Table of Contents
SCHEDULE 14C
INFORMATION
Information
Statement Pursuant to Section 14(c) of the Securities
Exchange
Act of 1934
Check the
appropriate box:
| þ Preliminary Information Statement | ||
|
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
|
||
| o Definitive Information Statement | ||
NAVISITE, INC.
(Name of Registrant as Specified in
Charter)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
| o | Fee computed on table below per Exchange Act Rule 14c-5(g) and 0-11. |
| 1) | Title of each class of securities to which transaction applies: |
| 2) | Aggregate number of securities to which transaction applies: |
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) | Proposed maximum aggregate value of transaction: |
| 5) | Total fee paid: |
| o | Fee paid previously by written preliminary materials. |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) | Amount Previously Paid: |
| 2) | Form Schedule or Registration Statement No.: |
| 3) | Filing Party: |
| 4) | Date Filed: |
Table of Contents
Preliminary
Copy
NAVISITE,
INC.
400 Minuteman Road
Andover, Massachusetts 01810
400 Minuteman Road
Andover, Massachusetts 01810
NOTICE OF ACTION TAKEN PURSUANT
TO
WRITTEN CONSENT OF STOCKHOLDERS
WRITTEN CONSENT OF STOCKHOLDERS
To the stockholders of NaviSite, Inc.:
This Notice and the accompanying Information Statement are being
furnished to the stockholders of NaviSite, Inc., a Delaware
corporation (the “Company”), in connection with action
taken by the holders of at least a majority of the issued and
outstanding voting securities of the Company, approving, by
written consent dated April 11, 2006, the issuance of the
shares of the Company’s Common Stock issuable upon exercise
of the warrants issued to SPCP Group, L.L.C. and SPCP
Group III LLC.
We Are Not Asking You for a Proxy and You are Requested Not
To Send Us a Proxy.
Your vote or consent is not requested or required to approve
these matters. The accompanying Information Statement is
provided solely for your information. The accompanying
Information Statement also serves as the notice required by
Section 228 of the Delaware General Corporation Law of the
taking of a corporate action without a meeting by less than
unanimous written consent of the stockholders of the Company.
By Order of the Board of Directors,
Monique Cormier
Secretary
Andover, Massachusetts
May , 2006
TABLE OF CONTENTS
Table of Contents
Preliminary
Copy
NAVISITE,
INC.
400 Minuteman Road
Andover, Massachusetts 01810
400 Minuteman Road
Andover, Massachusetts 01810
We Are
Not Asking You for a Proxy and You are Requested Not To Send Us
a Proxy.
General
This Information Statement is being furnished by NaviSite, Inc.,
a Delaware corporation (“NaviSite” or the
“Company”), in connection with action taken by the
holders of at least a majority of the issued and outstanding
voting securities of the Company, approving, by written consent
dated April 11, 2006, the issuance of the shares of the
Company’s Common Stock issuable upon exercise of the
warrants issued to SPCP Group, L.L.C. and SPCP Group III
LLC.
This Information Statement is being provided pursuant to the
requirements of
Rule 14c-2
of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) to inform holders of Common Stock
entitled to vote or give an authorization or consent in regard
to the matters acted upon by written consent. This Information
Statement is being mailed on or about May ,
2006 to the Company’s stockholders of record as of
April 12, 2006 (the “Record Date”). The Company
anticipates that the actions taken by written consent by the
Company’s majority stockholder will take effect on
May , 2006.
Reason
for the Written Consent
The
Silver Point Financing
On April 11, 2006, the Company entered into a Credit and
Guaranty Agreement (the “Credit Agreement”) with
Silver Point Finance, LLC (“Silver Point”) whereby
Silver Point provided to the Company a $70 million senior
secured term loan facility (the “Term Loan”) and a
$3 million senior secured revolving credit facility (the
“Revolving Facility,” and collectively with the Term
Loan, the “Credit Facility”). On April 11, 2006,
in connection with the Credit Facility, the Company issued two
warrants to purchase an aggregate of 3,514,933 (subject to
adjustment) shares of common stock, $0.01 par value per
share of the Company (the “Common Stock”), pursuant to
a Warrant Purchase Agreement by and between the Company, SPCP
Group, L.L.C. and SPCP Group III LLC, each a Delaware
limited liability company and affiliated entity of Silver Point.
SPCP Group, L.L.C. was issued a warrant to purchase
2,636,200 shares of Common Stock at an exercise price of
$.01 per share (“Warrant No. 1”), and SPCP
Group III LLC was issued a warrant to purchase
878,733 shares of Common Stock at an exercise price of
$.01 per share (“Warrant No. 2”, and
together with Warrant No. 1, the “Warrants”). The
Warrants are subject to potential weighted-average anti-dilution
adjustments that could result in additional shares being
issuable upon exercise of the Warrants. The Warrants also
contain a limitation on the maximum number of shares issuable
under the Warrants (the “Conversion Cap”), such that
absent stockholder approval, the Warrants may not be exercised
for more than 5,728,108 shares of Common Stock, which is
equal to approximately 19.999% of the outstanding shares of
Common Stock as of the date of issuance of the Warrants. The
Conversion Cap is intended to ensure the issuance of the
Warrants complies with NASD Rules governing The Nasdaq Capital
Market, where the Common Stock is listed. The Company agreed to
use its best efforts to obtain stockholder approval of the
issuance of the Common Stock upon exercise of the Warrants for
the purpose of terminating the effectiveness of the Conversion
Cap. The Warrants expire on April 11, 2016.
