def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material under Rule 14a-12
NaviSite, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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o Fee paid previously with 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.
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TABLE OF CONTENTS
400 Minuteman Road
Andover, Massachusetts 01810
November 19, 2008
Dear NaviSite Stockholders:
I am pleased to invite you to attend the 2008 Annual Meeting of
Stockholders of NaviSite, Inc. to be held on Thursday,
December 11, 2008 at 9:00 a.m., local time, at the
Marriott Boston Cambridge hotel located at Two Cambridge Center,
50 Broadway, Cambridge, MA 02142.
Specific details regarding admission to the meeting and the
business to be conducted at the Annual Meeting are included in
the accompanying Notice of Annual Meeting of Stockholders and
Proxy Statement. We encourage you to carefully read these
materials, as well as the enclosed Annual Report to Stockholders
for the fiscal year ended July 31, 2008. NaviSites
Board of Directors recommends that you vote in favor of each of
the director nominees and for the other proposal set forth in
the Notice of Annual Meeting and Proxy Statement.
Your vote is important. Whether or not you plan to attend the
Annual Meeting, I hope you will ensure that your shares are
represented and voted at the Annual Meeting by completing and
returning the enclosed proxy card. If you do attend the Annual
Meeting, you may withdraw your proxy and vote in person if you
so desire.
Thank you for your continued support.
Sincerely,
Arthur P. Becker
Chief Executive Officer and President
NAVISITE,
INC.
400 Minuteman Road
Andover, MA 01810
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Thursday, December 11, 2008
To the Stockholders of NaviSite, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders
(the Annual Meeting) of NaviSite, Inc., a Delaware
corporation (NaviSite), will be held on Thursday,
December 11, 2008 at 9:00 a.m., local time, at the
Marriott Boston Cambridge hotel located at Two Cambridge Center,
50 Broadway, Cambridge, MA 02142, to consider and act upon
the following matters:
(1) To elect Andrew Ruhan, Arthur P. Becker, James Dennedy,
Thomas R. Evans and Larry Schwartz, the current members of the
Board of Directors of NaviSite, to serve for an additional
one-year term;
(2) To ratify the appointment of KPMG LLP as
NaviSites independent registered public accounting firm
for the fiscal year ending July 31, 2009; and
(3) To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to
be transacted at the Annual Meeting.
A copy of NaviSites Annual Report to Stockholders for the
fiscal year ended July 31, 2008, which contains
consolidated financial statements and other information of
interest to stockholders, is included with this Notice and Proxy
Statement.
Admission of stockholders to the Annual Meeting will be on a
first-come, first-served basis, and picture identification will
be required to enter the Annual Meeting. An individual arriving
without picture identification will not be admitted unless it
can be verified that the individual is a NaviSite stockholder.
Use of cameras, cellular phones, recording equipment and other
electronic devices will not be permitted at the Annual Meeting.
NaviSite reserves the right to inspect any persons or items
prior to their admission to the Annual Meeting.
Only stockholders of record as of the close of business on
Monday, October 20, 2008 are entitled to notice of, and to
vote at, the Annual Meeting. All stockholders are cordially
invited to attend the meeting.
By order of the Board of Directors,
Thomas b. rosedale
Secretary
Andover, Massachusetts
November 19, 2008
YOUR VOTE
IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED RETURN
ENVELOPE TO ASSURE REPRESENTATION OF YOUR SHARES AT THE
ANNUAL MEETING. NO POSTAGE NEEDS TO BE AFFIXED IF THE PROXY CARD
IS MAILED IN THE UNITED STATES.
NAVISITE,
INC.
Annual Meeting of
Stockholders
To Be Held On Thursday,
December 11, 2008
General
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of NaviSite,
Inc., a Delaware corporation (NaviSite), for use at
NaviSites 2008 Annual Meeting of Stockholders (the
Annual Meeting), which will be held on Thursday,
December 11, 2008 at 9:00 a.m., local time, at the
Marriott Boston Cambridge hotel, Two Cambridge Center,
50 Broadway, Cambridge, MA 02142 and at any adjournments
thereof, for the purposes set forth in the Notice of Annual
Meeting of Stockholders (the Notice of Annual
Meeting).
The Notice of Annual Meeting, this Proxy Statement, the
accompanying proxy card and NaviSites Annual Report to
Stockholders for the fiscal year ended July 31, 2008 (the
2008 Annual Report) are being mailed to stockholders
on or about November 21, 2008. NaviSites principal
executive offices are located at 400 Minuteman Road, Andover,
Massachusetts 01810 and its telephone number is
(978) 682-8300.
Solicitation
The cost of soliciting proxies, including expenses in connection
with preparing and mailing this Proxy Statement, will be borne
by NaviSite. NaviSite may engage a paid proxy solicitor to
assist in the solicitation. Copies of solicitation materials
will be furnished to brokerage houses, nominees, fiduciaries and
custodians to forward to beneficial owners of NaviSites
common stock, $.01 par value per share (the Common
Stock), held in their names. In addition to the
solicitation of proxies by mail, NaviSites directors,
officers and other employees may, without additional
compensation, solicit proxies by telephone, facsimile,
electronic communication and personal interviews. NaviSite will
also reimburse banks, brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to stockholders.
Record
Date, Voting Securities and Votes Required
Only holders of record of Common Stock and NaviSites
Series A Convertible Preferred Stock (the Preferred
Stock) as of the close of business on Monday,
October 20, 2008 (the Record Date) will be
entitled to receive notice of and vote at the Annual Meeting and
any adjournments thereof. On the Record Date, NaviSite had
approximately 36,344,320 shares of Common Stock and
3,386,285 shares of Preferred Stock issued and outstanding
and entitled to be voted. The holders of Common Stock and
Preferred Stock are entitled to one vote for each share held as
of the Record Date on any proposal presented at the Annual
Meeting.
A majority of the shares of Common Stock and Preferred Stock
issued and outstanding, collectively, and entitled to be voted
at the Annual Meeting will constitute a quorum at the Annual
Meeting. Votes withheld, abstentions and broker non-votes shall
be counted for purposes of determining the presence or absence
of a quorum for the transaction of business at the Annual
Meeting.
The affirmative vote of the holders of a plurality of the votes
cast at the Annual Meeting is required for the election of
directors (Proposal No. 1). The affirmative vote of
the holders of a majority of the shares of Common Stock and
Preferred Stock present or represented by proxy and voting on
the matter is required to ratify the appointment of KPMG LLP as
NaviSites independent registered public accounting firm
for the fiscal year ending July 31, 2009
(Proposal No. 2).
Shares which abstain from voting on a particular matter and
shares held in street name by brokers or nominees
who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular
matter (broker non-votes) will not be counted as
votes in favor of such matter and will also not be counted as
votes cast or shares voting on such matter. Accordingly, neither
abstentions nor broker non-votes will have any effect upon the
outcome of voting with respect to the election of directors
(Proposal No. 1), which requires a plurality of the
votes cast, or the ratification of the appointment of KPMG LLP
as NaviSites independent registered public accounting firm
(Proposal No. 2), which requires an affirmative vote
of a majority of the shares of Common Stock and Preferred Stock,
collectively, present or represented by proxy and voting on the
matter.
An automated system administered by NaviSites transfer
agent tabulates the votes. The votes on each matter are
tabulated separately.
To vote by mail, complete, date and sign the enclosed proxy card
and return it in the enclosed envelope. No postage is necessary
if the proxy card is mailed in the United States. If you hold
your shares through a bank, broker or other nominee, they will
give you separate instructions for voting your shares.
Proxies
Voting By
Proxy
Voting instructions are included on your proxy card. If you
properly complete, sign and date your proxy card and return it
to us (in the postage prepaid envelope provided) in time to
vote, one of the individuals named as your proxy will vote your
shares as you have directed. If you sign and timely return your
proxy card but do not indicate how your shares are to be voted
with respect to one or more of the proposals to be voted on at
the Annual Meeting, your shares will be voted for each of such
proposals and in accordance with the judgment of the proxy
holders as to any other matter that may be properly brought
before the Annual Meeting, and the individuals named in the
proxy card will have discretionary authority to vote upon any
adjournment of the Annual Meeting.
Revoking
Your Proxy
You may revoke your proxy at any time before it is voted by:
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Notifying NaviSites Secretary in writing at the principal
executive offices of NaviSite located at 400 Minuteman Road,
Andover, MA 01810, Attention: Secretary, before the Annual
Meeting that you have revoked your proxy; or
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Attending the Annual Meeting and voting in person at the Annual
Meeting.
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Voting in
Person
If you plan to attend the Annual Meeting and wish to vote in
person, we will give you a ballot at the meeting. However, if
your shares are held in the name of your broker, bank or other
nominee, you must bring a proxy from your nominee authorizing
you to vote your street name shares held as of the
Record Date.
Householding
of Annual Meeting Materials
Some banks, brokers and other nominee record holders may
participate in the practice of householding proxy
statements and annual reports. This means that only one copy of
our Proxy Statement or 2008 Annual Report may have been sent to
multiple stockholders in your household. We will promptly
deliver a separate copy of either document 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) 682-8300.
If you want to receive separate copies of the Proxy Statement or
2008 Annual Report 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 NaviSite at the above
address and telephone number.
2
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of
September 30, 2008 (unless otherwise indicated), with
respect to the beneficial ownership of Common Stock and
Preferred Stock by the following:
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each person known by NaviSite to beneficially own more than 5%
of the outstanding shares of Common Stock or Preferred Stock;
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each of NaviSites directors;
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our Chief Executive Officer, our Chief Financial Officer, our
two other most highly compensated executive officers and an
additional former executive officer who would have been among
the three most highly compensated executive officers if she had
been serving as an executive officer at the end of fiscal year
2008 (together, the Named Executive
Officers); and
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all of the current executive officers and directors as a group.
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For purposes of the following table, beneficial ownership is
determined in accordance with the rules promulgated by the
Securities and Exchange Commission (the SEC) and the
information is not necessarily indicative of beneficial
ownership for any other purpose. Except as otherwise noted in
the footnotes to the table, NaviSite believes that each person
or entity named in the table has sole voting and investment
power with respect to all shares of Common Stock and Preferred
Stock shown as beneficially owned by them (or shares such power
with his or her spouse). Under such rules, shares of restricted
stock, shares of Common Stock issuable under options that are
currently exercisable or exercisable within 60 days after
September 30, 2008 (Presently Exercisable
Options) and shares of our Common Stock issuable under
warrants that are currently exercisable, or exercisable within
60 days after September 30, 2008 (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.
The percentage ownership of Common Stock of each person or
entity named in the following table is based on
36,342,792 shares of Common Stock outstanding as of
September 30, 2008, plus any shares subject to Presently
Exercisable Options and shares subject to Presently Exercisable
Warrants held by such person.
3
The percentage ownership of Preferred Stock of each person or
entity named in the following table is based on
3,386,285 shares of Preferred Stock outstanding as of
September 30, 2008.
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Amount and Nature of
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Beneficial Ownership
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Number of
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Percentage
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Number of
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Percentage of
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Name and Address of Beneficial Owner
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Common Shares
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of Common Stock
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Preferred Shares
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Preferred Stock
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5% Stockholders
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Atlantic Investors, LLC
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13,841,028
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(1)
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38.1
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%
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20 East 66th Street
New York, NY 10021
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Janus Capital Management LLC
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4,082,677
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(2)
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11.2
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%
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151 Detroit Street
Denver, CO 80206
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netASPx Holdings, Inc.
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3,119,185
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(3)
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92.1
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%
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c/o GTCR
Golder Rauner, LLC
6100 Sears Tower
Chicago, IL 60606
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Silver Point Capital Fund, L.P., Silver Point Capital Offshore
Fund, Ltd. and SPCP Group III LLC
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1,870,731(4
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5.1
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%
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c/o Silver
Point Capital, L.P.
