UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): May 6, 2004
NAVISITE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 000-27597 52-2137343
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
400 Minuteman Road
Andover, Massachusetts 01810
(Address of Principal Executive Offices) (Zip Code)
(978) 682-8300
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
On May 6, 2004, NaviSite, Inc. ("NaviSite") announced that it has signed a
definitive asset purchase agreement (the "Asset Purchase Agreement") pursuant to
which NaviSite will acquire substantially all of the assets and liabilities of
Surebridge, Inc. ("Surebridge"), a privately held provider of managed
application services for mid-market companies. The closing of the acquisition is
expected to occur later this month and is subject to the satisfaction of
customary closing conditions.
Under the terms of the Asset Purchase Agreement, NaviSite will acquire
substantially all of the assets of Surebridge in exchange for two promissory
notes in the aggregate principal amount of $39.5 million (subject to certain
adjustments based on the financials of Surebridge at closing), three million
shares of NaviSite common stock (the "Fixed Shares") and the assumption of
certain liabilities of Surebridge at closing.
The promissory notes to be issued by NaviSite to Surebridge consist of a
Primary Note and an Escrow Note (collectively, the "Notes"). The Primary Note
shall have a principal amount equal to $39.5 million less the principal amount
of the Escrow Note. The Escrow Note shall have a principal amount equal to
approximately 12.5% of the value of the aggregate consideration of the
transaction and shall be deposited into escrow for the purpose of satisfying
indemnification claims by NaviSite pursuant to the Asset Purchase Agreement.
The Notes accrue interest on the unpaid balance at an annual rate of 10%
and shall be paid in full no later than the second anniversary of the closing.
No interest shall accrue on any principal paid on the Notes within six months
after the closing. In the event that NaviSite realizes net proceeds in excess of
$1 million from certain equity or debt financings or sales of assets, NaviSite
is obligated to make payments on the Notes equal to 75% of all such net
proceeds.
The outstanding principal and accrued interest of the Notes shall be
convertible into shares of NaviSite common stock (the "Conversion Shares") at
the election of the holder (i) at any time following the first anniversary of
the closing if the aggregate principal outstanding under the Notes at such time
is greater than or equal to $20 million, (ii) at any time following the 18-month
anniversary of the closing if the aggregate principal outstanding under the
Notes at such time is greater than or equal to $10 million, (iii) at any time
following the second anniversary of the closing, and (iv) at any time following
an event of default thereunder. The conversion price shall be fixed at the
average closing price of NaviSite's common stock for the ten-day period ending
one day prior to closing.
For a period of one year following the closing of the acquisition,
Surebridge shall not sell, transfer, assign, convey, encumber, gift, distribute
or otherwise dispose of the Fixed Shares, the Conversion Shares or the Notes;
provided, however, if NaviSite does not make certain payments under the Notes or
otherwise suffers an event of default
thereunder, Surebridge may sell the Fixed Shares and the Conversion Shares at
any time thereafter.
The number of Fixed Shares to be issued to Surebridge at closing is not
subject to any adjustments prior to such issuance. The Fixed Shares and the
Conversion Shares shall have certain demand and piggyback registration rights
pursuant to a Registration Rights Agreement to be entered into by and between
NaviSite and Surebridge (the "Registration Rights Agreement").
On May 6, 2004, Atlantic Investors, LLC, the majority stockholder of
NaviSite, delivered to NaviSite an executed written consent of stockholders
approving, among other things, the issuance of the Fixed Shares and the
Conversion Shares.
The foregoing summary of the Asset Purchase Agreement, the Notes and the
Registration Rights Agreement, and the transactions contemplated therein and
thereby, is subject to, and qualified in its entirety by, the Asset Purchase
Agreement, the forms of Notes and the form of Registration Rights Agreement
filed as exhibits herewith, each of which is incorporated herein by reference.
A copy of the press release issued by NaviSite on May 6, 2004 concerning
the foregoing transaction is filed herewith as Exhibit 99.1 and is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
The exhibits listed in the Exhibit Index immediately preceding such
exhibits are filed with this report.
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.
NaviSite, Inc.
By: /s/ John J. Gavin, Jr.
--------------------------------------------
Date: May 7, 2004 John J. Gavin, Jr.
Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
2.1 Asset Purchase Agreement, dated as of May 6, 2004, by and among
the Registrant, Lexington Acquisition Corp. and Surebridge, Inc.
10.1 Form of Registration Rights Agreement by and between the
Registrant and Surebridge, Inc.
10.2 Form of Primary Note.
10.3 Form of Escrow Note.
99.1 Press Release of the Registrant, dated May 6, 2004.