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The
Written Consent
On April 11, 2006, Atlantic Investors, LLC, the majority
stockholder of the Company (“Atlantic Investors”),
delivered to the Company an executed written consent of
stockholders, in the form attached as Appendix I, approving
the issuance of the shares of the Common Stock upon exercise of
the Warrants (the “Written Consent”).
Voting
and Vote Required
The Company is not seeking consent, authorizations or proxies
from you. Section 228 of the Delaware General Corporation
Law (“Section 228”) provides that the written
consent of the holders of outstanding shares of voting capital
stock, having not less than the minimum number of votes which
would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and
voted, may be substituted for a meeting. Approval of at least a
majority of the outstanding shares of Common Stock present and
voting on the matter at a meeting would be required to approve
(i) the potential issuance of the shares of the Common
Stock upon the exercise of the Warrants in excess of 19.999% of
the outstanding Common Stock on the date the Warrants were
issued in the event anti-dilution adjustments occur and
(ii) the potential issuance of shares of Common Stock upon
exercise of the Warrants in excess of 19.999% which will result
in a change of control of the Company.
As of the date of the Written Consent, the Company had
28,673,246 shares of Common Stock outstanding and entitled
to vote. As of the Record Date, the Company had
28,675,746 shares of Common Stock outstanding and entitled
to vote. Each share of Common Stock is entitled to one vote. On
the date of the Written Consent, Atlantic Investors held
17,121,652 shares, or approximately 60%, of the outstanding
shares of the Common Stock. Accordingly, the matters approved by
Atlantic Investors by written consent have been approved under
Section 228 and require no further stockholder action.
Notice
Pursuant to Section 228
Pursuant to Section 228, the Company is also required to
provide prompt notice of the taking of a corporate action by
written consent to the stockholders who have not consented in
writing to such action. This Information Statement also serves
as the notice required by Section 228.
Dissenters’
Rights of Appraisal
The Delaware General Corporation Law does not provide
dissenters’ rights of appraisal to the Company’s
stockholders in connection with the matters approved by the
Written Consent.
Householding
of Stockholder Materials
Some banks, brokers and other nominee record holders may be
participating in the practice of “householding”
stockholder materials, such as proxy statements, information
statements and annual reports. This means that only one copy of
this Information Statement may have been sent to multiple
stockholders in your household. The Company will promptly
deliver a separate copy of this Information Statement to you if
you write or call us at the following address or telephone
number: Investor Relations Department, NaviSite, Inc., 400
Minuteman Road, Andover, Massachusetts 01810, telephone:
(978) 946-8729.
If you want to receive separate copies of stockholder materials
in the future, or if you are receiving multiple copies and would
like to receive only one copy for your household, you should
contact your bank, broker, or other nominee record holder, or
you may contact the Company at the above address and telephone
number.
APPROVAL
OF THE ISSUANCE OF SHARES UPON EXERCISE OF
WARRANTS
On April 11, 2006 (the “Closing Date”), the
Company entered into the Credit Agreement with Silver Point and
certain affiliated entities (collectively, with Silver Point,
the “Lenders”), whereby the Lenders provided to the
Company the Credit Facility. Avasta, Inc., ClearBlue
Technologies Management, Inc., Clearblue
Technologies/Chicago-Wells, Inc., Clearblue Technologies/Las
Vegas, Inc., Clearblue Technologies/
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Los Angeles, Inc., Clearblue Technologies/Milwaukee, Inc.,
Clearblue Technologies/Oak Brook, Inc., Clearblue
Technologies/Vienna, Inc., Clearblue Technologies/Dallas, Inc.,
Clearblue Technologies/New York, Inc., Clearblue
Technologies/San Francisco, Inc., Clearblue
Technologies/Santa Clara, Inc., Conxion Corporation,
Intrepid Acquisition Corp., Lexington Acquisition Corp.,
ManagedOps.com, Inc., Surebridge Acquisition Corp., Surebridge
Services, Inc., SiteROCK Corporation, NaviSite Acquisition
Subsidiary, Inc., and ClickHear, Inc. (each a direct or indirect
subsidiary of the Company) are also parties to the Credit
Agreement, as guarantors of the Company’s obligations
thereunder (each, a “Guarantor,” and collectively, the
“Guarantors”).
Warrants
to Purchase Company Stock
On the Closing Date, and in connection with the Credit Facility,
the Company issued a warrant to SPCP Group, L.L.C. and a warrant
to SPCP Group III LLC to purchase an aggregate of 3,514,933
(subject to adjustment) shares of Common Stock pursuant to a
Warrant Purchase Agreement by and between the Company, SPCP
Group, L.L.C. and SPCP Group III LLC, each a Delaware
limited liability company and affiliated entity of Silver Point.