Two Greenwich Plaza, 1st Floor
Greenwich, CT 06830
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Directors and Named Executive Officers
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Andrew Ruhan
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95,750
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(5)
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*
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Arthur P. Becker
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1,759,786
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(6)
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4.7
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%
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James Dennedy
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130,750
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(7)
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*
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Thomas R. Evans
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160,750
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(8)
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*
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Larry Schwartz
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130,750
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(7)
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*
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James W. Pluntze
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445,125
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(9)
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1.2
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%
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Mark Clayman
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397,083
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(10)
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1.1
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Nasir Cochinwala
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339,646
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(11)
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*
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Monique Cormier (12)
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All current executive officers and directors as a group
(7 persons)
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3,119,994
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(13)
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8.1
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Less than 1%. |
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Based on information provided by Atlantic Investors, LLC in its
Amendment No. 10 to Schedule 13D dated June 18, 2008
filed with the SEC. 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. 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 13,841,028 shares of our Common Stock
it currently holds are the only shares of our Common Stock
currently held by them. Atlantic Investors, LLC, in managing its
liquidity requirements from time to time, may pledge shares of
Common Stock as collateral to lenders; these arrangements are
generally structured to preserve for Atlantic Investors, LLC
beneficial ownership in the pledged securities. |
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Based on information provided by Janus Capital Management LLC
(Janus Capital) in its Amendment No. 1 to
Schedule 13G dated February 14, 2008 filed with the
SEC. Janus Capital is a registered |
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investment adviser, furnishing investment advice to various
investment companies registered under Section 8 of the
Investment Company Act of 1940 and to individual and
institutional clients (collectively, the Managed
Portfolios). As a result of its role as investment adviser
or sub adviser to the Managed Portfolios, Janus Capital may be
deemed to be the beneficial owner of 4,082,677 shares of
Common Stock held by such Managed Portfolios. However, Janus
Capital does not have the right to receive any dividends from,
or the proceeds from the sale of, the securities held in the
Managed Portfolios and disclaims any ownership associated with
such rights. |
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netASPx Holdings, Inc. is owned by GTCR Fund VI, LP, GTCR
VI Executive Fund, LP and GTCR Associates VI, LP. GTCR Partners
VI LP is the General Partner of the three aforementioned funds.
The General Partner of GTCR Partners VI, LP, is GTCR Golder
Rauner, LLC. |
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Based solely on information provided by Silver Point Capital,
L.P. (Silver Point) in its Schedule 13G dated
May 21, 2008 filed with the SEC. Includes
1,200,131 shares of Common Stock issuable upon exercise of
Presently Exercisable Warrants. Silver Point is the investment
manager of Silver Point Capital Fund, L.P. (the
Fund) and Silver Point Capital Offshore Fund, Ltd.
(the Offshore Fund). Silver Point Capital
Management, LLC (Management) is the general partner
of Silver Point. SPCP Group III LLC is an affiliate of
Silver Point and Management (via common ownership). Each of
Mr. Edward Mule and Mr. Robert OShea is a member
of Management and has voting and investment power with respect
to the shares of Common Stock held by the Fund and the Offshore
Fund. Silver Point, Management and Messrs. Mule and
OShea disclaim beneficial ownership of the shares of
Common Stock held by the Fund and the Offshore Fund, except to
the extent of any pecuniary interest. |
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Consists of 15,750 shares of restricted stock and
80,000 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options. Excludes 13,841,028 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. Ruhan disclaims beneficial ownership. Mr. Ruhan
holds a 10% equity interest in Unicorn Worldwide Holdings
Limited, a managing member of Atlantic Investors, LLC. |
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Includes 408,640 shares of restricted stock,
213,067 shares of Common Stock owned by Madison Technology
LLC and 1,103,125 shares of Common Stock issuable upon the
exercise of Presently Exercisable Options. Mr. Becker
disclaims personal pecuniary interest in 60,000 shares of
Common Stock held by Madison Technology LLC for the benefit of
his children. Excludes 13,841,028 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. |
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Consists of 15,750 shares of restricted stock and
115,000 shares of Common Stock issuable upon the exercise
of Presently Exercisable Options. |
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Includes 15,750 shares of restricted stock and
95,000 shares of Common Stock issuable upon the exercise of
Presently Exercisable Options. |
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Includes 180,750 shares of restricted stock and
249,375 shares of Common Stock issuable upon the exercise
of Presently Exercisable Options. |
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Consists of 120,000 shares of restricted stock and
277,083 shares of Common Stock issuable upon the exercise
of Presently Exercisable Options. |
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Includes 90,000 shares of restricted stock and
233,749 shares of Common Stock issuable upon the exercise
of Presently Exercisable Options. Mr. Cochinwala resigned
from NaviSite effective October 6, 2008. |
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Ms. Cormier served as NaviSites General Counsel, Vice
President and Secretary until her resignation, which was
effective June 20, 2008. |
(13) |
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Includes 772,390 shares of restricted stock,
213,067 shares of Common Stock owned by Madison Technology
LLC and 2,034,583 shares of Common Stock issuable upon the
exercise of Presently Exercisable Options. Excludes
13,841,028 shares of Common Stock owned by Atlantic
Investors, LLC with respect to which Messrs. Ruhan and
Becker disclaim beneficial ownership, and 426,134 shares of
Common Stock owned by Global Unicorn Worldwide Holdings S.A.R.L.
with respect to which Mr. Ruhan disclaims beneficial
ownership. |
5
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
Pursuant to NaviSites By-Laws, all of the directors are
elected at each annual meeting of stockholders and hold office
until his or her successor has been elected and qualified or
until his or her earlier death, resignation or removal. The
By-Laws further provide that the number of directors shall be
determined from time to time by resolution of the Board of
Directors or by the holders of shares representing a majority of
the votes entitled to be cast by all stockholders in any annual
election of directors.
The Board of Directors currently has five members. The current
members of the Board of Directors are Messrs. Andrew Ruhan,
Arthur P. Becker, James Dennedy, Thomas R. Evans and Larry
Schwartz.
The Board of Directors proposes and recommends that the five
nominees named below be elected as directors of NaviSite. The
persons named as proxies will vote to elect the five nominees
named below as directors of NaviSite unless the proxy card is
marked otherwise. Each nominee is presently serving as a
director, has consented to being named in this Proxy Statement
and has indicated his willingness to serve if elected. If for
any reason any nominee should become unable or unwilling to
serve, the persons named as proxies may vote the proxy for the
election of a substitute nominee. The Board of Directors has no
reason to believe that any nominee will be unable to serve.
Biographical and certain other information concerning
NaviSites nominees for re-election to the Board of
Directors, each of whom is presently serving as a director, is
set forth below. Information with respect to the number of
shares of Common Stock beneficially owned by each director, as
of September 30, 2008, appears above in the section
entitled Security Ownership of Certain Beneficial Owners
and Management. No director or executive officer is
related by blood, marriage or adoption to any other director or
executive officer.
Nominees
for Election to the Board of Directors
Andrew Ruhan, age 46, has served as Chairman of the
Board of NaviSite since September 2002. Mr. Ruhan is also a
Managing Director of Bridgehouse Capital, a London-based private
equity investment advisory firm. From 2000 to 2003,
Mr. Ruhan served as Chief Executive Officer of ClearBlue
Technologies, Inc. (CBT), a managed service provider
and a
predecessor-in-interest
to Atlantic Investors, LLC.
Arthur P. Becker, age 58, has served as a director
of NaviSite since September 2002 and its Chief Executive Officer
and President since February 2003. From 2000 to 2003,
Mr. Becker served as Vice Chairman and a director of CBT, a
predecessor-in-interest
to Atlantic Investors, LLC. Mr. Becker is also a co-founder
of Atlantic Investors, LLC, a holder of approximately 38% of the
outstanding shares of Common Stock as of the Record Date. Since
1999, Mr. Becker has been the Managing Member of Madison
Technology LLC, an investment fund that is focused on technology
and telecommunications companies. Madison Technology LLC is a
managing member of Atlantic Investors, LLC.
James Dennedy, age 43, has served as a director of
NaviSite since January 2003. Since April 2008, Mr. Dennedy
has been a principal and Chief Investment Officer of Arcadia
Capital Advisors, LLC, a capital management and advisory
services company. From September 2007 until April 2008,
Mr. Dennedy was Managing Partner of Hamilton-Madison Group,
LLC, a capital management and corporate development company.
From November 2004 until August 2007, Mr. Dennedy was the
President and Chief Executive Officer of Engyro Corporation, an
enterprise systems and network management company. From
September 2003 until November 2004, Mr. Dennedy served as a
Managing Partner of Mitchell-Wright, LLC, a technology buy-out
and investment company. Mr. Dennedy is also a director of
Entrust, Inc. and I-many, Inc.
Thomas R. Evans, age 54, has served as a director of
NaviSite since October 2003. Since June 2004, Mr. Evans has
been the Chief Executive Officer and President of Bankrate,
Inc., an Internet-based consumer banking marketplace.
Mr. Evans also serves on the Board of Directors of
Bankrate, Inc. From September 2002 to June 2004, Mr. Evans
was a private investor and consultant. Mr. Evans is also a
director of Future Fuel Corp.
Larry Schwartz, age 45, has served as a director of
NaviSite since May 2003. Since August 2004, Mr. Schwartz
has served as the Chief Executive Officer of Bridgehouse Marine
Limited, a company that
6
acquires and manages companies providing marine services to the
telecommunications and energy industries. In January 2004,
Mr. Schwartz founded The Wenham Group, a private equity
investment firm. From May 2000 to December 2003,
Mr. Schwartz was the Senior Vice President and Chief
Restructuring Officer for Genuity Inc., where Mr. Schwartz
also served as a member of Genuitys senior management
committee.
The Board of Directors recommends a vote FOR the election of
the above-named nominees as directors of NaviSite.
PROPOSAL NO. 2
RATIFICATION
OF SELECTION OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG LLP as NaviSites
independent registered public accounting firm to audit
NaviSites financial statements for the fiscal year ending
July 31, 2009. KPMG LLP has audited the financial
statements of NaviSite for each fiscal year since
NaviSites inception. If the stockholders do not ratify the
selection of KPMG LLP as NaviSites independent registered
public accounting firm, the Audit Committee will reconsider its
selection. Even if the appointment is ratified, the Audit
Committee, in its discretion, may direct the appointment of a
different independent registered public accounting firm at any
time during the year if the Audit Committee determines that such
a change would be in NaviSites and its stockholders
best interests. A representative of KPMG LLP is expected to be
present at the Annual Meeting and will have the opportunity to
make a statement if he or she desires to do so and will be
available to respond to appropriate questions from stockholders.
The Board of Directors recommends a vote FOR ratification of
the selection of KPMG LLP as NaviSites independent
registered public accounting firm for the fiscal year ending
July 31, 2009.
CORPORATE
GOVERNANCE AND BOARD MATTERS
Independence
of Members of the Board of Directors
The Board of Directors has determined that each of
Messrs. James Dennedy, Thomas Evans and Larry Schwartz,
constituting a majority of the directors of NaviSite, is an
independent director as defined in the rules of The Nasdaq Stock
Market, and none of Messrs. Dennedy, Evans and Schwartz has
a material relationship with NaviSite other than by virtue of
his service on the Board of Directors.
Board and
Committee Meetings
The Board of Directors held 4 meetings during the fiscal year
ended July 31, 2008. Each incumbent director attended at
least 75% of the aggregate of the total number of meetings of
the Board of Directors and the total number of meetings of the
committees on which he served. NaviSite strongly encourages all
directors to attend the annual meeting of stockholders. All
members of the Board of Directors attended the 2007 Annual
Meeting of Stockholders.
