
as of December 31, 1998, and the related statements of operations, stockholders'
equity and cash flows and notes to financial statements for the year then ended,
and (ii) its unaudited balance sheet as of December 31, 1999 (the "12/31/99
Balance Sheet"), and the related statements of operations, stockholders' equity
and cash flows for the year then ended (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared from, and are
in accordance with, the books and records of the Company and present fairly the
financial position and the results of operations of the Company as of the dates
and for the periods indicated, in each case in accordance with generally
accepted accounting principles consistently applied ("GAAP") throughout the
periods involved. The Company's books and records are sufficient to make them
auditable by the Buyer's auditors.
2.7 Absence of Certain Changes. Since the Company's inception, there has
occurred no event or development which has had, or could reasonably be foreseen
to have in the future, a material adverse effect on the assets, business,
financial condition, results of operations or future prospects of the Company (a
"Company Material Adverse Effect").
2.8 Undisclosed Liabilities. The Company has no liability (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for liabilities shown on the 12/31/99
Balance Sheet or on Section 2.8 of the Disclosure Schedule.
2.9 Tax Matters.
(a) The Company has filed all Tax Returns (as defined below) that it
was required to file and all such Tax Returns were correct and complete in all
material respects. The
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Company has paid all Taxes (as defined below) that were due or payable. The
unpaid Taxes of the Company for tax periods through December 31, 1999 do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) and do not exceed such accruals and reserves as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of the Company in filing its Tax Returns. The Company has no actual or potential
liability for any Tax obligation (whether by operation of law, by contract, or
otherwise) of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included the Company during a prior period)
other than the Company. All Taxes that the Company is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity. No independent
contractor engaged by the Company is an employee for federal or state tax
purposes. For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies or other similar assessments or liabilities, including without
limitation income, gross receipts, ad valorem, premium, value-added, excise,
real property, personal property, sales, use, transfer, withholding, employment,
unemployment insurance, social security, business license, business
organization, environmental, workers compensation, payroll, profits, license,
lease, service, service use, severance, stamp, occupation, windfall profits,
customs, duties, franchise and other taxes imposed by the United States of
America or any state, local or foreign government, or any agency thereof, or
other political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since inception. No
federal income Tax Returns of the Company have been audited by the Internal
Revenue Service. No examination or audit of any Tax Returns of the Company by
any Governmental Entity is currently in progress, threatened or contemplated.
The Company has not been informed by any jurisdiction that the jurisdiction
believes that the Company was required to file any Tax Return that was not
filed. The Company has not waived any statute of limitations with respect to
taxes or agreed to an extension of time with respect to a tax assessment or
deficiency.
(c) The Company: (i) is not a "consenting corporation" within the
meaning of Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), and none of the assets of the Company are subject to an election under
Section 341(f) of the Code; (ii) has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (iv) is not or has
ever been a member of an "affiliated group" of corporations (within the meaning
of Section 1504 of the Code), other than a group of which only
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the Company is a member, or has any actual or potential liability for any Taxes
of any person (other than the Company) under Treasury Regulation Section 1.1502-
6 (or any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company: (i) is property that is required
to be treated as being owned by any other person pursuant to the provisions of
former Section 168(f)(8) of the Code; (ii) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code; or (iii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.
(e) The Company has not undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of the
Code.
(f) No state or federal "net operating loss" of the Company determined
as of the Closing Date is subject to limitation on its use pursuant to Section
382 of the Code or comparable provisions of state law as a result of any
"ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
2.10 Assets. The Company owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from material
defects, has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used. No asset of the
Company (tangible or intangible) is subject to any Security Interest, other than
Security Interests which do not, individually or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company.
2.11 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual Property
(as defined below) incorporated in its products or necessary for, or used in,
the operation of its business as presently conducted (the "Company Intellectual
Property"). Each item of Company Intellectual Property will be owned or
available for use by the Company on substantially identical terms and conditions
immediately following the Closing. The Company has taken all reasonable measures
to protect the proprietary nature of each item of Company Intellectual Property,
and to maintain in confidence all trade secrets and confidential information,
that it owns or uses. No other person or entity (i) has any rights to any of the
Company Intellectual Property owned by the Company (except pursuant to
agreements or licenses specified in Section 2.11(c) of the Disclosure Schedule),
or (ii) is infringing, violating or misappropriating any of the Company
Intellectual Property. The Company has made available to the Buyer complete and
accurate copies of all written documentation in the Company's possession
relating to claims or disputes
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known to the Company concerning any item of Company Intellectual Property. For
purposes of this agreement, "Intellectual Property" means all (i) patents and
patent applications, (ii) copyrights and registrations thereof, (iii) mask works
and registrations and applications for registration thereof, (iv) computer
software, data and documentation, (v) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced to
practice, know-how, manufacturing and production processes and techniques,
research and development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (vi) trademarks, service marks,
trade names and applications and registrations therefor and (vii) other
proprietary rights relating to any of the foregoing. Section 2.11(a) of the
Disclosure Schedule lists each patent, patent application, copyright
registration, mask work registration or application therefor, and trademark or
service mark registration or application therefor of the Company.
(b) None of the activities or business presently conducted by the
Company infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity. The Company has not
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation and no such claim has been threatened by any third
party.
(c) Section 2.11(c) of the Disclosure Schedule identifies each license
or other agreement (or type of license or other agreement) pursuant to which the
Company has licensed, distributed or otherwise granted any rights to any third
party with respect to, any of the Company's Intellectual Property.
(d) Section 2.11(d) of the Disclosure Schedule identifies each item of
Company Intellectual Property that is owned by a party other than the Company,
and the license or agreement pursuant to which the Company uses it (excluding
off-the-shelf software programs licensed by the Company pursuant to "shrink
wrap" licenses).
(e) The Company has not disclosed the source code for any of the
software owned by the Company and incorporated in its products or necessary for
the operation of its business as presently conducted (the "Software") or other
confidential or proprietary information constituting, embodied in or pertaining
to the Software to any person or entity and has taken reasonable measure to
prevent such disclosure.
(f) All of the Software has been created by employees of the Company
within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements expressly assigning all
right, title and interest in the Software to the Company. No portion of the
Software was jointly developed with any third party.