SPCP Group, L.L.C. was issued a warrant to purchase
2,636,200 shares of Common Stock at an exercise price of
$.01 per share, and SPCP Group III LLC was issued a
warrant to purchase 878,733 shares of Common Stock at an
exercise price of $.01 per share. The Warrants are subject
to potential weighted-average anti-dilution adjustments that
could result in additional shares being issuable upon exercise
of the Warrants. The Warrants also contain the Conversion Cap,
such that absent stockholder approval, the Warrants may not be
exercised for more than 5,728,108 shares of Common Stock,
which is equal to approximately 19.999% of the outstanding
shares of Common Stock as of the date of issuance of the
Warrants. The Conversion Cap is intended to ensure the issuance
of the Warrants complies with NASD Rules governing The Nasdaq
Capital Market, where the Common Stock is listed. The Company
agreed to use its best efforts to obtain stockholder approval of
the issuance of the Common Stock upon exercise of the Warrants
for the purpose of terminating the effectiveness of the
Conversion Cap. The Warrants expire on April 11, 2016.
At any time and from time to time until April 11, 2016, the
warrantholders are entitled to demand and piggyback registration
rights, whereby either warrantholder may request the Company to
file a registration statement, or to include within a
registration statement to be filed, with the Securities and
Exchange Commission for the warrantholders’ resale of the
shares of Common Stock issuable upon exercise of the Warrants.
The warrantholders agreed that they will not sell or otherwise
transfer any shares of Common Stock they may acquire upon
exercise of the Warrants during the 90 days following the
Closing Date, provided that such restriction applies only to the
extent Atlantic Investors is also restricted from selling its
shares of Common Stock. On April 11, 2006, the Company
obtained Atlantic Investors’ written agreement that it
would not sell any shares of Common Stock it owns during the
90 days following the Closing Date.
Nasdaq
Stockholder Approval Requirements
The Common Stock is listed on The Nasdaq Capital Market. NASD
Rule 4350(i)(1)(D) requires that the issuer of stock in
connection with a transaction other than a public offering
secure stockholder approval prior to an issuance where the
issuance or potential issuance of the shares of common stock, or
securities convertible into or exercisable for common stock,
would result in the issuance of 20% or more of the common stock
or voting power of the issuer before the issuance for less than
the greater of book or market value of the stock. In addition,
NASD Rule 4350(i)(1)(B) requires that the issuer of stock
secure stockholder approval prior to an issuance or potential
issuance which will result in a change of control of the issuer.
NASD rules do not require stockholder approval of the issuance
of the Warrants or the closing of the Silver Point financing,
which closed on April 11, 2006. The Warrants are initially
exercisable for 3,514,933 shares of Common Stock (and in no
event more than 5,728,108 shares of Common Stock until
stockholder approval is effective). The potential issuance of
shares of Common Stock under the Warrants in excess of 5,728,108
(which represents approximately 19.999% of the Company’s
outstanding Common Stock as of the date of issuance of the
Warrants) (shares issued or potentially issued in excess of such
number are hereinafter referred to as the “Warrant
Shares”) could potentially cause the issuance to equal or
exceed the 20% threshold and could potentially be deemed a
change of control of the Company under applicable NASD rules.
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On April 11, 2006, Atlantic Investors delivered to the
Company an executed written consent approving the issuance of
the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants (including the issuance of the Warrant
Shares). This Information Statement is being sent to all
stockholders of the Company as of the Record Date as notice that
such action has been taken. The Company is not asking that you
vote to approve the issuance of the Warrant Shares. Under
federal law governing the taking of stockholder action by
written consent, stockholder approval of the issuance of the
Warrant Shares will be deemed effective 20 days after the
mailing of this Information Statement to stockholders of the
Company. Pursuant to the terms of the Warrants and the Warrant
Purchase Agreement, the Warrants shall not be convertible into
an aggregate number of shares of Common Stock that is greater
than 5,728,108 shares of Common Stock (which equals
approximately 19.999% of the Company’s outstanding Common
Stock as of the date of issuance of the Warrants) unless and
until such stockholder approval is deemed effective.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
April 15, 2006 (unless otherwise indicated), with respect
to the beneficial ownership of Common Stock by the following:
| • | each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock; | |
| • | each of the Company’s directors; | |
| • | each of the Named Executive Officers (as defined below under the heading “Executive Compensation”); and | |
| • | all of the current executive officers and directors as a group. |
For purposes of the following table, beneficial ownership is
determined in accordance with the rules promulgated by the
Securities and Exchange Commission and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Except as otherwise noted in the footnotes to the
table, the Company believes that each person or entity named in
the table has sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them
(or shares such power with his or her spouse). Under such rules,
shares of Common Stock issuable under (i) options that are
currently exercisable or exercisable within 60 days after
April 15, 2006 (“Presently Exercisable Options”)
and (ii) warrants that are currently exercisable or
exercisable within 60 days after April 15, 2006
(“Presently Exercisable Warrants”) are deemed
outstanding and are included in the number of shares
beneficially owned by a person named in the table and are used
to compute the percentage ownership of that person. These shares
are not, however, deemed outstanding for computing the
percentage ownership of any other person or entity. Unless
otherwise indicated, the address of each person listed in the
table is c/o NaviSite, Inc., 400 Minuteman Road, Andover,
Massachusetts 01810.