Committees
of the Board of Directors
The Board of Directors has designated two principal standing
committees, an audit committee (the Audit Committee)
and a Governance, Nominating and Compensation committee (the
GNC Committee), which replaced NaviSites
Compensation Committee on April 24, 2007. The current
members of the Audit Committee and the GNC Committee are
identified in the following table:
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Name
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Audit Committee
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GNC Committee
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James Dennedy
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Chair
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X
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Thomas R. Evans
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X
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X
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Larry Schwartz
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X
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Chair
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7
Audit
Committee
The Board of Directors has a standing Audit Committee
established in accordance with Section 3(a)(58)A of the
Securities Exchange Act of 1934, as amended (the Exchange
Act). The Audit Committee assists the Board of Directors
in fulfilling its responsibilities to stockholders concerning
NaviSites financial reporting and internal controls. The
Audit Committee facilitates open communication among the Audit
Committee, Board of Directors, NaviSites independent
registered public accounting firm and management. The Audit
Committee discusses with management and NaviSites
independent registered public accounting firm the financial
information developed by NaviSite, NaviSites systems of
internal controls and NaviSites audit process. The Audit
Committee is solely and directly responsible for appointing,
evaluating, retaining, and, where necessary, terminating the
engagement of NaviSites independent registered public
accounting firm. The independent registered public accounting
firm meets with the Audit Committee (both with and without the
presence of NaviSites management) to review and discuss
various matters pertaining to the audit, including
NaviSites financial statements, the report of the
independent registered public accounting firm on the results,
scope and terms of their work, and their recommendations
concerning the financial practices, controls, procedures and
policies employed by NaviSite.
The Audit Committee preapproves all audit services to be
provided to NaviSite by the principal auditor and all other
services (including reviewing, attestation and non-audit
services) to be provided to NaviSite by the independent
registered public accounting firm.
The Audit Committee is charged with establishing procedures for
(i) the receipt, retention and treatment of complaints
received by NaviSite regarding accounting, internal accounting
controls or auditing matters; and (ii) the confidential,
anonymous submission by employees of NaviSite of concerns
regarding questionable accounting or auditing matters. The Audit
Committee reviews all related party transactions on an ongoing
basis, and all such transactions must be approved by the Audit
Committee. The Audit Committee is authorized, without further
action by the Board of Directors, to engage independent legal,
accounting and other advisors as it deems necessary or
appropriate to carry out its responsibilities. The Board of
Directors has adopted a written charter for the Audit Committee,
a copy of which is available on NaviSites website,
www.navisite.com.
The Board of Directors has determined that all of the members of
the Audit Committee are independent as defined under the rules
of The Nasdaq Stock Market, and that the Audit Committee members
meet the independence requirements contemplated by
Rule 10A-3
under the Exchange Act. The Board of Directors has determined
that James Dennedy is an audit committee financial
expert as defined in Item 407(d)(5) of
Regulation S-K.
During the last fiscal year, the Audit Committee held 12
meetings.
GNC
Committee
The GNC Committee assists the Board of Directors in fulfilling
its responsibilities relating to (i) compensation of
NaviSites executive officers, (ii) the director
nomination process and (iii) reviewing NaviSites
compliance with NASDAQ and SEC corporate governance
requirements. The Board of Directors has adopted a written
charter for the GNC Committee, a copy of which is available on
NaviSites website, www.navisite.com. The Board of
Directors has determined that all of the members of the GNC
Committee are independent as defined under the rules of The
Nasdaq Stock Market. During the last fiscal year, the GNC
Committee held 8 meetings.
The GNC Committee determines salaries, incentives and other
forms of compensation for the Chief Executive Officer and the
executive officers of NaviSite and reviews and makes
recommendations to the Board of Directors with respect to
director compensation. In addition, the GNC Committee
administers NaviSites stock incentive compensation and
equity-based plans.
The GNC Committee annually reviews and approves the compensation
of all of our executive officers. In its review, the GNC
Committee assesses the competitiveness of our executive
compensation program by comparing our pay practices with those
of other companies whose business and financial condition are
similar to that of NaviSites. Please see
Compensation Discussion and Analysis
Benchmarking below for further
8
details. In determining individual salaries and bonuses, the GNC
Committee considers overall corporate performance, business unit
performance, individual performance and an individuals
historical salary and bonus levels.
The GNC Committee adopted a written Policy Regarding
Compensation of Executive Officers (the Compensation
Policy) last year. Under the Compensation Policy, the
aggregate compensation of our executive officers, including
annual base salary, target bonus and long-term incentive
compensation, is reviewed by the GNC Committee annually in June.
In July 2007, NaviSite retained DolmatConnell &
Partners as an independent advisor reporting to the GNC
Committee on executive compensation matters.
DolmatConnell & Partners was engaged to complete a
competitive analysis of NaviSites executive compensation
program and to provide an update to the executive compensation
analysis in fiscal 2008. DolmatConnell & Partners
provided an executive and Board compensation analysis, developed
an appropriate data source for comparative purposes, presented
market competitive long-term incentive stock grant practices,
reviewed stock ownership guidelines and alternatives to stock
granting practices, developed long-term incentive strategies and
developed allocation guidelines in fiscal 2007. In fiscal 2008,
DolmatConnell & Partners provided an update to the
executive compensation analysis, reviewed all of the elements of
compensation and provided recommendations to the GNC Committee
on each element of compensation.
The GNC Committee makes all determinations affecting the
compensation for our executive officers, including our Chief
Executive Officer, or CEO. The GNC Committee receives our
CEOs recommendations with respect to all components of our
executive officers compensation. The GNC Committee
expressly retains the right to exercise its discretion in
modifying any adjustments or awards recommended by the CEO. In
the case of our CEOs compensation, the GNC Committee
conducts its own evaluation of his performance and does not
request any recommendation from our CEO regarding his
compensation. Ultimately, the GNC Committee reserves to itself
discretion with respect to all compensation of our executive
officers.
The GNC Committee makes recommendations to the Board of
Directors concerning all facets of the director nominee
selection process. Generally, the GNC Committee identifies
candidates for director nominees in consultation with management
and the independent members of the Board, through the use of
search firms or other advisers, through the recommendations
submitted by stockholders or through such other methods as the
GNC Committee deems to be helpful to identify candidates. Once
candidates have been identified, the GNC Committee confirms that
the candidates meet the qualifications for director nominees
established by the Board. The GNC Committee may gather
information about the candidates through interviews,
questionnaires, background checks, or any other means that the
GNC Committee deems to be helpful in the evaluation process. The
GNC Committee meets to discuss and evaluate the qualities and
skills of each candidate, both on an individual basis and taking
into account the overall composition and needs of the Board.
Upon selection of a qualified candidate, the GNC Committee would
recommend the candidate for consideration by the full Board of
Directors.
In considering whether to include any particular candidate in
the Boards slate of recommended director nominees, the
Board will consider the candidates integrity, education,
business acumen, knowledge of NaviSites business and
industry, experience, diligence, conflicts of interest and the
ability to act in the interests of all stockholders. The Board
does not assign specific weights to particular criteria and no
particular criterion is a prerequisite for each prospective
nominee. NaviSite believes that the backgrounds and
qualifications of its directors, considered as a group, should
provide a composite mix of experience, knowledge and abilities
that will allow the Board to fulfill its responsibilities. The
GNC Committee will consider director candidates who are
recommended by the stockholders of NaviSite. Such recommendation
for nomination must be in writing and include the following:
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Name and address of the stockholder making the recommendation;
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Number of shares of Common Stock that are owned beneficially and
held of record by such stockholder;
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Name and address of the individual recommended for consideration
as a director nominee;
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9
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Principal occupation and experience of the director nominee;
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Total number of shares of Common Stock that will be voted for
the director nominee by the stockholder making the
recommendation; and
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A written statement from the stockholder making the
recommendation stating whether the director nominee has
indicated his or her willingness to serve if elected and why
such recommended candidate would be able to fulfill the duties
of a director.
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Nominations must be sent to the attention of the Secretary of
NaviSite by U.S. mail to NaviSite, Inc., 400 Minuteman
Road, Andover, Massachusetts 01810. The Secretary will then
provide the nomination to the GNC Committee for consideration.
Assuming that the required material has been provided on a
timely basis, the GNC Committee will evaluate
stockholder-recommended candidates by following substantially
the same process, and applying substantially the same criteria,
as it follows for candidates submitted by others.
Stockholder
Communications with the Board of Directors
Stockholders may communicate with the Board of Directors by
sending written communications to the Board of Directors or any
individual member of the Board of Directors to the following
address: Board of Directors,
c/o Secretary,
NaviSite, Inc., 400 Minuteman Road, Andover, Massachusetts
01810. The Secretary will forward all such correspondence
accordingly, except for mass mailings, job inquiries, surveys,
business solicitations or advertisements, personal grievances,
matters as to which NaviSite tends to receive repetitive or
duplicative communications, or patently offensive or otherwise
inappropriate material.
MANAGEMENT
Officers are appointed annually by the Board of Directors and
serve at the discretion of the Board of Directors. Set forth
below is information regarding the current executive officers of
NaviSite.
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Name
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Age
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Position
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Arthur P. Becker
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58
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Chief Executive Officer, President and Director
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James W. Pluntze
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47
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Chief Financial Officer and Treasurer
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Mark Clayman
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39
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Senior Vice President of Hosting Services
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Arthur P. Becker has served as a director of NaviSite
since September 2002 and its Chief Executive Officer and
President since February 2003. From 2000 to 2003,
Mr. Becker has served as Vice Chairman and a director of
CBT, a
predecessor-in-interest
to Atlantic Investors, LLC. Mr. Becker is also a co-founder
of Atlantic Investors, LLC, a holder of approximately 38% of the
outstanding shares of our Common Stock as of the Record Date.
Since 1999, Mr. Becker has been the Managing Member of
Madison Technology LLC, an investment fund that is focused on
technology and telecommunications companies. Madison Technology
LLC is a managing member of Atlantic Investors, LLC.
James W. Pluntze has served as Chief Financial Officer
and Treasurer of NaviSite since January 2007. Mr. Pluntze
first joined NaviSite in 2002 as a director and as the Chairman
of the Audit Committee. From March 2003 until May 2005,
Mr. Pluntze served as the acting Chief Financial Officer of
NaviSite and from May 2005 until January 2007, Mr. Pluntze
served as NaviSites Senior Vice President of Finance.
Mark Clayman has served as Senior Vice President of
Hosting Services of NaviSite since June 2006. Mr. Clayman
joined NaviSite as Vice President, Hosting and Chief Information
Officer through the acquisition of Surebridge, Inc. in June
2004. From June 1999 through June 2004, Mr. Clayman served
as Vice President and Chief Information Officer of Surebridge,
Inc., a leading application outsourcer.
10
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Compensation
Philosophy and Objectives
We place a great deal of importance on recruiting, hiring,
retaining and motivating high quality personnel. Our executive
compensation program has three objectives: (i) to align the
interests of our executive officers with the interests of our
stockholders by basing a significant portion of an
executives compensation on our performance; (ii) to
attract and retain talented executive officers who can
contribute to our success; and (iii) to provide incentives
for superior performance by our executives. Historically, we
have chosen to achieve these objectives through salary
increases, cash and stock bonuses and periodic grants of equity
awards.
Compensation
Elements
Elements of compensation for our executive officers include:
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base salary;
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annual bonuses;
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long-term incentive awards;
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employee benefits;
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perquisites and personal benefits.
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Our policy for allocating between currently paid and long-term
compensation is to ensure adequate base compensation to attract
and retain our personnel, while providing incentives to maximize
our long-term value for our stockholders. While we do not adhere
to rigid formulas or targets in determining the mix of
compensation elements, the GNC Committee has determined that
base salaries should be at the Peer Group (as defined below)
25th percentile, target bonuses should be at the Peer Group 75th
percentile and annual long term incentive compensation should be
at the Peer Group 50th percentile. We incorporate flexibility
into our compensation structure to respond to the changing
business environment and needs of NaviSite.