2.12 Inventory. All inventory of the Company consists of a quality and
quantity usable and saleable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value.
<PAGE>
2.13 Real Property and Leases.
(a) The Company owns no real property.
(b) Section 2.13 of the Disclosure Schedule lists and describes briefly
all real property leased or subleased to the Company and lists the term of such
lease, any extension and expansion options, and the rent payable thereunder. The
Company has delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) listed in Section 2.13 of the Disclosure
Schedule. With respect to each lease and sublease listed in Section 2.13 of the
Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or acceleration
thereunder;
(iv) there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(v) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(vi) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
2.14 Contracts. Section 2.14 of the Disclosure Schedule lists the
following agreements (written or oral) to which the Company is a party:
(a) any agreement (or group of related written agreements) for the
lease of personal property from or to third parties providing for lease payments
in excess of $10,000 per annum;
(b) any agreement (or group of related written agreements) for the
purchase or sale of products or other personal property or for the furnishing or
receipt of services (i) which calls for performance over a period of more than
one year, or (ii) which involves more than the sum of $10,000, or (iii) in which
the Company has granted manufacturing rights, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
<PAGE>
(c) any agreement establishing a partnership or joint venture;
(d) any agreement (or group of related written agreements) under which
it has created, incurred, assumed, or guaranteed (or may create, incur, assume,
or guarantee) indebtedness (including capitalized lease obligations) involving
more than $10,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement between the Company and any of the Company
Stockholders or their Affiliates (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"));
(g) any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect; and
(h) any other agreement (or group of related agreements) either
involving more than $10,000 or not entered into in the Ordinary Course of
Business.
The Company has delivered to the Buyer a correct and complete copy of each
agreement or a description of any oral agreement, (as amended to date) listed in
Section 2.14 of the Disclosure Schedule. With respect to each agreement so
listed: (i) the agreement is legal, valid, binding and enforceable and in full
force and effect; (ii) the agreement will continue to be legal, valid, binding
and enforceable and in full force and effect immediately following the Closing
in accordance with the terms thereof as in effect prior to the Closing; and
(iii) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the agreement.
2.15 Accounts Receivable. All accounts receivable of the Company and the
Subsidiaries are valid receivables subject to no setoffs or counterclaims and
are current and collectible within 90 days after the date on which it first
became due and payable, net of the applicable reserve for bad debts.
2.16 Bank Accounts; Powers of Attorney. Section 2.16 of the Disclosure
Schedule identifies all bank and brokerage accounts of the Company, whether or
not such accounts are held in the name of the Company, lists the respective
signatories therefor and lists the names of all persons holding a power of
attorney from the Company with respect to such accounts. There are no other
outstanding powers of attorney executed on behalf of the Company.
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company is a party. There is no claim pending under any such policy as to
<PAGE>
which coverage has been questioned, denied or disputed by the underwriter of
such policy. All premiums due and payable under all such policies have been paid
and the Company is otherwise in compliance in all material respects with the
terms of such policies.
2.18 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or, to
the Company's knowledge, threatened against the Company or which in any manner
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
2.19 Employees. Section 2.19 of the Disclosure Schedule contains a list of
all employees of the Company, along with the position and the annual rate of
compensation of each such person. Each such employee has entered into non-
disclosure and employee intellectual property agreements with the Company, a
copy of which has previously been delivered to the Buyer. Section 2.19 contains
a list of all employment contracts, consulting agreements, patent disclosure
agreements, non-competition agreements, or any other similar agreement or
arrangement purporting to restrict in any way the right of any employee or
consultant of the Company to fully perform their obligations as an employee or
consultant of the Company. No employee or consultant of the Company (a) is in
violation of any term of any employment contract, consulting agreement, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee or consultant to be
employed or engaged by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or to the use of
trade secrets or proprietary information of others or (b) has given notice to
the Company nor is the Company otherwise aware, that any such employee or
consultant intends to terminate his or her employment or engagement with the
Company. The Company is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes. Each Key Employee (as
defined in Section 5.6) will have satisfied all other employment and consulting
obligations and will have commenced full time employment at NaviSite by
March 1, 2000.
2.20 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
<PAGE>
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation.
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company or a Subsidiary.
(b) Section 2.20(b) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans maintained, or contributed to, by
the Company or any ERISA Affiliate. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last five plan years for each Employee
Benefit Plan, have been delivered to the Buyer. Each Employee Benefit Plan has
been administered in all material respects in accordance with its terms and each
of the Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Company, each ERISA Affiliate and each Employee
Benefit Plan are in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and the regulations thereunder
(including without limitation Section 4980 B of the Code, Subtitle K, Chapter
100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA).
All filings and reports as to each Employee Benefit Plan required to have been
submitted to the Internal Revenue Service or to the United States Department of
Labor have been duly submitted.
(c) There are no Legal Proceedings (except claims for benefits payable
in the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material liability.
(d) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service
<PAGE>
to the effect that such Employee Benefit Plans are qualified and the plans and
the trusts related thereto are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, no such determination letter has
been revoked and revocation has not been threatened, and no such Employee
Benefit Plan has been amended or operated since the date of its most recent
determination letter or application therefor in any respect, and no act or
omission has occurred, that would adversely affect its qualification or
materially increase its cost. Each Employee Benefit Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of, Section 401(k)(3) and
Section 401(m)(2) of the Code for each plan year ending prior to the Closing
Date.
(e) Neither the Company nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(f) At no time has the Company or any ERISA Affiliate been obligated to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code or
other applicable law and insurance conversion privileges under state law. The
assets of each Employee Benefit Plan which is funded are reported at their fair
market value on the books and records of such Employee Benefit Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or any ERISA
Affiliate that would subject the Company, any Subsidiary or any ERISA Affiliate
to (i) any material fine, penalty, tax or liability of any kind imposed under
ERISA or the Code or (ii) any contractual indemnification or contribution
obligation protecting any fiduciary, insurer or service provider with respect to
any Employee Benefit Plan.
(i) No Employee Benefit Plan is funded by, associated with or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and terminable unilaterally
by the Company at any time without liability to the Company as a result thereof
and no Employee Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees by
its terms prohibits the Company from amending or terminating any such Employee
Benefit Plan.