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The percentage ownership of Common Stock of each person or
entity named in the following table is based on
28,677,412 shares of Common Stock outstanding as of
April 15, 2006 plus any shares subject to Presently
Exercisable Options held by such person.
|
Amount and Nature of |
||||||||
| Beneficial Ownership | ||||||||
|
Name and Address of |
Number of |
Percentage |
||||||
|
Beneficial Owner
|
Shares | of Class | ||||||
|
5% Stockholders
|
||||||||
|
Atlantic Investors, LLC
|
17,121,652 | (1) | 59.7 | % | ||||
|
20 East 66th Street
New York, NY 10021 |
||||||||
|
Hewlett-Packard Financial Services
Company
|
4,416,592 | (2) | 15.4 | % | ||||
|
420 Mountain Avenue
Murray Hill, NJ 07974 |
||||||||
|
Waythere, Inc.(3)
|
3,000,000 | 10.5 | % | |||||
|
c/o BG Affiliates
One Beacon Street Suite 1500 Boston, MA 02108 |
||||||||
|
SPCP Group, L.L.C. and SPCP
Group III LLC
|
3,514,933 | (4) | 10.9 | % | ||||
|
c/o Silver Point Capital
Two Greenwich Plaza Greenwich, CT 06830 |
||||||||
|
Directors and Named Executive
Officers
|
||||||||
|
Andrew Ruhan
|
57,500 | (5) | * | |||||
|
Arthur P. Becker
|
838,769 | (6) | 2.9 | % | ||||
|
Gabriel Ruhan
|
431,249 | (7) | 1.5 | % | ||||
|
James Dennedy
|
92,500 | (7) | * | |||||
|
Thomas R. Evans
|
66,944 | (7) | * | |||||
|
Larry Schwartz
|
92,500 | (7) | * | |||||
|
John J. Gavin, Jr.
|
253,474 | (7) | * | |||||
|
Kenneth Drake(8)
|
— | — | ||||||
|
Stephen Pace(9)
|
— | — | ||||||
|
All current executive officers and
directors as a group (8 persons)
|
1,867,796 | (10) | 6.2 | % | ||||
| * | Less than 1%. | |
| (1) | Based on information provided by Atlantic Investors, LLC in a Form 4 dated July 28, 2004 filed with the SEC on July 30, 2004. Atlantic Investors, LLC is controlled by two managing members, Unicorn Worldwide Holdings Limited and Madison Technology LLC. Unicorn Worldwide Holdings Limited is jointly controlled by its Board members, Simon Cooper and Simon McNally. Mr. Becker is the managing member of Madison Technology LLC. Messrs. Cooper and McNally for Unicorn Worldwide Holdings Limited and Mr. Becker for Madison Technology LLC share voting and investment power over the securities held by Atlantic Investors, LLC. Mr. A. Ruhan holds a 10% equity interest in Unicorn Worldwide Holdings Limited, a managing member of Atlantic Investors, LLC. Atlantic Investors, LLC has informed us that the 17,121,652 shares of Common Stock it holds is currently its sole investment. | |
| (2) | Shares are held of record by Hewlett-Packard Financial Services Company, a wholly owned subsidiary of Hewlett-Packard Company, a widely held publicly traded company. Hewlett-Packard Company and Hewlett-Packard Financial Services Company may each be deemed the beneficial owner of these shares. | |
| (3) | Waythere, Inc. (formerly known as Surebridge, Inc.) is a corporation with a Board of Directors elected by stockholders. No individual member of the Board of Directors has voting or investment power over the securities held by Waythere. |
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| (4) | Consists of shares of Common Stock issuable upon the exercise of Presently Exercisable Warrants. SPCP Group, L.L.C. is owned by Silver Point Capital Fund, L.P. (the “Fund”) and Silver Point Capital Offshore Fund (the “Offshore Fund”). Silver Point, L.P. (“Silver Point”) is the investment manager of the Fund and the Offshore Fund. Silver Point is controlled by Edward A. Mule and Robert J. O’Shea. SPCP Group III LLC is an affiliate of Silver Point (via common ownership) and is controlled by Messrs. Mule and O’Shea. | |
| (5) | Consists of shares of Common Stock issuable upon the exercise of Presently Exercisable Options. Excludes 17,121,652 shares of Common Stock owned by Atlantic Investors, LLC and 426,134 shares of Common Stock owned by Global Unicorn Worldwide Holdings S.A.R.L., a wholly owned subsidiary of Unicorn Worldwide Holdings Limited, with respect to all of which Mr. A. Ruhan disclaims beneficial ownership. Mr. A. Ruhan holds a 10% equity interest in Unicorn Worldwide Holdings Limited, a managing member of Atlantic Investors, LLC. | |
| (6) | Consists of 213,069 shares of Common Stock owned by Madison Technology LLC and 625,700 shares of Common Stock issuable upon the exercise of Presently Exercisable Options. Excludes 17,121,652 shares of Common Stock owned by Atlantic Investors, LLC with respect to which Mr. Becker disclaims beneficial ownership. Mr. Becker is the managing member of Madison Technology LLC, a managing member of Atlantic Investors, LLC. | |
| (7) | Consists of shares of Common Stock issuable upon the exercise of Presently Exercisable Options. | |
| (8) | Mr. Drake resigned as the General Counsel and Secretary of the Company effective July 4, 2005. | |
| (9) | Mr. Pace resigned as the Senior Vice President, Sales and Marketing of the Company effective June 3, 2005. | |
| (10) | Consists of 213,069 shares of Common Stock owned by Madison Technology LLC and 1,654,027 shares of Common Stock issuable upon the exercise of Presently Exercisable Options. Excludes 17,121,652 shares of Common Stock owned by Atlantic Investors, LLC with respect to which Messrs. A. Ruhan and Becker disclaim beneficial ownership, and 426,134 shares of Common Stock owned by Global Unicorn Worldwide Holdings S.A.R.L., a wholly owned subsidiary of Unicorn Worldwide Holdings Limited, with respect to which Mr. A. Ruhan disclaims beneficial ownership. Mr. A. Ruhan holds a 10% equity interest in Unicorn Worldwide Holdings Limited, a managing member of Atlantic Investors, LLC, and Mr. Becker is the managing member of Madison Technology LLC, a managing member of Atlantic Investors, LLC. |