Base Salaries. A competitive base salary is the
foundation of our compensation structure and we believe it is
required to attract, retain and motivate the executive officers
in alignment with our business strategies. Absent a promotion or
significant increase in responsibilities, our GNC Committee
reviews base salaries of our executive officers in the context
of existing salaries. In fiscal 2008, our GNC Committee reviewed
our Named Executive Officers base salaries and approved a
base salary increase of 8% for Mr. Pluntze.
Messrs. Becker, Clayman and Cochinwala and Ms. Cormier
did not receive a base salary increase in fiscal 2008.
Annual Bonuses. A significant portion of the direct cash
compensation for our Named Executive Officers consists of annual
incentive bonuses. Our GNC Committee established a target bonus
opportunity for each of our Named Executive Officers for fiscal
2008 under our FY 2008 Executive Management Bonus Program
(2008 MBP). Target bonus opportunities are
expressed as a percentage of the base salary paid to the Named
Executive Officer during that fiscal year. For fiscal 2008, the
target bonus percentages for the Named Executive Officers were
75% for Mr. Becker, 44.4% for Mr. Clayman, 50% for
Mr. Cochinwala, 44% for Mr. Pluntze and 29% for
Ms. Cormier. The GNC Committee generally selects bonus
amounts for the executive officers such that the target bonus
opportunity approximates the 75th percentile of comparable
positions at our peer companies.
The 2008 MBP was designed to recognize and reward the
achievement of financial, business and management goals that are
essential to our success. As designed, for Messrs. Becker
and Pluntze and Ms. Cormier, the bonus payments under the
2008 MBP could range from 0% to 130% of an
individuals target bonus, based on business and individual
performance and the discretion of the GNC Committee. For
Messrs. Clayman and Cochinwala, the bonus payments under
the 2008 MBP could range from 0% to 145% of an
individuals target bonus, based on business and individual
performance and the discretion of the GNC
11
Committee. The 2008 MBP design contemplated both financial
achievements and personal goals and objectives in order to
compute the percentage of target achieved.
For Messrs. Becker and Pluntze and Ms. Cormier, there
were two financial metrics upon which the 2008 MBP was
based: Target 1 was the achievement of $183,000,000
of gross revenue in fiscal 2008 and Target 2 was the
achievement of $43,000,000 of Adjusted EBITDA, as defined by
NaviSite, in fiscal 2008. For Mr. Becker, 75% of his bonus
target was dependent on meeting Target 1 and 25% was based on
meeting Target 2. For each of Mr. Pluntze and
Ms. Cormier, 50% of their bonus target was based on meeting
Target 1, 25% was based on meeting Target 2 and 25% was based on
meeting personal objectives.
The 2008 MBP was structured so that Messrs. Becker and
Pluntze and Ms. Cormier only began to earn a cash bonus if
NaviSites gross revenue was 85% of Target 1 and
NaviSites Adjusted EBITDA was 75% of Target 2. If
NaviSites gross revenue was 85% of Target 1 and
NaviSites Adjusted EBITDA was 75% of Target 2, then
Messrs. Becker and Pluntze and Ms. Cormier would earn
a cash bonus equal to 70% of the portion earned based on meeting
Target 1, plus 70% of the portion earned based on meeting Target
2, plus the portion earned based on meeting personal objectives,
as applicable. The bonus targets would be earned in full only if
NaviSites gross revenue was 100% of Target 1 and
NaviSites Adjusted EBITDA was 100% of Target 2. Between
triggering the earning of the cash bonus at 85% of Target 1 and
75% of Target 2 and the 100% achievement of Target 1 and Target
2, the cash bonus earned by each of Messrs. Becker and
Pluntze and Ms. Cormier would be paid in a linear
relationship to the achievement of Target 1 and Target 2. In
addition, each of Messrs. Becker and Pluntze and
Ms. Cormier had the opportunity to earn an over-achievement
bonus. The over-achievement bonus would be paid for achievement
of 101% to 110% of Target 2. The percent payout of each
executive officers over-achievement bonus would equal the
percent achievement above the 100% goal. Mr. Pluntze and
Ms. Cormier would also have to meet their personal
objectives in order to earn any payout of the over-achievement
bonus. In no event would the over-achievement bonus earned be
more than 30% of the target bonus opportunity for each of
Messrs. Becker and Pluntze and Ms. Cormier.
For Mr. Clayman, there were four financial metrics upon
which the 2008 MBP was based: Target 1 was the
achievement of $113,368,313 of gross revenue of the Hosting
Services division of NaviSite in fiscal 2008; Target
2 was the achievement of $37,830,486 of EBITDA of the
Hosting Services division of NaviSite in fiscal 2008;
Target 3 was the achievement of $37,942,863 of gross
revenue of the Application Management division of NaviSite in
fiscal 2008; and Target 4 was the achievement of
$20,464,217 of EBITDA of the Application Management division of
NaviSite in fiscal 2008. For Mr. Clayman, 20% of his bonus
target was dependent on meeting Target 1, 50% was based on
meeting Target 2, 10% was based on meeting Target 3 and 20% was
based on meeting Target 4.
The 2008 MBP was structured so that Mr. Clayman only
began to earn a cash bonus if the Hosting Services
divisions gross revenue was 85% of Target 1, the Hosting
Services divisions EBITDA was 75% of Target 2, the
Application Management divisions gross revenue was 85% of
Target 3 and the Application Management divisions EBITDA
was 75% of Target 4. If the Hosting Services divisions
gross revenue was 85% of Target 1, the Hosting Services
divisions EBITDA was 75% of Target 2, the Application
Management divisions gross revenue was 85% of Target 3 and
the Application Management divisions EBITDA was 75% of
Target 4, then Mr. Clayman would earn a cash bonus equal to
70% of the portion earned based on meeting Target 1, plus 70% of
the portion earned based on meeting Target 2, plus 70% of the
portion earned based on meeting Target 3, plus 70% of the
portion earned based on meeting Target 4. The bonus target would
be earned in full only if the Hosting Services divisions
gross revenue was 100% of Target 1, the Hosting Services
divisions EBITDA was 100% of Target 2, the Application
Management divisions gross revenue was 100% of Target 3
and the Application Management divisions EBITDA was 100%
of Target 4. Between triggering the earning of the cash bonus at
85% of Targets 1 and 3 and 75% of Targets 2 and 4 and the 100%
achievement of Target 1, Target 2, Target 3 and Target 4, the
cash bonus earned by Mr. Clayman would be paid in a linear
relationship to the achievement of Target 1, Target 2, Target 3
and Target 4. In addition, Mr. Clayman had the opportunity
to earn an over-achievement bonus. The over-achievement bonus
would be paid for achievement of 101% to 110% of Target 2. The
percent payout of Mr. Claymans over-achievement bonus
would equal the percent achievement above the 100% goal. In no
event would the over-achievement bonus earned be more than 45%
of the target bonus opportunity for Mr. Clayman.
12
For Mr. Cochinwala, there were three financial metrics upon
which the 2008 MBP was based: Target 1 was the
achievement of $2,877,764 of EBITDA of the Professional Services
division of NaviSite in fiscal 2008; Target 2 was
the achievement of $37,942,863 of gross revenue of the
Application Management division of NaviSite in fiscal 2008; and
Target 3 was the achievement of $20,464,217 of
EBITDA of the Application Management division of NaviSite in
fiscal 2008. For Mr. Cochinwala, 50% of his bonus target
was dependent on meeting Target 1, 15% was based on meeting
Target 2, and 35% was based on meeting Target 3.
The 2008 MBP was structured so that Mr. Cochinwala
only began to earn a cash bonus if the Professional Services
divisions EBITDA was 75% of Target 1, the Application
Management divisions gross revenue was 85% of Target 2 and
the Application Management divisions EBITDA was 75% of
Target 3. If the Professional Services divisions EBITDA
was 75% of Target 1, the Application Management divisions
gross revenue was 85% of Target 2 and the Application Management
divisions EBITDA was 75% of Target 3, then
Mr. Cochinwala would earn a cash bonus equal to 70% of the
portion earned based on meeting Target 1, plus 70% of the
portion earned based on meeting Target 2, plus 70% of the
portion earned based on meeting Target 3. The bonus target would
be earned in full only if the Professional Services
divisions EBITDA was 100% of Target 1, the Application
Management divisions gross revenue was 100% of Target 2
and the Application Management divisions EBITDA was 100%
of Target 3. Between triggering the earning of the cash bonus at
75% of Targets 1 and 3 and 85% of Target 2 and the 100%
achievement of Target 1, Target 2 and Target 3, the cash bonus
earned by Mr. Cochinwala would be paid in a linear
relationship to the achievement of Target 1, Target 2 and Target
3. In addition, Mr. Cochinwala had the opportunity to earn
an over-achievement bonus. The over-achievement bonus would be
paid for achievement of 101% to 110% of Target 1. The percent
payout of Mr. Cochinwalas over-achievement bonus
would equal the percent achievement above the 100% goal. In no
event would the over-achievement bonus earned be more than 45%
of the target bonus opportunity for Mr. Cochinwala.
Actual bonus payments for fiscal 2008 are set forth in the
Summary Compensation Table and reflect that
(i) Mr. Becker achieved approximately 53% of his
overall target bonus, (ii) Mr. Clayman achieved
approximately 50% of his overall target bonus,
(iii) Mr. Cochinwala achieved approximately 32% of his
overall target bonus and (iv) Mr. Pluntze achieved
approximately 45% of his overall target bonus. Ms. Cormier
did not receive a bonus payment under the 2008 MBP as she
resigned prior to the end of the fiscal year.
Long-Term Equity Incentives. The GNC Committee believes
that placing a portion of an executives total compensation
in the form of restricted stock achieves three objectives:
(i) it aligns the interest of our executives directly with
those of our stockholders; (ii) it gives executives a
significant long-term interest in our success; and (iii) it
helps us retain key executives. In determining the number and
terms of shares to grant an executive, the GNC Committee will
primarily consider the executives past performance and the
degree to which an incentive for long-term performance would
benefit NaviSite. The GNC Committee also considers the total
number of shares reserved for issuance under our stock incentive
plans, our projected hiring needs for the near future and our
recent performance.
Beginning in fiscal 2008 under the Compensation Policy,
long-term incentive compensation for executive officers is
comprised of grants of shares of restricted stock (the
Annual Restricted Stock Grants). The terms and
number of shares subject to the Annual Restricted Stock Grants
will be determined by the GNC Committee each year. The effective
grant date for fiscal 2008 was August 21, 2007. The GNC
Committee approved the grant for fiscal 2009 on July 22,
2008. From an accounting perspective, the grant date determined
pursuant to SFAS 123R for equity-based awards was
August 27, 2008.
The GNC Committee approved the fiscal 2008 Annual Restricted
Stock Grant on August 21, 2007. The restricted stock was
granted under the Amended and Restated 2003 Stock Incentive
Plan. Each grant was divided into 60% accelerated shares and 40%
non-accelerated shares. The shares vest as to
331/3%
of the original number of each of the accelerated and
non-accelerated shares on the first, second and third
anniversary of the grant date. In the event that NaviSite
achieved $184,400,000 in revenue and $45,100,000 of adjusted
EBITDA for fiscal year 2008, the restrictions with respect to
100% of the accelerated shares would have automatically lapsed.
NaviSite did not achieve these targets and the restrictions on
the accelerated shares did
13
not automatically lapse. Messrs. Clayman and Cochinwala did
not receive a 2008 Annual Restricted Stock Grant as they were
not executive officers of NaviSite as of the date of the grant.
Please see Grants of Plan-Based Awards For Fiscal
2008 below for details regarding the fiscal 2008 Annual
Restricted Stock Grants.