(k) Section 2.20(k) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the
<PAGE>
occurrence of a transaction involving the Company of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Company that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the Company, including without limitation any stock option plan,
stock appreciation right plan, restricted stock plan, stock purchase plan,
severance benefit plan or Employee Benefit Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
(l) Each Company Stockholder is employed solely by the Company.
2.21 Environmental Matters.
(a) The Company has complied with all applicable Environmental Laws (as
defined below). There is no pending or, to the knowledge of the Company,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the
Company. For purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by the
Company. With respect to any such releases of
<PAGE>
Materials of Environmental Concern, the Company has given all required notices
to Governmental Entities (copies of which have been provided to the Buyer). The
Company is not aware of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those owned, operated or
controlled by the Company that could reasonably be expected to have an impact on
the real property or facilities owned, operated or controlled by the Company.
For purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the federal Resource Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
(c) Set forth in Section 2.21(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits relating to premises
currently or previously owned or operated by the Company (whether conducted by
or on behalf of the Company or a third party, and whether done at the initiative
of the Company or directed by a Governmental Entity or other third party) which
were issued or conducted during the past five years and which the Company has
possession of or access to. Complete and accurate copies of each such report, or
the results of each such investigation or audit, have been provided to the
Buyer.
2.22 Legal Compliance. The Company, and the conduct and operation of its
business, is in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Company or
business.
2.23 Permits. Section 2.23 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
are the only Permits that are required for the Company to conduct its respective
businesses as presently conducted or as proposed to be conducted. Each such
Permit is in full force and effect and, to the best of the knowledge of the
Company, no suspension or cancellation of such Permit is threatened and there is
no basis for believing that such Permit will not be renewable upon expiration.
Each such Permit will continue in full force and effect following the Closing.
2.24 Certain Business Relationships With Affiliates. No Affiliate of the
Company (a) owns any property or right, tangible or intangible, which is used in
the business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to the Company. Section 2.24 of the Disclosure
Schedule describes any transactions or relationships between the Company and any
Affiliate thereof which are reflected in the statements of operations of the
Company included in the Financial Statements.
<PAGE>
2.25 Brokers' Fees. Neither the Company nor any Company Stockholder has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
2.26 Books and Records. The minute books and other similar records of the
Company contain true and complete records of all actions taken at any meetings
of the Company's stockholders, Board of Directors or any committee thereof and
of all written consents executed in lieu of the holding of any such meeting. The
books and records of the Company accurately reflect in all material respects the
assets, liabilities, business, financial condition and results of operations of
the Company and have been maintained in accordance with good business and
bookkeeping practices.
2.27 Year 2000 Compliance. All of the products and services currently
being marketed, distributed or licensed by the Company or which were marketed,
distributed or licensed by the Company since inception, and all internal
systems, including, without limitation, computer hardware systems, software
applications, firmware, equipment containing embedded microchips and other
embedded systems, are Year 2000 Compliant (as defined below). The Company is not
aware of any failure to be Year 2000 Compliant of any third-party system that is
material to the business or operations of the Company, including without
limitation any system belonging to any of the Company's suppliers, service
providers or customers. For purposes of this Agreement, "Year 2000 Compliant"
means that the applicable system or item:
(a) will accurately receive, record, store, provide, recognize and
process all date and time data from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years;
(b) will accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
(c) will not malfunction, cease to function or provide invalid or
incorrect results as a result of (x) the change of years from 1999 to 2000, (y)
date data, including date data which represents or references different
centuries, different dates during 1999 and 2000, or more than one century or (z)
the occurrence of any particular date;
in each case without human intervention, other than original data entry.
2.28 Customers, Distributors and Suppliers. Section 2.28 of the Disclosure
Schedule sets forth (a) all representatives or distributors of the Company
(whether pursuant to commission, royalty or other arrangement), (b) the 10
largest customers of the Company in terms of revenue recognized during the
period from January 1, 1999 through December 31, 1999 and (c) the ten largest
suppliers of Company in terms of costs recognized for the purchase of products
or services during the period from January 1, 1999 to December 31, 1999
(collectively, the
<PAGE>
"Distributors, Customers and Suppliers"). The Company does not know of any plan
or intention of any of the Distributors, Customers or Suppliers, and the Company
has not received any written or oral threat from any of the Distributors,
Customers or Suppliers, to terminate, cancel or otherwise adversely modify its
relationship with the Company or to decrease materially or limit its products to
or services to the Company or its usage, purchase or distribution of the
services or products of the Company.
2.29 Authority to Execute and Perform Agreements. Each Company Stockholder
has the full legal right and the power and authority to enter into, execute and
deliver this Agreement and the other agreements which this Agreement provides
that the Company Stockholders shall enter into, execute and deliver and to
perform fully such Company Stockholder's obligations hereunder and thereunder.
This Agreement and the other agreements which this Agreement provides that the
Company Stockholders shall enter into, execute and deliver have been duly
executed and delivered and are valid and binding obligations of the Company
Stockholders enforceable against the Company Stockholders in accordance with
their terms.
2.30 Title to Shares. Each Company Stockholder owns beneficially and of
record, free and clear of any lien, claim or encumbrance, the Company Shares set
forth opposite such Company Stockholder's name on Section 2.2 of the Disclosure
Schedule. There are no stockholder agreements, voting trusts, proxies or other
agreements or understandings with respect to the outstanding shares of capital
stock of the Company to which any Company Stockholder is a party.
2.31 EB Media. EB Media has been dissolved.
2.32 Equity Ownership. Set forth on the Disclosure Schedule are all equity
interests, or rights to acquire the same, held by any Company Stockholder;
provided, however, that the foregoing provision shall not be construed to
require disclosure by any Company Stockholder holding or having the right to
acquire an aggregate of not more than 2% of any class of securities of any
corporation having a class of securities registered pursuant to the Securities
Exchange Act of 1934, as amended.
2.33 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Company pursuant to this Agreement, and no other
statement made by the Company or any of its representatives in connection with
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Company has disclosed to the
Buyer all material information relating to the business of the Company or the
transactions contemplated by this Agreement.