ADDITIONAL
INFORMATION ABOUT NAVISITE
Director
Compensation
On September 27, 2005, the Board of Directors adopted a new
policy with respect to the compensation of the independent
directors of the Board and the Chairman of the Board. The new
policy provides that each independent director and the Chairman
of the Board shall be paid an annual fee of $20,000. In
addition, (i) the Chairperson of the Audit Committee and of
the Compensation Committee will each receive an additional
annual fee of $5,000, (ii) each member of the Audit
Committee and the Compensation Committee, other than the
Chairman, will receive an additional annual fee of $3,000, and
(iii) the Chairman of the Board will receive an additional
annual fee of $7,000. Upon initial election to the Board, each
independent director and the Chairman of the Board will receive
an initial stock option of 50,000 shares of Common Stock,
which stock option will vest monthly over a period of three
years. Upon re-election to the Board, each independent director
and the Chairman of the Board will receive a stock option for
15,000 shares of Common Stock, which stock option will vest
monthly over a period of 12 months. The Chairman of the
Audit Committee and the Compensation Committee will not receive
any additional stock options by virtue of his position as a
committee Chairman.
During the 2005 fiscal year, Messrs. A. Ruhan, G. Ruhan and
Becker were not paid for service on the Board of Directors. In
accordance with the Company’s previous director
compensation policy, upon re-election to the Board of Directors,
each of Messrs. Evans, Dennedy and Schwartz received an
option to purchase
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15,000 shares of Common Stock on December 9, 2004 at a
purchase price per share of $2.38. The option vests monthly over
a period of 12 months. In addition, upon
Mr. Dennedy’s re-election as the Chairperson of the
Audit Committee and upon Mr. Schwartz’s re-election as
the Chairperson of the Compensation Committee, each of
Messrs. Dennedy and Schwartz was granted an option to
purchase 10,000 shares of Common Stock on December 9,
2004 at a purchase price of $2.38. The options vest monthly over
a period of 12 months. The Company also paid each of
Messrs. Evans, Dennedy and Schwartz an aggregate of $11,250
during the 2005 fiscal year. Of the $11,250 paid to the
directors in the 2005 fiscal year, $4,375 was earned in the 2004
fiscal year and $6,875 was earned in the 2005 fiscal year.
Apart from the arrangements discussed above, the Company does
not pay any cash compensation to members of its Board of
Directors for their services as members of the Board of
Directors, although directors are reimbursed for their
reasonable travel expenses incurred in connection with attending
Board of Directors and committee meetings. Directors who are
also Company officers or employees are eligible to participate
in the Amended and Restated 2003 Stock Incentive Plan, as
amended.
The Company and each member of the Board of Directors have
entered into an indemnification agreement pursuant to which the
directors will be indemnified by the Company, subject to certain
limitations, for any liabilities incurred by the directors in
connection with their role as directors of the Company.
Executive
Compensation
Summary
Compensation
The following table sets forth certain summary information with
respect to the compensation paid during the fiscal years ended
July 31, 2005, 2004 and 2003 earned by each of (i) all
individuals who served as the Chief Executive Officer during the
fiscal year ended July 31, 2005, (ii) one other
executive officer who was serving as an executive officer on
July 31, 2005 whose total annual salary and bonus for
fiscal year 2005 exceeded $100,000, and (iii) two former
executive officers who would have been among the most highly
compensated executive officers during fiscal year 2005 had they
remained executive officers as of July 31, 2005
(collectively, the “Named Executive Officers”). In the
table below, columns required by the regulations of the SEC have
been omitted where no information was required to be disclosed
under those columns.
SUMMARY
COMPENSATION TABLE
|
Long-Term |
||||||||||||||||
| Compensation | ||||||||||||||||
| Awards | ||||||||||||||||
|
Securities |
||||||||||||||||
| Annual Compensation |
Underlying |
|||||||||||||||
|
Name and Principal
Position
|
Year | Salary ($) | Bonus ($) | Options | ||||||||||||
|
Arthur P. Becker
|
2005 | 275,000 | — | 500,000 | ||||||||||||
|
Chief Executive Officer and
President
|
2004 | 275,000 | — | 460,000 | ||||||||||||
| 2003 | 121,635 | — | 40,000 | |||||||||||||
|
John J. Gavin, Jr.
|
2005 | 250,000 | — | 300,000 | ||||||||||||
|
Chief Financial Officer and
Treasurer
|
2004 | 50,800 | — | 200,000 | ||||||||||||
|
Kenneth Drake
|
2005 | 185,989 | — | 100,000 | ||||||||||||
|
Former General Counsel and
Secretary
|
2004 | 155,769 | — | 80,000 | ||||||||||||
|
Stephen Pace
|
2005 | 331,227 | 30,000 | 90,000 | ||||||||||||
|
Former Senior Vice President,
Sales and Marketing
|
||||||||||||||||
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Table of Contents
Option
Grants During the Fiscal Year Ended July 31, 2005
The following table sets forth information regarding options to
purchase Common Stock granted to the Named Executive Officers
during the fiscal year ended July 31, 2005. The Company has
never granted any stock appreciation rights.