The GNC Committee approved the fiscal 2009 Annual Restricted
Stock Grant on July 22, 2008. The restricted stock was
granted under the Amended and Restated 2003 Stock Incentive
Plan. The restrictions lapse as follows (i) for the first
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $182,330,695 for 20 consecutive trading days
and, so long as the employee remains employed by NaviSite as of
each vesting date, the remaining 50% of such
1/3
vests on the one year anniversary thereafter, (ii) for the
second
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $232,330,695 for 20 consecutive trading days,
and so long as the employee remains employed by NaviSite as of
each vesting date, the remaining 50% of such
1/3
vests on the one year anniversary thereafter, and (iii) for
the final
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $282,330,695 for 20 consecutive trading days
and, so long as the employee remains employed by NaviSite as of
each vesting date, the remaining 50% of such
1/3
vests on the one year anniversary thereafter. If the performance
targets are not met, the restricted shares will be forfeited to
NaviSite on the tenth anniversary of the grant date.
These shares of restricted stock are not subject to any
separation or change of control agreement NaviSite currently has
in place with any of the executive officers and will not
accelerate in accordance with the provisions of any such
separation or change of control agreement. In the event there is
a change of control (as defined in the Restricted Stock
Agreement with each executive officer), which results in a
market capitalization: (x) exceeding $182,330,695, then
100% of the first
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; (y) exceeding $232,330,695,
then 100% of the first and second
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; or (z) exceeding
$282,330,695, then 100% of all of the shares will vest
immediately, so long as the employee remains employed by
NaviSite as of such date. Please see Grants of Plan-Based
Awards For Fiscal 2008 below for details regarding the
fiscal 2009 Annual Restricted Stock Grants.
Employee Benefits. We sponsor the following benefits
under which our executive officers and other eligible employees
may participate. The cost of such coverage for employee and
dependents is partially borne by the executive or employee and
dependent upon coverage elected. Eligibility for participation
is upon hire, most benefits include a prerequisite of working
30-hours or
more per week on a consistent basis.
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|
|
|
|
Health Insurance: Offer an HMO and two PPO plans which provide
for in and out of network coverage.
|
|
|
|
Dental Insurance: Provide 100% coverage for preventative, 80%
basic restorative, 50% major restorative. Deductible is $50/$150
calendar year basic or major. Orthodontic 50% to $1,500 maximum.
|
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|
|
Vision: Hardware reimbursement for glasses, lenses, contacts.
$150 per person/$400 family. No premium cost.
|
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|
|
Life/AD&D: Benefit equal to two times their base annual
salary, not to exceed $500,000. Commission, bonus and overtime
excluded. 100% paid NaviSite. Supplemental life/AD&D also
offered. Cost borne by executive or employee.
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|
|
STD/LTD: NaviSite bears the cost of these policies. Optional
employee purchase of tax free benefit offered.
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FSA (Flexible Spending Account Health/Dependent): Allows use of
pre-tax dollars to cover certain expenses not covered by
insurance.
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|
401(k) Plan: All of our employees who work in the U.S. are
eligible to participate in the 401(k) Plan if they meet
eligibility requirements. Contribute on a pre-tax basis, up to
50% of their respective total income (includes commission, bonus
and overtime) from NaviSite, subject to a maximum aggregate
annual contribution imposed by the IRS. We currently have no
employer match.
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Employee Assistance Program: 24/7 confidential hotline and
website assistance.
|
14
The GNC
Committees Process
Our GNC Committee annually reviews and approves the compensation
of all of our executive officers, as is described in the
Corporate Governance and Board Matters GNC
Committee section above. In addition, our GNC Committee
adopted the Compensation Policy last year, which policy is
described in the Corporate Governance and Board
Matters GNC Committee section above.
Compensation
Consultant
In fiscal 2007, NaviSite retained DolmatConnell &
Partners as an independent advisor reporting to the GNC
Committee on executive compensation matters.
DolmatConnell & Partners role is further
described in the Corporate Governance and Board
Matters GNC Committee section above.
Benchmarking
Benchmark data was used by our GNC Committee to review and to
help determine the appropriate amount of each executive
officers compensation. Benchmark companies were selected
by DolmatConnell & Partners, and are referred to as
the Peer Group. The companies in the Peer Group were
selected to reflect similar business product and service,
similar size, targeted customer segments and the markets for
executive talent most applicable to NaviSite. The GNC Committee
used the companies in the Peer Group to verify and determine
competitive pay levels for our executive officers. The companies
in the Peer Group were:
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Art Technology Group, Inc.,
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Diamond Management & Technology Consultants, Inc.,
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Digital River, Inc.,
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Equinix, Inc.,
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Imergent, Inc.,
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Internap Network Services Corporation,
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iPass Inc.,
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Limelight Networks, Inc.,
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Perficient, Inc.,
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QAD Inc.,
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RCM Technologies, Inc.,
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Switch & Data Facilities Company, Inc.,
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TeleCommunication Systems, Inc.,
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Terremark, Inc. and
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Vignette Corporation.
|
A second data source comprised of compensation survey data from
the Radford Executive Survey was used to assess the cash
compensation of all executive officers except the Chief
Executive Officer and Chief Financial Officer.
The GNC Committee examined the range of benchmark company data
for each executive officers position. The benchmark data
examined was: (i) annual run rate (run rate is equal to the
number of stock options and full-value shares granted divided by
the number of shares of Common Stock outstanding; our annual run
rate in fiscal 2007 was 6.7%, which was slightly above the Peer
Group 75th percentile of 4.8%); (ii) equity outstanding
(consisting of stock options and restricted shares as a
percentage of shares outstanding); our equity outstanding in
fiscal 2007 was 19.2%, which was above the Peer Group 75th
percentile of 14.5%; (iii) total stock option overhang (we
had a total overhang of 28.4% in fiscal 2007, placing us at the
Peer
15
Group 76th percentile); (iv) base salaries (positioned at
the Peer Group 25th percentile); (v) bonus targets
(positioned at the Peer Group 75th percentile); (vi) annual
long-term incentive compensation (positioned at the Peer Group
50% percentile); (vii) actual total cash compensation
(positioned at the Peer Group 25th percentile);
(viii) target total cash compensation (positioned at the
Peer Group 50th percentile); (ix) annual equity
participation (positioned at the Peer Group 50th percentile) and
(x) actual total direct compensation (positioned between
the Peer Group 25th and 50th percentile).
Role of
Executive Officers in Compensation Decisions
Our Chief Executive Officer provides recommendations with
respect to all components of our executive officers
compensation to our GNC Committee, as is described in the
Corporate Governance and Board Matters GNC
Committee section above.
Executive
Officer Agreements
We have employment agreements and indemnification agreements
with each of our executive officers. We have also entered into
Separation Agreements with each of our executive officers. Under
these agreements, these officers will be entitled to receive
severance benefits upon termination by NaviSite without cause or
by the executive officer for good reason following a change in
control. See Employment Agreements and
Potential Payments Upon Termination or Change in
Control below for a more detailed description of these
agreements. We believe that the potential benefits provided by
these agreements will help: (i) assure that our executive
officers can give their full attention and dedication to our
business, free from distractions caused by personal
uncertainties and risks related to a pending or threatened
change in control, (ii) assure our executive officers
objectivity in considering shareholders interests,
(iii) assure our executive officers of fair treatment in
case of involuntary termination following a change in control,
and (iv) attract and retain key executive talent.
Tax and
Accounting Considerations
Deductibility of Executive Compensation.
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), generally disallows a federal
income tax deduction to public companies for certain
compensation over $1,000,000 paid to certain officers.
Qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. The GNC
Committee intends to review the potential effects of
Section 162(m) of the Code periodically and intends to
structure our equity awards in a manner that is intended to
avoid disallowances under Section 162(m) of the Code unless
the GNC Committee believes that such compliance would not be in
the best interest of us or our stockholders.
Accounting for Stock-Based Compensation. Beginning on
August 1, 2005, NaviSite began accounting for stock-based
payments including stock option awards in accordance with the
requirements of Statement of Financial Accounting Standards
No. 123(R), Share Based Payment.
Compensation
Committee Report
The GNC Committee has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of
Regulation S-K
with management. Based on this review and discussion, the GNC
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in
NaviSites proxy statement on Schedule 14A.
By the Governance, Nominating and
Compensation Committee
Larry Schwartz, Chairman
James Dennedy
Thomas R. Evans
16
The information contained in the foregoing report shall not be
deemed to be soliciting material or
filed or incorporated by reference into any of
NaviSites previous or future filings with the SEC, or
subject to the liabilities of Section 18 of the Exchange
Act, except to the extent specifically incorporated by reference
into a document filed under the Securities Act of 1933, as
amended (the Securities Act), or the Exchange Act.
Summary
Compensation Table
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
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|
Incentive
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Arthur P. Becker
|
|
|
2008
|
|
|
$
|
350,000
|
|
|
$
|
501,987
|
|
|
$
|
109,872
|
|
|
$
|
138,944
|
(3)
|
|
|
|
|
|
$
|
1,100,803
|
|
Chief Executive Officer and President
|
|
|
2007
|
|
|
$
|
350,000
|
|
|
|
|
|
|
$
|
367,218
|
|
|
$
|
187,500
|
(4)
|
|
|
|
|
|
$
|
904,718
|
|
James W. Pluntze(5)
|
|
|
2008
|
|
|
$
|
243,000
|
|
|
$
|
231,661
|
|
|
$
|
77,159
|
|
|
$
|
47,729
|
(3)
|
|
|
|
|
|
$
|
599,549
|
|
Chief Financial Officer and Treasurer
|
|
|
2007
|
|
|
$
|
204,231
|
|
|
|
|
|
|
$
|
98,155
|
|
|
$
|
75,000
|
(4)
|
|
|
|
|
|
$
|
377,386
|
|
Mark Clayman
|
|
|
2008
|
|
|
$
|
225,000
|
|
|
|
|
|
|
$
|
96,313
|
|
|
$
|
50,000
|
(3)
|
|
|
|
|
|
$
|
371,313
|
|
Senior Vice President of Hosting Services
|
|
|
2007
|
|
|
$
|
225,000
|
|
|
|
|
|
|
$
|
146,815
|
|
|
$
|
106,406
|
(4)
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|
|
|
|
|
$
|
478,221
|
|
Nasir Cochinwala(6)
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|
2008
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|
|
$
|
200,000
|
|
|
|
|
|
|
$
|
86,973
|
|
|
$
|
31,911
|
(3)
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|
|
|
|
|
$
|
318,884
|
|
Former Senior Vice President of Professional Services
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|
2007
|
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|
$
|
200,000
|
|
|
|
|
|
|
$
|
102,969
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|
|
$
|
81,560
|
(4)
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$
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384,529
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|
Monique Cormier(7)
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|
2008
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$
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179,039
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|
|
$
|
111,540
|
|
|
$
|
14,043
|
|
|
|
|
|
|
$
|
99,425
|
(8)
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|
$
|
404,047
|
|
Former General Counsel, Vice President and Secretary
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|
2007
|
|
|
$
|
190,000
|
|
|
|
|
|
|
$
|
21,063
|
|
|
$
|
41,250
|
(4)
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$
|
252,313
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|
|
(1) |
|
Reflects the fiscal 2008 expense for restricted stock awards
granted to the Named Executive Officers. Amounts reflect the
compensation cost recorded in the fiscal 2008 consolidated
financial statements for each named individual in accordance
with Financial Accounting Standards Board Share Based
Payment, an amendment of FASB Statements No. 123 and
95 (SFAS 123R). Please refer to footnote
2(n) in our consolidated financial statements filed on
Form 10-K
for the fiscal year ended July 31, 2008. These amounts
reflect NaviSites accounting expense for these awards and
do not correspond to the actual value that might be realized by
the named individuals. |
(2) |
|
Reflects the fiscal 2008 and fiscal 2007 expense for stock
option awards granted to the Named Executive Officers. Amounts
reflect the compensation cost recorded in the fiscal 2008 and
fiscal 2007 consolidated financial statements for each named
individual and includes grants made in previous years for which
compensation expense is required to be recognized in accordance
with SFAS 123R. The expense has been calculated based on
the grant date fair value of the respective awards using a
Black-Scholes option pricing model. Please refer to footnote
2(n) in our consolidated financial statements filed on
Form 10-K
for the fiscal year ended July 31, 2008 and footnote 3(m)
in our consolidated financial statements filed on
Form 10-K
for the fiscal year ended July 31, 2007. These amounts
reflect NaviSites accounting expense for these awards and
do not correspond to the actual value that might be realized by
the named individuals. |
(3) |
|
Represents amounts earned under the FY 2008 Executive Management
Bonus Program. Bonuses were not paid until November 7,
2008, except that Mr. Cochinwalas bonus payment was
paid to him in October 2008. |
(4) |
|
Represents amounts earned under the FY 2007 Executive Management
Bonus Program. Bonuses were not paid until September 28,
2007. |
(5) |
|
Mr. Pluntze was promoted to Chief Financial Officer on
January 1, 2007. |
(6) |
|
Mr. Cochinwala resigned from NaviSite on October 6,
2008. |
(7) |
|
Ms. Cormier resigned from NaviSite on June 20, 2008. |
(8) |
|
Includes $8,502 for payment of unused vacation upon
Ms. Cormiers resignation. The remaining amount
represents the actual amount realized by Ms. Cormier
relating to stock options exercised during fiscal year 2008. |
17
The following table sets forth the details of awards granted to
the Named Executive Officers during fiscal 2008.