<PAGE>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company Shareholders as follows:
3.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
400,000,000 shares of Buyer Common Stock and 5,000,000 shares of preferred
stock, $.01 par value per share (the "Buyer Preferred Stock"), of which (i) 250
shares are designated Series A Preferred Stock, (ii) 50,000 shares are
designated Series B Preferred Stock, (iii) 375,000 shares have been designated
as Series C Preferred Stock and (iv) 18,090.45 shares have been designated as
Series D Preferred Stock. As of the close of business on November 9, 1999,
118,662,978 shares of Buyer Common Stock were issued and outstanding, and (i) no
shares of Series A Preferred Stock, (ii) 35,000 shares of Series B Preferred
Stock (convertible into an aggregate of 1,384,538 shares of Buyer Common Stock),
(iii) 375,000 shares of Series C Preferred Stock (convertible into an aggregate
of 3,925,674 shares of Buyer Common Stock), and (iv) no shares of Series D
Preferred Stock were issued and outstanding. When issued in accordance with the
terms of this Agreement, the shares of Buyer Common Stock to be issued hereunder
will be duly authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights and shall be issued pursuant to an exemption from the
registration and prospectus delivery requirements of, and in compliance with,
the Securities Act, and applicable state law.
3.3 Authorization of Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and the Escrow Agreement and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the Escrow Agreement by the Buyer and the performance of this
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby by the Buyer have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against it
in accordance with its terms.
3.4 Reports and Financial Statements. The Buyer has previously furnished
to the Company complete and accurate copies, as amended or supplemented, of its
(a) Annual Report on Form 10-K for the fiscal year ended July 31, 1999, as filed
with the Securities and Exchange Commission ("SEC"), and (b) all other reports
filed by the Buyer under Section 13 of the Exchange Act with the SEC since July
31, 1999 (such reports are collectively referred to herein as the "Buyer
Reports"). The Buyer Reports constitute all of the documents required to be
filed by the Buyer under Section 13 of the Exchange Act with the SEC since July
31, 1999. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the
<PAGE>
Buyer Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Buyer.
3.5 Absence of Material Adverse Changes. Since July 31, 1999, there has
not been any material adverse change in the assets, business, financial
condition or results of operations of the Buyer and its Affiliates, taken as a
whole, other than those that are disclosed in the Buyer Reports.
3.6 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE IV - ARTICLE IV - SURVIVAL; INDEMNIFICATION
4.1 Survival of Obligations.
(a) The representations and warranties of the Company and the Company
Stockholders in this Agreement or any document delivered pursuant hereto shall
survive the Closing for a period of two years and shall terminate and be of no
further force or effect as of the second anniversary of the Closing Date, except
that (i) the representations and warranties in Section 2.9 shall survive the
Closing until 90 days after the expiration of the applicable statute of
limitations (giving effect to any applicable extensions), (ii) the
representations and warranties in Section 2.21 shall survive the Closing until
90 days after the expiration of the applicable statute of limitations and (iii)
the representations and warranties in Sections 2.2, 2.3, 2.29 and 2.30 shall
survive the Closing forever and shall not terminate. The representations and
warranties of the Buyer in this Agreement shall survive the Closing for a period
of one year and shall terminate and be of no further force or effect as of the
first anniversary of the Closing Date.
(b) The respective covenants and agreements of the Company and the
Company Stockholders in this Agreement or any document delivered pursuant hereto
shall survive the Closing and shall be fully effective and enforceable for the
periods therein indicated or where not indicated, forever.
4.2 Stockholder Obligation to Indemnify.
(a) Subject to Section 4.3, subsequent to the Effective Time, the
Company Stockholders shall, jointly and severally, indemnify and hold harmless
the Buyer, NaviSite and their directors, officers, employees, agents, affiliates
and assigns (collectively, the "Indemnified
<PAGE>
Persons") from and against all losses, liabilities, damages, deficiencies, costs
or expenses, including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys' fees, whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing (collectively, "Losses")
suffered or incurred by the Company or any Indemnified Person based upon,
arising out of or otherwise in respect of (i) any inaccuracy in or breach of any
representation or warranty of the Company in this Agreement or in any document
delivered pursuant hereto, (ii) any inaccuracy in or breach of any
representation or warranty of any of the Company Stockholders in this Agreement
or in any document delivered pursuant hereto or (iii) any breach of any covenant
or agreement of the Company in this Agreement or any document delivered pursuant
hereto, (iv) any breach of any covenant or agreement of any of the Company
Stockholders in this Agreement or any document delivered pursuant hereto.
(b) No indemnification shall be payable pursuant to Section 4.2(a) with
respect to any inaccuracy or breach of any representation or warranty or breach
of any covenant or agreement after termination thereof in accordance with
Section 4.1, except with respect to claims made prior to such termination
pursuant to Section 4.4 but not then resolved (such representation, warranty,
covenant or agreement surviving with respect to such claim until resolution of
such claim).
(c) All indemnification payments for any Loss under this Article IV
shall be made to Buyer, and the Company Stockholders shall not be required to
make payment for the same Loss to NaviSite.
4.3 Limitations on Stockholder Indemnification.
(a) The limitations of Sections 4.2(b) and 4.3(b) shall not apply in
the case of a fraudulent or intentional misrepresentation or breach by the
Company or any of the Company Stockholders.
(b) Each Company Stockholder shall have no further obligation to
indemnify Indemnified Persons pursuant to Section 4.2(a), or to transfer shares
to Buyer under Section 5.6 or 5.7 or to sell shares to Buyer under any Stock
Restriction Agreement after the aggregate consideration paid by such Company
Stockholder to Buyer pursuant to this Article IV equals (i) the number of Buyer
Shares received by such Company Stockholder pursuant to this Agreement less any
such Buyer Shares transferred to Buyer pursuant to Section 5.6 or 5.7 or sold to
Buyer pursuant to any Stock Restriction Agreement multiplied by (ii) the Closing
Price.
(c) Any surrender of Buyer Shares by a Company Stockholder pursuant to
Section 5.6 shall be credited against any indemnification obligation incurred by
such Company Stockholder for the Damages giving rise to such surrender under
Section 5.6. Any surrender of Buyer Shares by a Company Stockholder pursuant to
Section 5.7 shall be credited against any indemnification obligation incurred by
such Company Stockholder for the Damages giving rise to such surrender under
Section 5.7.