STOCK
OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31,
2005
| Individual Grants | ||||||||||||||||||||||||
|
Percent |
||||||||||||||||||||||||
|
of |
||||||||||||||||||||||||
|
Total |
||||||||||||||||||||||||
|
Number |
Options |
|||||||||||||||||||||||
|
of |
Granted |
Potential Realizable |
||||||||||||||||||||||
|
Securities |
to |
Exercise |
Value at Assumed |
|||||||||||||||||||||
|
Underlying |
Employees |
Price |
Annual Rates of Stock |
|||||||||||||||||||||
|
Options |
in |
(Per |
Price Appreciation for |
|||||||||||||||||||||
|
Granted |
Fiscal |
Share) |
Expiration |
Option Term ($)(1) | ||||||||||||||||||||
|
Name
|
(#) | Year | ($) | Date | 5% | 10% | ||||||||||||||||||
|
Arthur P. Becker
|
500,000(2 | ) | 10.21 | % | 1.58 | 3/31/2015 | 496,655 | 1,258,522 | ||||||||||||||||
|
John J. Gavin, Jr.
|
50,000(3 | ) | 1.02 | % | 2.62 | 9/28/2014 | 82,385 | 208,780 | ||||||||||||||||
| 250,000(2 | ) | 5.10 | % | 1.58 | 3/31/2015 | 248,327 | 629,261 | |||||||||||||||||
|
Kenneth Drake
|
20,000(3 | ) | 0.41 | % | 2.62 | 9/28/2014 | 32,954 | 83,512 | ||||||||||||||||
| 80,000(2 | ) | 1.63 | % | 1.58 | 3/31/2015 | 79,465 | 201,363 | |||||||||||||||||
|
Stephen Pace
|
90,000(2 | ) | 1.84 | % | 1.58 | 3/31/2015 | 89,398 | 226,534 | ||||||||||||||||
| (1) | Amounts reported in these columns represent hypothetical amounts that may be realized upon exercise of the options immediately prior to the expiration of their term assuming the specified rates of appreciation (5% and 10%) on the underlying Common Stock over the term of the options. These numbers are calculated based on rules promulgated by the SEC and do not reflect the Company’s estimate of future stock price growth. Actual gains, if any, on stock option exercises and Common Stock holdings are dependent on the timing of such exercise and the future performance of the underlying Common Stock. There can be no assurance that the rates of appreciation assumed in this table can be achieved or that the amounts reflected will be received by the optionholder. | |
| (2) | On April 1, 2005, this option was granted under the Company’s Amended and Restated 2003 Stock Incentive Plan. The option vests as to 1/36th of the number of shares subject to the option on each monthly anniversary of the grant date until the option is fully vested on the third anniversary of the grant date. | |
| (3) | On September 28, 2004, this option was granted under the Company’s Amended and Restated 2003 Stock Incentive Plan. The option vested as to 25% of the original number of shares subject to the option on March 28, 2005 and thereafter vests monthly in equal amounts until fully vested on March 28, 2008. |
8
Table of Contents
Options
Exercised During Fiscal Year Ended July 31, 2005
The following table sets forth the number of exercisable and
unexercisable options to purchase Common Stock held by the Named
Executive Officers as of July 31, 2005. No stock options to
purchase Common Stock were exercised by any Named Executive
Officer during the fiscal year ended July 31, 2005.
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
FISCAL YEAR-END OPTION VALUES
|
Number of Securities |
Value of Unexercised |
|||||||||||||||
|
Underlying Unexercised |
In the Money |
|||||||||||||||
| Options at July 31, 2005 | Options at July 31, 2005 ($) | |||||||||||||||
|
Name
|
Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||
|
Arthur P. Becker
|
366,677 | 633,323 | 13,753 | 151,247 | ||||||||||||
|
John J. Gavin, Jr.
|
125,004 | 374,996 | 6,877 | 75,623 | ||||||||||||
|
Kenneth Drake
|
67,918 | — | 2,200 | — | ||||||||||||
|
Stephen Pace
|
40,417 | — | 1,650 | — | ||||||||||||
Employment
Agreements and Severance and Change of Control
Arrangements
Arthur
Becker
The Company entered into an employment agreement with Arthur P.