GRANTS OF
PLAN-BASED AWARDS FOR FISCAL 2008
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All Other Stock
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards(1)
|
|
Estimated Future Payouts Under Equity Incentive Plan
Awards
|
|
Shares of Stock or
|
|
Grant Date
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Fair Value
|
Name
|
|
Grant Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
of Stock
|
|
Arthur P. Becker
|
|
|
|
(2)
|
|
|
0
|
|
|
|
262,500
|
|
|
|
341,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/21/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,640
|
(3)
|
|
$
|
1,043,905
|
|
|
|
|
7/22/08
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
277,000
|
(5)
|
|
|
277,000
|
(5)
|
|
|
|
|
|
$
|
911,330
|
|
James W. Pluntze
|
|
|
|
(2)
|
|
|
0
|
|
|
|
106,920
|
|
|
|
138,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/21/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,750
|
(3)
|
|
$
|
481,748
|
|
|
|
|
7/22/08
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
120,000
|
(5)
|
|
|
120,000
|
(5)
|
|
|
|
|
|
$
|
394,800
|
|
Mark Clayman
|
|
|
|
(2)
|
|
|
0
|
|
|
|
100,000
|
|
|
|
145,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/08
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
120,000
|
(5)
|
|
|
120,000
|
(5)
|
|
|
|
|
|
$
|
394,800
|
|
Nasir Cochinwala(6)
|
|
|
|
(2)
|
|
|
0
|
|
|
|
100,000
|
|
|
|
145,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/22/08
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
90,000
|
(5)(6)
|
|
|
90,000
|
(5)(6)
|
|
|
|
|
|
$
|
296,100
|
|
Monique Cormier(7)
|
|
|
|
(2)
|
|
|
0
|
|
|
|
52,200
|
|
|
|
67,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/21/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,250
|
(3)(7)
|
|
$
|
231,953
|
|
|
|
|
(1) |
|
Non-equity awards are made pursuant to our FY 2008 Executive
Management Bonus Program. The threshold amount is 0% of target,
as no payment is made if target is not met and maximum is 130%
of target for Messrs. Becker and Pluntze and
Ms. Cormier and maximum is 145% of target for
Messrs. Clayman and Cochinwala. Certain of each Named
Executive Officers targets were met and the following
bonus payments were made on November 7, 2008 (except the
bonus payment to Mr. Cochinwala was made in October 2008):
(i) $138,944 to Mr. Becker, which reflects an
achievement of approximately 53% of his target bonus payment;
(ii) $47,729 to Mr. Pluntze, which reflects an
achievement of approximately 45% of his target bonus payment;
(iii) $50,000 to Mr. Clayman, which reflects an
achievement of approximately 50% of his target bonus payment;
and (iv) $31,911 to Mr. Cochinwala, which reflects an
achievement of approximately 32% of his target bonus payment.
Ms. Cormier did not receive a bonus payment as she resigned
prior to the end of the fiscal year. See Compensation
Discussion and Analysis for a discussion of the program. |
|
(2) |
|
The GNC Committee approved the terms of the FY 2008 Executive
Management Bonus Program on December 12, 2007. |
|
(3) |
|
The restricted stock was granted under the Amended and Restated
2003 Stock Incentive Plan. Each grant was divided into 60%
accelerated shares and 40% non-accelerated shares. The shares
vest as to
331/3%
of the original number of each of the accelerated and
non-accelerated shares on the first, second and third
anniversary of the grant date. In the event that NaviSite
achieved $184,400,000 in revenue and $45,100,000 of adjusted
EBITDA for fiscal year 2008, the restrictions with respect to
100% of the accelerated shares would have automatically lapsed.
NaviSite did not achieve these targets and the restrictions on
the accelerated shares did not automatically lapse. |
|
(4) |
|
The restricted stock was granted under the Amended and Restated
2003 Stock Incentive Plan. The GNC Committee approved the grant
on July 22, 2008. However, the grant date determined
pursuant to SFAS 123R for equity-based awards was
August 27, 2008 and accordingly, no SFAS 123R expense
was taken in fiscal year 2008. |
|
(5) |
|
The restricted stock was granted under the Amended and Restated
2003 Stock Incentive Plan. The restrictions lapse as follows
(i) for the first
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $182,330,695 for 20 consecutive trading days
and, so long as the employee remains employed by NaviSite as of
each vesting date, the remaining 50% of such
1/3
vests on the one year anniversary thereafter, (ii) for the
second
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $232,330,695 for 20 consecutive trading days,
and so long as the employee remains employed by NaviSite as of
each vesting date, the remaining 50% of such
1/3
vests on the one year anniversary thereafter, and (iii) for
the final
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of |
18
|
|
|
|
|
$282,330,695 for 20 consecutive trading days and, so long as the
employee remains employed by NaviSite as of each vesting date,
the remaining 50% of such
1/3
vests on the one year anniversary thereafter. In the event there
is a change of control (as defined in the Restricted Stock
Agreement with each executive officer), which results in a
market capitalization: (x) exceeding $182,330,695, then
100% of the first
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; (y) exceeding $232,330,695,
then 100% of the first and second
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; or (z) exceeding
$282,330,695, then 100% of all of the shares will vest
immediately, so long as the employee remains employed by
NaviSite as of such date. |
|
(6) |
|
Mr. Cochinwala resigned from NaviSite on October 6,
2008. Per an arrangement with NaviSite, Mr. Cochinwala has
until April 6, 2009 (plus an additional
90-day
period beyond such date provided Mr. Cochinwala has not
violated any ongoing obligations to NaviSite) for the
restrictions to lapse on the shares of restricted stock before
forfeiting such shares to NaviSite. |
|
(7) |
|
Ms. Cormier resigned from NaviSite on June 20, 2008
and the 29,250 shares of restricted stock granted to
Ms. Cormier were forfeited to NaviSite on such date. |
Employment
Agreements
Arthur
Becker
We entered into an employment agreement with Arthur P. Becker as
of February 21, 2003, pursuant to which he is employed as
our Chief Executive Officer and President. His agreement is for
a continuous term, but subject to the provisions described under
Potential Payments Upon Termination or Change in
Control, may be terminated by either party at any time.
Pursuant to this agreement, Mr. Becker is entitled to
receive:
|
|
|
|
|
a base salary, currently $350,000 per year, which is reviewed by
our GNC Committee annually (but no more frequently than
annually);
|
|
|
|
an annual bonus upon our achievement of various financial
and/or other
goals established by the Board of Directors; and
|
|
|
|
fringe benefits, including stock options and health insurance
and other benefits available to our employees.
|
We have also entered into an indemnification agreement with
Mr. Becker pursuant to which he will be indemnified by us,
subject to certain limitations, for any liabilities incurred by
him in connection with his role as a director and officer of
NaviSite.
Mark
Clayman
We entered into an employment offer letter with Mark Clayman as
of May 19, 2004, pursuant to which he is employed as our
Senior Vice President of Hosting Services. Pursuant to this
agreement, Mr. Clayman is entitled to receive:
|
|
|
|
|
a base salary, currently $225,000 per year;
|
|
|
|
an annual bonus upon our achievement of various financial
and/or other
goals established by the Board of Directors; and
|
|
|
|
fringe benefits, including stock options and health insurance
and other benefits available to our employees.
|
We have entered into an indemnification agreement with
Mr. Clayman pursuant to which he will be indemnified by us,
subject to certain limitations, for any liabilities incurred by
him in connection with his role as an officer of NaviSite.
19
Nasir
Cochinwala
We entered into an employment offer letter with Nasir Cochinwala
as of June 17, 2005, pursuant to which he was employed as
our Senior Vice President of Professional Services. Pursuant to
this agreement, Mr. Cochinwala was entitled to receive:
|
|
|
|
|
a base salary, which at the time of his resignation on
October 6, 2008 was $200,000 per year;
|
|
|
|
an annual bonus upon our achievement of various financial
and/or other
goals established by the Board of Directors; and
|
|
|
|
fringe benefits, including stock options and health insurance
and other benefits available to our employees.
|
We entered into an indemnification agreement with
Mr. Cochinwala pursuant to which he would have been
indemnified by us, subject to certain limitations, for any
liabilities incurred by him in connection with his role as an
officer of NaviSite.
On October 6, 2008, Mr. Cochinwala resigned from
NaviSite and the terms of his employment offer letter are no
longer in effect.
Monique
Cormier
We entered into an employment offer letter with Monique Cormier
as of August 12, 2005, pursuant to which she was employed
as our General Counsel. Pursuant to this agreement,
Ms. Cormier was entitled to receive:
|
|
|
|
|
a base salary, which at the time of her resignation on
June 20, 2008 was $190,000 per year; and
|
|
|
|
fringe benefits, including stock options and health insurance
and other benefits available to our employees.
|
We entered into an indemnification agreement with
Ms. Cormier pursuant to which she would have been
indemnified by us, subject to certain limitations, for any
liabilities incurred by her in connection with her role as an
officer of NaviSite.
On June 20, 2008, Ms. Cormier resigned from NaviSite
and the terms of her employment offer letter are no longer in
effect.
James
Pluntze
We entered into an employment offer letter with James Pluntze as
of April 4, 2003, pursuant to which he was employed as our
Vice President of Finance and Acting Chief Financial Officer.
Mr. Pluntze was promoted to Chief Financial Officer and
Treasurer, effective January 1, 2007. Pursuant to this
agreement, Mr. Pluntze is entitled to receive:
|
|
|
|
|
a base salary, currently $243,000 per year;
|
|
|
|
an annual bonus upon our achievement of various financial
and/or other
goals established by the Board of Directors; and
|
|
|
|
fringe benefits, including stock options and health insurance
and other benefits available to our employees.
|
We have entered into an indemnification agreement with
Mr. Pluntze pursuant to which he will be indemnified by us,
subject to certain limitations, for any liabilities incurred by
him in connection with his role as an officer of NaviSite.
For details regarding our obligations in the event of various
potential circumstances of termination of employment for any of
our executive officers, please see Potential Payments Upon
Termination or
Change-In-Control
below.