<PAGE>
4.4 Procedures Relating to Indemnification.
(a) An Indemnified Person (the "Indemnified Party") shall give prompt
written notice to the Stockholders Representatives (as defined in Section 4.5(a)
as representatives of the indemnifying parties (collectively, the "Indemnifying
Party") of any Loss in respect of which such Indemnified Party is seeking
indemnification under Sections 4.2(a), specifying in reasonable detail the
nature of such Loss, the section or sections of this Agreement to which the Loss
relates, and the amount of such Loss (or if not then determinable, its best
estimate of the amount of such Loss), except that any delay or failure so to
notify the Indemnifying Party shall only relieve the Indemnifying Party of its
obligations hereunder to the extent, if at all, that it is prejudiced by reason
of such delay or failure.
(b) If a Loss is suffered or incurred for or on account of or arises
from or in connection with any demand, claim, suit, action, cause of action,
investigation or inquiry by a person not party to this Agreement (a "Third Party
Claim"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all expenses. The Indemnified Party shall have the right to employ
separate counsel in such Third Party Claim and participate in such defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party. The Indemnifying Party shall not, without the Indemnified
Party's prior written consent, settle or compromise any Third Party Claim or
consent to the entry of any judgment with respect to any Third Party Claim which
would have an adverse effect on the Indemnified Party, except that the
Indemnifying Party may, without the Indemnified Party's prior written consent,
compromise or settle any such Third Party Claim or consent to entry of any
judgment with respect to any Third Party Claim which requires solely money
damages paid by the Indemnifying Party, and which includes as an unconditional
term thereof the release by the claimant or the plaintiff of the Indemnified
Party from all liability in respect of such Third Party Claim. If the
Indemnifying Party fails to assume the defense of any Third Party Claim within
20 business days after notice thereof, the Indemnified Party shall have the
right to undertake the defense, compromise or settlement of such Third Party
Claim for the account of the Indemnifying Party, subject to the right of the
Indemnifying Party to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the Indemnified Party at any time prior to the
compromise, settlement or final determination thereof. No Indemnified Party
shall, without the Indemnifying Party's prior written consent, settle or
compromise any Third Party Claim or consent to the entry of any judgment with
respect to any Third Party Claim unless such Indemnified Party has undertaken
the defense, compromise or settlement in accordance with this Section 4.4(b) and
the consent compromise or settlement of such Third Party Claim requires solely
money damages to be paid by the Indemnifying Party, and which includes as an
unconditional term thereof the release by the claimant or the plaintiff of the
Indemnifying Party from all liability in respect of such Third Party Claim. The
Indemnifying Party shall pay any Loss suffered or incurred for or on account of
or arising from or in connection with any Third Party Claim with respect to
which an Indemnified Party has undertaken the defense, compromise or settlement
in accordance with this Section 4.4(b) within 20 business days of receipt of
notice from such Indemnified Party of such Loss.
<PAGE>
(c) With respect to any Loss (other than any Loss suffered or incurred
for or on account of or arising from or in connection with any Third Party
Claim), the Stockholders Representatives shall have 30 business days from
receipt of notice from the Indemnified Party of such Loss within which to
respond in writing whether the Indemnified Party accepts responsibility for the
Loss or contests the validity of such Loss. If neither of the Stockholders
Representatives respond within such 30 business day period, the Indemnifying
Party shall be deemed to have accepted responsibility to make payment and shall
have no further right to contest the validity of such Loss.
4.5 Stockholder Representative.
(a) In order to administer the transactions contemplated by this
Agreement and the Escrow Agreement, including the indemnification obligations of
the Company Stockholders under this Article 4, the Company Stockholders hereby
designate and appoint Troy Snyder and Christopher Levy as their representatives
for purposes of this Agreement and the Escrow Agreement and as attorney-in-facts
and agents for and on behalf of each Company Stockholder (each in such capacity,
a "Stockholder Representative").
(b) The Company Stockholders hereby authorize each of the Stockholder
Representatives, acting singly, to represent the Company Stockholders, and their
successors, with respect to all matters arising under this Agreement and the
Escrow Agreement, including without limitation, (i) to take all action necessary
in connection with the indemnification obligations of the Company Stockholders
under this Article 4, including the defense or settlement of any claims and the
making of payments with respect thereto, (ii) to give and receive all notices
required to be given under this Agreement and the Escrow Agreement and (iii) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Company Stockholders by the Stockholder Representatives pursuant
to this Agreement and the Escrow Agreement.
(c) In the event that Troy Snyder, Christopher Levy or any substitute
Stockholder Representative dies, becomes unable to perform his responsibilities
as Stockholder Representative or resigns from such position, the Company
Stockholders having an aggregate of greater than 50% ownership interest in the
Company as set forth on Schedule 2.2 hereto shall select another representative
to fill such vacancy and such substituted Stockholder Representative shall be
deemed to be a Stockholder Representative for all purposes of this Agreement and
the Escrow Agreement.
(d) All decisions and actions by the Stockholder Representatives,
including without limitation any agreement between the Stockholder
Representatives and the Buyer or NaviSite or the Escrow Agent relating to
indemnification obligations of the Company Stockholders under this Article 4,
including the defense or settlement of any claims and the making of payments
with respect hereto, shall be binding upon all of the Company Stockholders, and
no Company Stockholders shall have the right to object, dissent, protest or
otherwise contest the same. The Stockholder Representatives shall incur no
liability to the Company Stockholders with respect to any action taken or
suffered by the Stockholder Representatives in reliance upon
<PAGE>
any notice, direction, instruction, consent, statement or other documents
believed by them to be genuinely and duly authorized, nor for any other action
or inaction with respect to the indemnification obligations of the Company
Stockholders under this Article 4, including the defense or settlement of any
claims and the making of payments with respect thereto, except to the extent
resulting from a Stockholder Representative's own willful misconduct or gross
negligence. The Stockholder Representatives may, in all questions arising under
this Agreement or the Escrow Agreement rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by the Stockholder
Representatives shall not be liable to the Company Stockholders.
(e) The Buyer, NaviSite and the Escrow Agent shall be able to rely
conclusively on the written instructions and decisions of any one Stockholder
Representative with respect to the indemnification obligations of the Company
Stockholders under this Article 4, including the defense or settlement of any
claims or the making of payments with respect thereto, or as to any other
actions required or permitted to be taken by the Stockholder Representatives
hereunder, and no party hereunder shall have any cause of action against the
Buyer or the Escrow Agent to the extent the Buyer, NaviSite or the Escrow Agent
has relied upon the written instructions or decisions of any one Stockholder
Representative.