Becker as of February 21, 2003, pursuant to which he is
employed as the Company’s Chief Executive Officer and
President. His agreement is for a continuous term, but subject
to the provisions described below, may be terminated by either
party at any time. Pursuant to this agreement, Mr. Becker
is entitled to receive:
| • | a base salary, currently $275,000 per year, which is reviewed by our Board of Directors annually (but no more frequently than annually); | |
| • | an annual bonus upon the Company’s achievement of various financial and/or other goals established by the Board; and | |
| • | fringe benefits, including stock options and health insurance and other benefits available to our employees. |
If Mr. Becker’s employment is terminated (i) by
reason of death or disability, (ii) by the Company with
cause or (iii) due to his voluntary resignation, then he
will receive no additional salary or benefits other than what
has accrued through the date of termination.
If Mr. Becker’s employment is terminated without cause
and he signs a general release of known and unknown claims in a
form satisfactory to the Company, Mr. Becker will receive
severance payments at his final base salary rate, less
applicable withholding, until the earlier of (i) six months
after the date of his termination without cause, or
(ii) the date on which he first commences other employment.
Mr. Becker and the Company have also entered into an
indemnification agreement pursuant to which he will be
indemnified by the Company, subject to certain limitations, for
any liabilities incurred by him in connection with his role as a
director and officer of the Company.
On April 6, 2006, the Company entered into a Separation
Agreement with Mr. Becker. The Separation Agreement
provides that if Mr. Becker’s employment is terminated
by the Company other than for Cause (as defined in the
Separation Agreement), Disability (as defined in the Separation
Agreement) or death, or by the employee for Good Reason (as
defined in the Separation Agreement) following a Change in
Control (as defined in the Separation Agreement), then the
Company shall be obligated to (i) pay Mr. Becker as
severance his annual base salary in effect on the date of
termination for a period of six months, (ii) pay a lump sum
bonus payment to Mr. Becker equal to his target bonus for
the current fiscal year pro rated to the date of termination,
(iii) pay to Mr. Becker any unpaid bonus from the
prior fiscal year, (iv) pay all legal fees and expenses
incurred by Mr. Becker in seeking to obtain or enforce any
right provided by the Separation
9
Table of Contents
Agreement, and (v) reimburse Mr. Becker for COBRA
payments for health and welfare benefits continuation if he
elects COBRA coverage for a period of six months.
Mr. Becker will not be entitled to the foregoing benefits
if an equivalent benefit is received by him from another
employer during the six month period following his termination.
The Separation Agreement also provides that following a Change
in Control of the Company, all options and shares of restricted
stock issued to Mr. Becker under the Company’s Amended
and Restated 2003 Stock Incentive Plan or any other Company
stock incentive plan will become exercisable and vested in full
on the date of the Change in Control.
John J.
Gavin, Jr.
On April 6, 2006, the Company entered into a Separation
Agreement with Mr. Gavin, the Company’s Chief
Financial Officer. The Separation Agreement provides that if
Mr. Gavin’s employment is terminated by the Company
other than for Cause (as defined in the Separation Agreement),
Disability (as defined in the Separation Agreement) or death, or
by Mr. Gavin for Good Reason (as defined in the Separation
Agreement) following a Change in Control (as defined in the
Separation Agreement), then the Company shall be obligated to
(i) pay Mr. Gavin as severance his annual base salary
in effect on the date of termination for a period of six months,
in the case of a termination by the Company other than for
Cause, Disability or death, or for a period of twelve months, in
the case of a termination by Mr. Gavin for Good Reason,
(ii) pay a lump sum bonus payment to Mr. Gavin equal
to his target bonus for the current fiscal year pro rated to the
date of termination, (iii) pay to Mr. Gavin any unpaid
bonus from the prior fiscal year, (iv) pay all legal fees
and expenses incurred by Mr. Gavin in seeking to obtain or
enforce any right provided by the Separation Agreement, and
(v) reimburse Mr. Gavin for COBRA payments for health
and welfare benefits continuation if he elects COBRA coverage
for a period of six months, in the case of a termination by the
Company other than for Cause, Disability or death, or for a
period of twelve months, in the case of a termination by
Mr. Gavin for Good Reason.
Mr. Gavin will not be entitled to the foregoing benefits if
an equivalent benefit is received by him from another employer
during the six month period following his termination, in the
case of a termination by the Company other than for Cause,
Disability or death, or for a period of twelve months in the
case of a termination by him for Good Reason.
The Separation Agreement also provides that following a Change
in Control of the Company, all options and shares of restricted
stock issued to Mr. Gavin under the Company’s Amended
and Restated 2003 Stock Incentive Plan or any other Company
stock incentive plan will become exercisable and vested in full
on the date of the Change in Control.
Kenneth
Drake
The Company entered into an employment offer letter with Kenneth
Drake as of July 15, 2003, pursuant to which he was
employed as the Company’s General Counsel. Pursuant to this
agreement, Mr. Drake was entitled to receive:
| • | an annual base salary of $180,000 per year; and | |
| • | fringe benefits, including stock options and health insurance and other benefits available to our employees. |
Mr. Drake was also eligible for an annual discretionary
bonus based in part upon the Company’s achievement of
various goals set by Mr. Drake and the Company’s
President and Chief Executive Officer.
Pursuant to the agreement, if Mr. Drake’s employment
was terminated (i) by reason of death or disability,
(ii) by the Company with Cause (as defined) or
(iii) due to his voluntary resignation without Good Reason
(as defined), then he was not entitled to receive any additional
salary or benefits other than what had accrued through the date
of termination.