20
The following table details unexercised options and restricted
shares that have not vested for each of the Named Executive
Officers as of July 31, 2008.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Plan Awards: Market
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Plan Awards: Number
|
|
|
or Payout Value of
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
of Unearned Shares,
|
|
|
Unearned Shares,
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Units or Other
|
|
|
Units or Other
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Rights That Have
|
|
|
Rights That Have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Not Vested (#)
|
|
|
Not Vested ($)
|
|
|
Arthur P. Becker
|
|
|
40,000
|
|
|
|
|
|
|
|
2.55
|
|
|
|
7/9/2013
|
|
|
|
131,640
|
(1)
|
|
$
|
429,146
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
2.55
|
|
|
|
7/10/2013
|
|
|
|
277,000
|
(2)
|
|
$
|
903,020
|
|
|
|
|
400,000
|
|
|
|
|
|
|
|
5.41
|
|
|
|
1/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
1.58
|
|
|
|
3/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
103,125
|
|
|
|
|
|
|
|
1.48
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
James W. Pluntze
|
|
|
40,000
|
|
|
|
|
|
|
|
2.55
|
|
|
|
7/9/2013
|
|
|
|
60,750
|
(1)
|
|
$
|
198,045
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
2.55
|
|
|
|
7/10/2013
|
|
|
|
120,000
|
(2)
|
|
$
|
391,200
|
|
|
|
|
3,125
|
|
|
|
|
|
|
|
2.55
|
|
|
|
1/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
16,875
|
|
|
|
|
|
|
|
2.55
|
|
|
|
9/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
|
|
|
|
1.58
|
|
|
|
3/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
|
|
|
|
1.45
|
|
|
|
2/23/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
40,625
|
|
|
|
34,375
|
(3)
|
|
|
4.14
|
|
|
|
11/27/2016
|
|
|
|
|
|
|
|
|
|
Mark Clayman
|
|
|
20,000
|
|
|
|
|
|
|
|
2.55
|
|
|
|
9/20/2014
|
|
|
|
120,000
|
(2)
|
|
$
|
391,200
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
4.39
|
|
|
|
6/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
2.44
|
|
|
|
1/4/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
1.58
|
|
|
|
3/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
1.45
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
22,916
|
|
|
|
27,084
|
(4)
|
|
|
5.50
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
Nasir Cochinwala(5)
|
|
|
143,333
|
|
|
|
16,667
|
(5)(6)
|
|
|
1.76
|
|
|
|
6/29/2015
|
|
|
|
90,000
|
(2)(5)
|
|
$
|
293,400
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
1.45
|
|
|
|
2/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
22,916
|
|
|
|
27,084
|
(5)(7)
|
|
|
5.50
|
|
|
|
3/21/2017
|
|
|
|
|
|
|
|
|
|
Monique Cormier(8)
|
|
|
17,500
|
|
|
|
|
|
|
|
1.55
|
|
|
|
8/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
|
|
|
|
1.48
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Restricted stock granted under the Amended and Restated 2003
Stock Incentive Plan. Each grant was divided into 60%
accelerated shares and 40% non-accelerated shares. The shares
vest as to
331/3%
of the original number of each of the accelerated and
non-accelerated shares on the first, second and third
anniversary of the grant date. In the event that NaviSite
achieved $184,400,000 in revenue and $45,100,000 of adjusted
EBITDA for fiscal year 2008, the restrictions with respect to
100% of the accelerated shares would have automatically lapsed.
NaviSite did not achieve these targets and the restrictions on
the accelerated shares did not automatically lapse. |
|
(2) |
|
Restricted stock granted under the Amended and Restated 2003
Stock Incentive Plan. The restrictions lapse as follows
(i) for the first
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $182,330,695 for 20 consecutive trading days
and, so long as the employee remains employed by NaviSite, the
remaining 50% of such
1/3
vests on the one year anniversary thereafter, (ii) for the
second
1/3
of the shares, 50% vests upon NaviSite exceeding a market
capitalization of $232,330,695 for 20 consecutive trading days,
and so long as the employee remains employed by NaviSite, the
remaining 50% of such
1/3
vests on the one year anniversary thereafter, and (iii) for
the final
1/3
of the shares, 50% vests upon |
21
|
|
|
|
|
NaviSite exceeding a market capitalization of $282,330,695 for
20 consecutive trading days and, so long as the employee remains
employed by NaviSite, the remaining 50% of such
1/3
vests on the one year anniversary thereafter. In the event there
is a change of control (as defined in the Restricted Stock
Agreement with each executive officer), which results in a
market capitalization: (x) exceeding $182,330,695, then
100% of the first
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; (y) exceeding $232,330,695,
then 100% of the first and second
1/3
of the shares will vest immediately, so long as the employee
remains employed by NaviSite as of such date, with the remainder
of the shares being forfeited; or (z) exceeding
$282,330,695, then 100% of all of the shares will vest
immediately, so long as the employee remains employed by
NaviSite as of such date. |
|
(3) |
|
Options for the purchase of approximately 1,562 shares vest
and become exercisable each month until they are fully vested
and exercisable on May 27, 2010. |
|
(4) |
|
Options for the purchase of approximately 1,041 shares vest
and become exercisable each month until they are fully vested
and exercisable on September 18, 2010. |
|
(5) |
|
Mr. Cochinwala resigned from NaviSite on October 6,
2008. Per an arrangement with NaviSite, all of
Mr. Cochinwalas option awards will continue to vest
and be exercisable until April 6, 2009 (plus an additional
90-day
period beyond such date provided Mr. Cochinwala has not
violated any ongoing obligations to NaviSite) and
Mr. Cochinwala has until April 6, 2009 (plus an
additional
90-day
period beyond such date provided Mr. Cochinwala has not
violated any ongoing obligations to NaviSite) for the
restrictions to lapse on the shares of restricted stock before
forfeiting such shares to NaviSite. |
|
(6) |
|
Options for the purchase of approximately 3,333 shares will
vest and become exercisable each month until they are fully
vested and exercisable on December 27, 2008. |
|
(7) |
|
Options for the purchase of approximately 1,041 shares vest
and become exercisable each month until they are fully vested
and exercisable on April 6, 2009. |
|
(8) |
|
Ms. Cormier resigned from NaviSite on June 20, 2008,
and all of her unvested outstanding equity awards were
immediately forfeited to NaviSite on such date. Per an agreement
with NaviSite, Ms. Cormier was given a
90-day
period beyond the date of her resignation to exercise her vested
options. |
The following table sets forth certain information for each of
the Named Executive Officers concerning the number and value
realized on the exercise of stock options and vesting of stock
awards during fiscal 2008.
OPTION
EXERCISES AND STOCK VESTED DURING FISCAL 2008
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
Arthur P. Becker
|
|
|
|
|
|
|
|
|
James W. Pluntze
|
|
|
|
|
|
|
|
|
Mark Clayman
|
|
|
|
|
|
|
|
|
Nasir Cochinwala
|
|
|
|
|
|
|
|
|
Monique Cormier
|
|
|
5,000
|
|
|
$
|
14,150
|
|
|
|
|
5,000
|
|
|
$
|
12,250
|
|
|
|
|
5,000
|
|
|
$
|
13,750
|
|
|
|
|
14,075
|
|
|
$
|
36,173
|
|
|
|
|
5,000
|
|
|
$
|
14,600
|
|
22
Potential
Payments Upon Termination or
Change-in-Control
Arthur
Becker
Under Mr. Beckers employment agreement, if his
employment is terminated (i) by reason of death or
disability, (ii) by us 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. Beckers employment is terminated without cause
and he signs a general release of known and unknown claims in a
form satisfactory to us, 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.
On April 3, 2006, we entered into a Separation Agreement
with Mr. Becker. The Separation Agreement provides that if
his employment is terminated by us other than for cause (as
defined), disability (as defined) or death, or by
Mr. Becker for good reason (as defined) following a change
of control (as defined), then we 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 equal to his target bonus
for the current fiscal year pro rated to the date of
termination, (iii) pay 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 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 of control (as defined) of NaviSite, all
options and shares of restricted stock issued to Mr. Becker
under our Amended and Restated 2003 Stock Incentive Plan or any
other NaviSite stock incentive plan will become exercisable and
vested in full on the date of the change of control. However,
the shares of restricted stock granted to Mr. Becker
pursuant to the 2009 Annual Restricted Stock Grant are not
subject to any separation or change of control agreement
NaviSite currently has in place with Mr. Becker and will
not accelerate in accordance with the provisions of any such
separation or change of control agreement.
Our obligation to provide the forgoing benefits is subject to
the effectiveness of a general waiver and release from
Mr. Becker in favor of us, our directors, officers,
employees, representatives, agents and affiliates in a form
satisfactory to us.
Mark
Clayman
On April 3, 2006, we entered into a Separation Agreement
with Mr. Clayman. The Separation Agreement provides that if
his employment is terminated by us other than for cause (as
defined), disability (as defined) or death, or by
Mr. Clayman for good reason (as defined) following a change
of control (as defined), then we shall be obligated to
(i) pay Mr. Clayman as severance the higher of
(x) his annual base salary in effect on the date of
termination or (y) his annual base salary in effect
immediately prior to the change of control, for a period of six
months, (ii) pay a lump sum bonus payment equal to his
target bonus for the current fiscal year pro rated to the date
of termination, (iii) pay any unpaid bonus from the prior
fiscal year, (iv) pay all legal fees and expenses incurred
by Mr. Clayman in seeking to obtain or enforce any right
provided by the Separation Agreement, and (v) reimburse
Mr. Clayman for COBRA payments for health and welfare
benefits continuation if he elects COBRA coverage for a period
of six months. Mr. Clayman 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 if
Mr. Claymans employment is terminated by us other
than for cause (as defined), disability (as defined) or death,
or by Mr. Clayman for good reason (as defined) within
twelve months following a change of control (as defined) of
NaviSite, all options and shares of restricted stock issued to
Mr. Clayman under our Amended and Restated 2003 Stock
Incentive Plan or any other NaviSite stock incentive plan will
become exercisable and vested in full on the date of
termination. However, the shares of restricted stock granted to
Mr. Clayman pursuant to the 2009 Annual Restricted Stock
23
Grant are not subject to any separation or change of control
agreement NaviSite currently has in place with Mr. Clayman
and will not accelerate in accordance with the provisions of any
such separation or change of control agreement.
Our obligation to provide the forgoing benefits is subject to
the effectiveness of a general waiver and release from
Mr. Clayman in favor of us, our directors, officers,
employees, representatives, agents and affiliates in a form
satisfactory to us.
Nasir
Cochinwala
On April 3, 2006, we entered into a Separation Agreement
with Mr. Cochinwala. The Separation Agreement provided that
if his employment was terminated by us other than for cause (as
defined), disability (as defined) or death at any time during
his employment, or by Mr. Cochinwala for good reason (as
defined) within twelve months after a change of control (as
defined), then we would be obligated to (i) pay
Mr. Cochinwala as severance the higher of (x) his
annual base salary in effect on the date of termination or
(y) his annual base salary in effect immediately prior to
the change of control, for a period of six months, (ii) pay
a lump sum bonus payment equal to his target bonus for the
current fiscal year pro rated to the date of termination,
(iii) pay any unpaid bonus from the prior fiscal year,
(iv) pay all legal fees and expenses incurred by
Mr. Cochinwala in seeking to obtain or enforce any right
provided by the Separation Agreement, and (v) reimburse
Mr. Cochinwala for COBRA payments for health and welfare
benefits continuation if he elected COBRA coverage for a period
of six months.
The Separation Agreement also provided that if
Mr. Cochinwalas employment was terminated by us other
than for cause (as defined), disability (as defined) or death,
or by Mr. Cochinwala for good reason (as defined) within
twelve months following a change of control (as defined) of
NaviSite, all options and shares of restricted stock issued to
Mr. Cochinwala under our Amended and Restated 2003 Stock
Incentive Plan or any other NaviSite stock incentive plan would
become exercisable and vested in full on the date of
termination. However, the shares of restricted stock granted to
Mr. Cochinwala pursuant to the 2009 Annual Restricted Stock
Grant are not subject to any separation or change of control
agreement NaviSite currently has in place with
Mr. Cochinwala and will not accelerate in accordance with
the provisions of any such separation or change of control
agreement.