(f) The Company Stockholders acknowledge and agree that the Stockholder
Representatives may incur costs and expenses on behalf of the Stockholders in
their capacity as Stockholder Representatives ("Representative Expenses"). Each
of the Company Stockholders agrees to pay the Stockholder Representatives,
promptly upon demand by the Stockholder Representative therefor, a percentage of
any Representative Expenses equal to such Stockholder's ownership interest in
the Company as set forth on Schedule 2.2 hereto.
ARTICLE V - COVENANTS AND AGREEMENTS
5.1 Investment Representation and Lock-Up Agreements. At the Closing, each
Company Stockholder shall deliver to the Buyer a duly executed Investment
Representation and Lock-Up Agreement in substantially the form attached hereto
as Exhibit B.
5.2 Stock Restriction Agreements. At the Closing, each Company Stockholder
shall deliver to the Buyer a duly executed Stock Restriction Agreement in
substantially the form attached hereto as Exhibit C (the "Stock Restriction
Agreements").
5.3 Non-Competition. At the Closing, each Company Stockholder shall
deliver to the Buyer a duly executed Non-Competition and Non-Solicitation
Agreement in substantially the form attached hereto as Exhibit D.
5.4 Opinion of Counsel. The Buyer shall have received an opinion of
Fulbright & Jaworski LLP, counsel to the Company Stockholders, the Company and
the Subsidiaries, dated as of the Closing Date, substantially the form attached
hereto as Exhibit E, and as to such other matters as may be reasonably requested
by the Buyer or its counsel.
<PAGE>
5.5 Resignations. At the Closing, the company shall deliver the
resignations of each Director and each officer of the Company, effective as of
the Closing.
5.6 Retention. The following are the key employees of the Company as of
the Closing: Troy Snyder, Christopher Levy, Christopher Knox, Randy Levine,
Scott Bossinger, James Sherry, Michael Wallace and Michael Turner (collectively,
the "Key Employees"). The Company Stockholders hereby covenant and agree that at
least sixty-seven percent (67%) of the Key Employees shall remain employees of
the Company at all times through the first anniversary of the Closing Date,
except to the extent any one or more of the Key Employees is terminated without
Cause (as defined below), resigns for Good Reason (as defined below), dies or
becomes disabled. The Parties hereby agree that for each one percent (1%) by
which the percentage of Key Employees who remain with the Company at all times
through the first anniversary of the Closing Date (the "Retention Rate") is less
than sixty-seven percent (67%), other than by reason of termination without
Cause, resignation for Good Reason, death or disability, the Company
Stockholders, on a pro rata basis according to their proportionate interests
shown on Schedule 2.2, shall transfer to Buyer, for no consideration, three
percent (3%) of all Buyer Shares, such that if the Retention Rate is less than
thirty-four percent (34%), Company Stockholders shall have transferred (100%) of
all the Buyer Shares Notwithstanding the foregoing, any shares repurchased by
the Buyer under any Stock Restriction Agreement shall be credited against, and
reduce, the number of shares that shall be transferred under Section 5.6.
"Good Reason" shall have the meaning set forth in the Stock Restriction
Agreement.
"Cause" shall have the meaning set forth in the Stock Restriction
Agreement.
5.7 Streaming Revenue. If the Streaming Revenue (as defined below) is less
than $1,375,000 for the 11 month period ended December 31, 2000, the Company
Stockholders shall, on a pro rata basis according to their proportionate
interests shown on Schedule 2.2, transfer to Buyer, for no consideration, a
number of shares of Buyer Common Stock equal to the total number of Buyer Shares
multiplied by a fraction, the numerator of which shall be $1,375,000, less the
amount of Streaming Revenue achieved for the 11 month period ended December 31,
2000, and the denominator of which shall be $1,375,000. Notwithstanding the
foregoing, no Buyer Shares shall be required to be transferred to Buyer
hereunder if, prior to December 31, 2000, NaviSite ceases to provide a
reasonable level of funding for the development and commercialization of
streaming media services, as determined in the judgment of NaviSite's
management.
"Streaming Revenue" shall mean all revenue recognized, after January 31,
2000, without duplication: (i) by ClickHear or NaviSite from sales of streaming
media services; (ii) by NaviSite from sales of hosting services to customers who
purchase both hosting services and streaming media services from ClickHear
and/or NaviSite; and (iii) by NaviSite from sales of hosting services to
customers of the Company as of the Closing Date.
<PAGE>
5.8 Non-Disclosure and Developments. At the Closing, the Company shall
deliver to the Buyer a duly executed Non-Disclosure and Developments Agreement
executed by each employee of the Company in the form attached hereto as
Exhibit F.
5.9 Audited Financial Statements. The Company Stockholders shall, at their
expense, provide to the Buyer and NaviSite, as soon as practicable following the
Closing, audited financial statements of the Company for the year ended December
31, 1999 ("Audited Financial Statements"). Notwithstanding anything to the
contrary herein, the Buyer shall be entitled to make a claim for indemnification
under Article IV as a result of any breach of any representation or warranty
made in Section 2.6, 2.7 or 2.8 uncovered in the Audited Financial Statements
only if the claimed amount exceeds $25,000 (in which event the claim may be made
for the full amount).
5.10 Slik Technology. The Company Stockholders will use their best efforts
to obtain any necessary approval from the California Franchise Tax Board and
dissolve Slik Technology.