10
Table of Contents
If Mr. Drake’s employment was terminated by the
Company without Cause or by Mr. Drake with Good Reason, and
he signed a general release of known and unknown claims in a
form satisfactory to the Company, Mr. Drake would have
received severance payments at his final base salary rate, less
applicable withholding, and continuation of medical benefits
until six months after the date of his termination.
Mr. Drake voluntarily resigned as the Company’s
General Counsel, which resignation was effective on July 4,
2005. Because Mr. Drake voluntarily resigned, he received
no payments from the Company pursuant to his employment
agreement as a result of his resignation other than payments of
base salary and vacation accrued through the effective date of
his resignation.
Stephen
Pace
In connection with the Company’s acquisition of the
Surebridge business, the Company and Mr. Pace entered into
an employment offer letter, dated as of June 9, 2004, which
provided for the employment of Mr. Pace as the
Company’s Senior Vice President, Sales and Marketing.
Pursuant to this agreement, Mr. Pace was entitled to
receive:
| • | an annual base salary of $255,000; | |
| • | additional compensation under the Company’s 2005 Senior Vice President, Sales and Marketing Compensation Plan; and | |
| • | fringe benefits, including stock options, health insurance, a car allowance and other benefits available to our employees. |
Mr. Pace also received a bonus of $30,000 that the Company
had previously agreed to pay in connection with the Surebridge
acquisition.
The employment offer letter also provided that in the event the
Company terminated Mr. Pace’s employment for reasons
other than cause (as defined), the Company would continue to pay
Mr. Pace his base salary for a period of 12 months,
provided that if Mr. Pace commenced any employment during
the 12-month
period following the termination of his employment, the
remaining amount of base salary to be paid by the Company would
be reduced by the amount of compensation received by
Mr. Pace from such other employment.
Mr. Pace voluntarily resigned as the Company’s Senior
Vice President, Sales and Marketing, which resignation was
effective on June 3, 2005. Because Mr. Pace
voluntarily resigned, he received no payments from the Company
pursuant to his employment offer letter as a result of his
resignation other than payments of base salary, commissions, car
allowance and vacation accrued through the effective date of his
resignation.
By Order of the Board of Directors,
Monique Cormier
Secretary
May , 2006
11
Table of Contents
APPENDIX I
WRITTEN
CONSENT OF
STOCKHOLDERS OF NAVISITE, INC.
STOCKHOLDERS OF NAVISITE, INC.
The undersigned, being the record holder of a majority of the
issued and outstanding shares of Common Stock of NaviSite, Inc.,
a Delaware corporation (the “Company”), does hereby
take the following actions and adopt the following resolutions
in accordance with Section 228(a) of the General
Corporation Law of the State of Delaware:
WHEREAS, on the date hereof, the undersigned stockholder
is the record and beneficial owner of 17,121,652 shares of
common stock of the Company, or 60.1% of the outstanding common
stock of the Company on the date hereof;
WHEREAS, NASD Rule 4350(i)(1)(B) requires that the
issuer of stock secure stockholder approval prior to an issuance
or potential issuance which will result in a change of control
of the issuer;
WHEREAS, NASD Rule 4350(i)(1)(D) requires that the
issuer of stock in connection with the sale, issuance or
potential issuance of 20% or more of the outstanding common
stock of the Company in other than a public offering secure
stockholder approval prior to an issuance where the issuance or
potential issuance of the shares of common stock, or securities
convertible into or exercisable for common stock, could result
in the issuance of 20% or more of the common stock or voting
power of the issuer before the issuance;
WHEREAS, the Board of Directors of the Company has
approved the issuance of the warrant (the “Warrant”)
to Silver Point Finance, LLC (or its affiliates); and
WHEREAS, the Board of Directors of the Company is seeking
stockholder approval of the issuance of the Warrant for the
purpose of satisfying the requirements imposed by NASD
Rule 4350(i)(1)(B) and NASD Rule 4350(i)(1)(D).
NOW, THEREFORE, BE IT RESOLVED, that the issuance of the
Warrant and the common stock issuable upon exercise of the
Warrant, including those shares that may exceed 20% of the
Company’s outstanding shares immediately prior to the
issuance of the Warrant, be and hereby is authorized and
approved.
RESOLVED, FURTHER, that the directors of the Company are
hereby authorized and directed to take any such action as may be
deemed necessary and advisable in order to carry out the purpose
and intent of the foregoing resolutions.
The actions set forth in this Written Consent of Stockholder
shall be effective on the first calendar day that is not less
than 20 calendar days after the date that the definitive
Schedule 14C “information statement,” as such
term is defined in
Rule 14c-1
promulgated under Regulation 14C of the Securities Exchange
Act of 1934, as amended (“Regulation 14C”),
relating to such actions is sent or given in accordance with
Rule 14c-2
promulgated under Regulation 14C.
IN WITNESS WHEREOF, the undersigned stockholder has
caused this Written Consent of Stockholders to be executed on
the date set forth opposite its name below.
ATLANTIC INVESTORS LLC
By: UNICORN WORLDWIDE HOLDINGS
LIMITED, a managing member of Atlantic
Investors LLC
LIMITED, a managing member of Atlantic
Investors LLC
| By: |
/s/ Simon
J. McNally
|
Name: Simon J. McNally
Title: Director
Dated: April 11, 2006
I-1