ARTICLE VI - DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
- ------------ -------
12/31/99 Balance Sheet 2.6
Agreement Introduction
Audited Financial Statements 5.9
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Preferred Stock 3.2
Buyer Reports 3.4
Buyer Shares 1.5(a)
Cause 5.6
CERCLA 2.21(a)
Closing 1.1
Closing Date 1.3
Closing Price 1.5(a)
Code 2.9(c)
Company Introduction
Company Common Stock Introduction
Company Financial Statements 2.6
Company Intellectual Property 2.11(a)
Company Material Adverse Effect 2.7
Company Shares Introduction
Company Stockholder Introduction
<PAGE>
Disclosure Schedule Article II
Distributors, Customers and Suppliers 2.28
Employee Benefit Plan 2.20(a)(i)
Environmental Law 2.21(a)
ERISA 2.20(a)(ii)
ERISA Affiliate 2.20(a)(iii)
Escrow Agreement 1.4
Escrow Shares 1.5(a)
Exchange Act 2.14(f)
GAAP 2.6
Good Reason 5.6
Governmental Entity 2.4
Indemnified Party 4.4(a)
Indemnifying Party 4.4(a)
Indemnified Persons 4.1
Initial Shares 1.5(a)
Intellectual Property 2.11(a)
Key Employee 5.6
Legal Proceeding 2.18
Losses 4.2(a)
Materials of Environmental Concern 2.21(b)
NaviSite Introduction
NaviSite Common Stock 1.5(c)
Ordinary Course of Business 2.4
Party Introduction
Permit 2.23
Representative Expenses 4.5(f)
Retention Rate 5.6
SEC 3.4
Securities Act 2.2
Security Interest 2.4
Software 2.11(e)
Stock Restriction Agreements 5.2
Stockholder Representative 4.5(a)
Streaming Revenue 5.7
Subsidiary 2.5
Taxes 2.9(a)
Tax Returns 2.9(a)
Third Party Claim 4.4(b)
Year 2000 Compliant 2.27
<PAGE>
ARTICLE VII - MISCELLANEOUS
7.1 Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
7.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
7.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
7.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that NaviSite may assign its rights, interests
and obligations hereunder to an Affiliate of the Buyer or NaviSite.
7.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
<PAGE>
<TABLE>
<S> <C>
IF TO THE COMPANY: COPY (WHICH SHALL NOT CONSTITUTE LEGAL NOTICE) TO:
------------------ --------------------------------------------------
ClickHear, Inc. Fulbright & Jaworski LLP
4822 Santa Monica Avenue 600 Congress Street, Suite 2400
Suite 220 Austin, Texas 78701
San Diego, CA 92107 Attn: John C. Boehm, Jr., Esq.
Attn: President
IF TO THE BUYER: COPY (WHICH SHALL NOT CONSTITUTE LEGAL NOTICE) TO:
---------------- --------------------------------------------------
CMGI, Inc. Hale and Dorr LLP
100 Brickstone Square, 5th Floor 60 State Street
Andover, MA 01810 Boston, MA 02109
Attn: Chief Financial Officer Attn: Mark G. Borden, Esq.
IF TO NAVISITE: COPY (WHICH SHALL NOT CONSTITUTE LEGAL NOTICE) TO:
-------------- -------------------------------------------------
NaviSite, Inc. Hale and Dorr LLP
400 Minuteman Road 60 State Street
Andover, MA 01810 Boston, MA 02109
Attn: Chief Financial Officer Attn: Mark G. Borden, Esq.
</TABLE>
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
7.9 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.10 Expenses. The Company Stockholders, and not the Company, shall bear
all costs and expenses (including broker, investment banking, legal and other
professional fees and
<PAGE>
expenses) incurred by the Company Stockholders or the Company in connection with
this Agreement and the transactions contemplated hereby. If not paid by the
Company Stockholders within ten (10) days of an invoice or demand for payment,
such expenses may be recovered by the Buyer pursuant to the Escrow Agreement.
NaviSite, and not the Buyer, shall bear all costs and expenses (including
broker, investment banking, legal and other professional fees and expenses)
incurred by the Buyer or NaviSite in connection with this Agreement and the
transactions contemplated hereby.
7.11 Specific Performance. Each of the Parties acknowledges and agrees that
one or more of the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
7.12 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of the United States District Court for the District of
Massachusetts sitting in Boston, Massachusetts in any action or proceeding
arising out of or relating to this Agreement, (b) agrees that all claims in
respect of the action or proceeding may be heard and determined in any such
court, and (c) agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety or other security that might be required of
any other Party with respect thereto. Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
7.8. Nothing in this Section 7.13, however, shall affect the right of any Party
to serve legal process in any other manner permitted by law.
7.13 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
7.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
CMGI, INC.
By: /s/ David Andonian
-----------------------------------
Name: David Andonian
Title: President, Corporate Development
NAVISITE, INC.
By: /s/ Joel Rosen
-----------------------------------
Name: Joel Rosen
Title: Chief Executive Officer
CLICKHEAR, INC.
By: /s/ Troy Snyder
-----------------------------------
Name: Troy Snyder
Title: President
<PAGE>
COMPANY STOCKHOLDERS
/s/ Troy Snyder /s/ Jodie Bossinger
- ------------------------------- -----------------------------
Troy Snyder Spousal Consent
/s/ Christopher Levy
- -------------------------------
Christopher Levy
/s/ Christopher Knox
- -------------------------------
Christopher Knox
/s/ Randy Levine
- -------------------------------
Randy Levine
/s/ Michael Wallace
- -------------------------------
Michael Wallace
/s/ James Sherry
- -------------------------------
James Sherry
/s/ Michael Turner
- -------------------------------
Michael Turner
<PAGE>
EXHIBIT 99.2
INTER-COMPANY AGREEMENT
THIS INTER-COMPANY AGREEMENT (the "Agreement") is made and entered into as
of February 22, 2000 between CMGI Inc., a Delaware corporation ("CMGI"), and
NaviSite, Inc., a Delaware corporation and a majority-owned subsidiary of CMGI
("NaviSite").
WHEREAS, pursuant to the Stock Purchase Agreement (the "Purchase
Agreement") entered into as of February 16, 2000 by and among CMGI, NaviSite,
ClickHear Inc., a Nevada corporation (the "Company"), and the Stockholders of
Company (the "Stockholders"), the Stockholders will acquire shares of the common
stock, $.01 par value per share, of CMGI ("CMGI Common Stock") and CMGI will
acquire all of the issued and outstanding shares of the Company (the "Company
Shares"). Capitalized terms used herein but not defined herein shall have the
meaning set forth in the Purchase Agreement.
WHEREAS, pursuant to the Purchase Agreement, CMGI has agreed to contribute
to NaviSite all of the Company Shares and NaviSite has agreed to issue and
deliver to CMGI shares of common stock, $.01 par value per share, of NaviSite
("NaviSite Common Stock")
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and other good and valuable consideration, the
parties hereto hereby agree as follows:
1. Purchase Agreement Transactions.
(a) Contribution. On the date hereof, CMGI hereby agrees to contribute
to NaviSite, and NaviSite hereby agrees to accept from CMGI, all of the Company
Shares held by CMGI in the consideration for a number of shares of NaviSite
Common Stock determined in accordance with the Purchase Agreement.
(b) Returned Escrow Shares. If any cash amounts are paid by a
Stockholder to CMGI pursuant to any indemnification obligations in the Purchase
Agreement, CMGI shall promptly deliver such cash amount to NaviSite. If any
shares of CMGI Common Stock are surrendered by a Stockholder to CMGI in payment
of any indemnification obligation in the Purchase Agreement, pursuant to
Sections 5.6 or 5.7 of the Purchase Agreement or as a result of forfeiture under
a Stock Restriction Agreement, CMGI shall transfer to NaviSite a number of
shares of NaviSite Common Stock equal to the number of such shares of CMGI
Common Stock multiplied by the ratio of the average closing price of the CMGI
Common Stock to that of the NaviSite Common Stock over the five (5) consecutive
trading days ending on the trading day that is three (3) trading days prior to
the Closing Date of the Purchase Agreement, each as adjusted for any subsequent
stock splits, stock dividends or similar events. In the event the shares of
NaviSite Common Stock received by CMGI pursuant to Section 1(a) are exchanged
for cash, securities or other property pursuant to a merger, consolidation or
other acquisition of NaviSite, CMGI may, in lieu of transferring shares of
NaviSite Common Stock to NaviSite pursuant to this Section 1(c), transfer the
cash, securities or other property received by CMGI with respect to the number
of shares of NaviSite Common Stock otherwise required to be transferred by CMGI
to NaviSite hereunder.
<PAGE>
(c) Indemnity. NaviSite shall have primary authority to enforce
indemnification provisions of the Purchase Agreement. NaviSite and CMGI shall
use commercially reasonable efforts to enforce the indemnification rights of
CMGI and NaviSite under Article IV of the Purchase Agreement, and any rights of
CMGI to recover shares of CMGI Common Stock under Sections 5.6 or 5.7 of the
Purchase Agreement and under the Stock Restriction Agreements; provided that
NaviSite shall reimburse CMGI for any fees and expenses incurred by CMGI in
enforcing such rights.
(d) No Remedy. NaviSite agrees and acknowledges that it shall have no
remedies under Article III of the Purchase Agreement against CMGI for any
indemnification claim which it may have under such Article III and that it shall
not seek to assert any right to indemnification under such Article III against
CMGI.
(e) Responsibility for Representations. As between CMGI and NaviSite,
any liability arising from a breach of any representation in Article III of the
Purchase Agreement relating to CMGI shall be the responsibility of CMGI.
(f) Responsibility for Covenants. As between CMGI and NaviSite, any
liability arising from a breach of any covenant in Article V of the Purchase
Agreement relating to CMGI shall be the responsibility of CMGI and any liability
arising from a breach of any covenant in Article V relating to NaviSite shall be
the responsibility of NaviSite.
2. NaviSite Representations.
(a) Organization. NaviSite is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
(b) Authorization of Transaction. NaviSite has all requisite power and
authority to execute and deliver this Agreement, the Escrow Agreement and the
Purchase Agreement and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Escrow Agreement and the Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby by NaviSite have been duly and validly authorized by all necessary
corporate action on the part of NaviSite. This Agreement, Escrow Agreement and
the Purchase Agreement have been duly and validly executed and delivered by the
Buyer and constitute valid and binding obligations of NaviSite, enforceable
against it in accordance with their terms.
(c) Reports and Financial Statements. NaviSite has previously furnished
to the CMGI complete and accurate copies, as amended or supplemented, of all
reports filed by the Buyer under Section 13 of the Exchange Act with the SEC
(such reports are collectively referred to herein as the "NaviSite Reports").
The NaviSite Reports constitute all of the documents required to be filed by
NaviSite under Section 13 of the Exchange Act with the SEC. As of their
respective dates, the NaviSite Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of NaviSite
included in the NaviSite Reports (i) comply as to form in all material respects
with applicable accounting requirements and the
<PAGE>
published rules and regulations of the SEC with respect thereto, (ii) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of NaviSite as of the respective
dates thereof and for the periods referred to therein, and (iv) are consistent
with the books and records of the NaviSite.
(d) Absence of Material Adverse Changes. Since October 31, 1999, there
has not been any material adverse change in the assets, business, financial
condition or results of operations of the NaviSite, other than those that are
disclosed in the NaviSite Reports.
(e) Brokers' Fees. NaviSite has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3. Miscellaneous.
(a) No Third Party Beneficiaries. The purpose of this Agreement is to
provide for the equitable adjustment of amounts due NaviSite and CMGI with
respect to the acquisition of the Company by NaviSite as set forth above and
shall not under any circumstances be deemed to create any rights in, or confer
any benefits upon, any third party or parties (including, without limitation,
the former Company Shareholders) in any respect. Nothing herein shall be
construed as waiving or affecting any respective rights of the parties hereto
with respect to any amounts held in the Escrow or with respect to any
indemnification obligations or otherwise.
(b) Entire Agreement. This Agreement and the Purchase Agreement and the
documents referred to herein and therein constitute the entire agreement among
CMGI and NaviSite and supersedes any prior understandings, agreements or
representations by or among the parties, written or oral, with respect to the
subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other party.
(d) Counterparts and Facsimile Signature. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(f) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered as provided
in the Purchase Agreement.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of the Commonwealth of
Massachusetts.
(h) Amendments and Waivers. The parties may mutually amend any
provision of this Agreement at any time. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both
of the parties. No waiver of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the party giving such waiver. No
waiver by any party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
(j) Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
(k) Capitalized terms. Capitalized terms used herein which are defined
in the Purchase Agreement have the same meanings herein as therein, except to
the extent that such meanings are amended hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CMGI, INC.
By: /s/ David Andonian
---------------------------------
Name: David Andonian
Title: President, Corporate Development
NAVISITE, INC.
By: /s/ Joel Rosen
---------------------------------
Name: Joel Rosen
Title: Chief Executive Officer