On October 6, 2008, Mr. Cochinwala resigned from
NaviSite and he was not entitled to receive any severance
benefits under his Separation Agreement with NaviSite.
Monique
Cormier
On April 6, 2006, we entered into a Separation Agreement
with Ms. Cormier. The Separation Agreement provides that if
her employment is terminated by us other than for cause (as
defined), disability (as defined) or death, or by
Ms. Cormier for good reason (as defined) following a change
of control (as defined), then we shall be obligated to
(i) pay Ms. Cormier as severance her annual base
salary in effect on the date of termination for a period of six
months, (ii) pay a lump sum bonus payment equal to her
target bonus for the current fiscal year pro rated to the date
of termination, (iii) pay any unpaid bonus from the prior
fiscal year, (iv) pay all legal fees and expenses incurred
by Ms. Cormier in seeking to obtain or enforce any right
provided by the Separation Agreement, and (v) reimburse
Ms. Cormier for COBRA payments for health and welfare
benefits continuation if she elects COBRA coverage for a period
of six months. Ms. Cormier will not be entitled to the
foregoing benefits if an equivalent benefit is received by her
from another employer during the six month period following her
termination.
The Separation Agreement also provides that following a change
of control (as defined) of NaviSite, all options and shares of
restricted stock issued to Ms. Cormier under our Amended
and Restated 2003 Stock Incentive Plan or any other NaviSite
stock incentive plan will become exercisable and vested in full
on the date of the change of control.
24
Our obligation to provide the forgoing benefits is subject to
the effectiveness of a general waiver and release from
Ms. Cormier in favor of us, our directors, officers,
employees, representatives, agents and affiliates in a form
satisfactory to us.
On June 20, 2008, Ms. Cormier resigned from NaviSite
and she was not entitled to receive any severance benefits under
her Separation Agreement with NaviSite.
James
Pluntze
On July 31, 2007, we entered into a new Separation
Agreement with Mr. Pluntze, which supersedes the Separation
Agreement between us and Mr. Pluntze dated April 3,
2006. The Separation Agreement provides that if
Mr. Pluntzes employment is terminated by us other
than for cause (as defined), disability (as defined) or death,
or by Mr. Pluntze for good reason (as defined) following a
change in control, then we shall be obligated to (i) pay to
Mr. Pluntze 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. Pluntze equal
to his target bonus for the current fiscal year pro rated to the
date of termination, (iii) pay to Mr. Pluntze any
unpaid bonus from the prior fiscal year, (iv) pay all legal
fees and expenses incurred by Mr. Pluntze in seeking to
obtain or enforce any right provided by the Separation
Agreement, and (v) reimburse Mr. Pluntze for COBRA
payments for health and welfare benefits continuation if
Mr. Pluntze elects COBRA coverage for a period of six
months. Mr. Pluntze will not be entitled to the foregoing
benefits if an equivalent benefit is received by
Mr. Pluntze from another employer during the six month
period following his termination.
The Separation Agreement also provides that upon a change in
control (as defined) all options and shares of restricted stock
granted or issued to Mr. Pluntze under our Amended and
Restated 2003 Stock Incentive Plan or any other stock incentive
plan of NaviSite shall become exercisable and vested in full on
the date of the change in control. However, the shares of
restricted stock granted to Mr. Pluntze pursuant to the
2009 Annual Restricted Stock Grant are not subject to any
separation or change in control agreement NaviSite currently has
in place with Mr. Pluntze and will not accelerate in
accordance with the provisions of any such separation or change
in control agreement.
Our obligation to provide the forgoing benefits is subject to
the effectiveness of a general waiver and release from
Mr. Pluntze in favor of us, our directors, officers,
employees, representatives, agents and affiliates in a form
satisfactory to us.
The following table summarizes payments that NaviSite would be
required to make to each executive officer under the separation
agreements in the case of (1) termination of the executive
without cause and (2) termination related to a change in
control of NaviSite. For the purposes of this table, we have
assumed that each event occurred on July 31, 2008, the last
business day of our last completed fiscal year.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for Termination
|
|
|
Payments for Termination upon
|
|
|
|
Without Cause
|
|
|
Change in Control
|
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
Health
|
|
|
|
|
|
Accelerated
|
|
|
Health
|
|
Name
|
|
Severance(1)
|
|
|
Benefits(2)
|
|
|
Severance(1)
|
|
|
Vesting(3)
|
|
|
Benefits(2)
|
|
|
Arthur P. Becker
|
|
$
|
437,500
|
|
|
$
|
7,268
|
|
|
$
|
437,500
|
|
|
$
|
541,918
|
|
|
$
|
7,268
|
|
James W. Pluntze
|
|
$
|
228,420
|
|
|
$
|
7,916
|
|
|
$
|
228,420
|
|
|
$
|
350,649
|
|
|
$
|
7,916
|
|
Mark Clayman
|
|
$
|
262,500
|
|
|
$
|
648
|
|
|
$
|
262,500
|
|
|
$
|
82,763
|
|
|
$
|
648
|
|
|
|
|
(1) |
|
Severance is for six (6) months of base pay and fiscal year
2008 target bonus. |
|
(2) |
|
Health Benefits are payments of premiums for COBRA for six
(6) months following termination. |
|
(3) |
|
Cost to accelerate vesting of options and restricted stock is
the amount of stock compensation which would be recorded under
SFAS 123R. |
25
The following table summarizes compensation paid to our
non-employee directors during fiscal 2008.
DIRECTOR
COMPENSATION FOR FISCAL 2008
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|
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|
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|
|
|
|
|
|
|
|
Fees Earned or
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|
|
|
|
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Stock Awards
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|
|
Option Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
James Dennedy
|
|
|
78,000
|
|
|
|
54,935
|
|
|
|
20,045(3
|
)
|
|
|
152,980
|
|
Thomas R. Evans
|
|
|
70,500
|
|
|
|
54,935
|
|
|
|
20,045(4
|
)
|
|
|
145,480
|
|
Andrew Ruhan
|
|
|
51,000
|
|
|
|
54,935
|
|
|
|
20,045(5
|
)
|
|
|
125,980
|
|
Larry Schwartz
|
|
|
89,500
|
|
|
|
54,935
|
|
|
|
20,045(6
|
)
|
|
|
164,480
|
|
|
|
|
(1) |
|
Amounts reflect compensation cost recorded in the fiscal 2008
consolidated financial statements for each named individual. As
of July 31, 2008 outstanding stock awards were 15,750
restricted shares for each director granted under our Amended
and Restated Director Compensation Plan. The grant date fair
value of restricted stock awards made to all directors in fiscal
2008 was $5.50 per share as computed in accordance with
SFAS 123R. Please refer to footnote 2(n) in NaviSites
consolidated financial statements filed on
Form 10-K
for the year ended July 31, 2008 for a discussion of the
assumptions used in computing the grant date fair value of stock
based compensation awards. These amounts reflect NaviSites
accounting expense for these awards and do not correspond to the
actual value that might be realized by the named individuals.
9,184 shares granted to each director have vested. |
|
(2) |
|
Reflects the fiscal 2008 expense for stock option awards granted
to the director in prior years. Amounts reflect the compensation
cost recorded in the fiscal 2008 consolidated financial
statements for each named individual and includes grants made in
previous years for which compensation expense is required to be
recognized in accordance with SFAS 123R. The expense has
been calculated based on the grant date fair value of the
respective awards using a Black-Scholes option pricing model.
Please refer to footnote 2(n) in our consolidated financial
statements filed on
Form 10-K
for the fiscal year ended July 31, 2008. These amounts
reflect NaviSites accounting expense for these awards and
do not correspond to the actual value that might be realized by
the named individuals. |
|
(3) |
|
Represents 115,000 options outstanding of which all are
exercisable. |
|
(4) |
|
Represents 95,000 options outstanding of which all are
exercisable. |
|
(5) |
|
Represents 80,000 options outstanding of which all are
exercisable. |
|
(6) |
|
Represents 115,000 options outstanding of which all are
exercisable. |
On August 10, 2007, based upon the recommendation of the
GNC Committee, the Board of Directors adopted the NaviSite, Inc.
Amended and Restated Director Compensation Plan (the
Plan). The Plan provides that each independent
director and the Chairman of the Board shall be paid an annual
fee of $36,000. In addition, the Plan provides that the chairman
of the GNC Committee and the chairman of the Audit Committee
shall each receive an additional annual fee of $15,000. Each
member of the GNC Committee and the Audit Committee (other than
the chair of each such committee) shall receive an additional
annual fee of $7,500, and the Chairman of the Board shall
receive an additional annual fee of $15,000. All annual fees
shall be payable in quarterly installments. The Plan also
provides that upon initial election to the Board, each
independent director and the Chairman of the Board shall receive
an initial grant of 31,500 shares of restricted Common
Stock. The shares subject to the initial grant shall vest
monthly over a period of thirty-six months. Upon re-election to
the Board, each independent director and the Chairman of the
Board shall receive a grant of 15,750 shares of restricted
Common Stock. The members of the Audit Committee and the GNC
Committee, and the Committee Chairs, will not receive any
additional shares of restricted Common Stock as a result of
their membership on such committees or position as a chair of
such committee. The shares of restricted Common Stock subject to
the annual grant shall vest monthly over a period of twelve
months. Upon a change in control of NaviSite, the shares subject
to the initial grant and the annual grant shall become fully
vested.
26
During the 2008 fiscal year, Mr. Becker was not paid for
his service on the Board of Directors. In accordance with the
Plan, upon re-election to the Board of Directors, each of
Messrs. Ruhan (Chairman), Evans, Dennedy and Schwartz
received a grant of 15,750 shares of restricted Common
Stock on December 12, 2007. The shares of restricted stock
vest monthly over a period of twelve months. In addition, under
the Plan, we paid Mr. Dennedy $58,500 for his service as an
independent director, Chairman of the Audit Committee and as a
member of the GNC Committee; Mr. Evans $51,000 for his
service as an independent director, a member of the Audit
Committee and a member of the GNC Committee; Mr. Schwartz
$58,500 as an independent director, Chairman of the GNC
Committee and member of the Audit Committee; and Mr. Ruhan
$51,000 as Chairman of the Board. Messrs. Schwartz, Dennedy
and Evans also served on a special committee in fiscal 2008 in
which they evaluated possible transactions for NaviSite.
Mr. Schwartz received $31,000 as Chairman of this committee
and Messrs. Dennedy and Evans each received $19,500 for
their service on this committee in fiscal 2008.
Apart from the arrangements discussed above, we do not pay any
cash compensation to members of our 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 NaviSite officers or
employees are eligible to participate in the Amended and
Restated 2003 Stock Incentive Plan.
Each member of the Board of Directors has entered into an
indemnification agreement with us pursuant to which they will be
indemnified by us, subject to certain limitations, for any
liabilities incurred by them in connection with their role as
directors of NaviSite.
ADDITIONAL
INFORMATION
Compensation
Committee Interlocks and Insider Participation
The members of the GNC Committee are Messrs. Dennedy, Evans
and Schwartz, all of whom are independent directors. No member
of the GNC Committee has a relationship that would constitute an
interlocking relationship with executive officers or directors
of NaviSite or another entity.
Independent
Registered Public Accounting Firm Fees
The following table presents fees for professional audit
services rendered by KPMG LLP for the audit of NaviSites
annual financial statements for fiscal years ended July 31,
2007 and 2008, and fees billed for other services rendered by
KPMG LLP.
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|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
Audit Fees(1)
|
|
$
|
577,672
|
|
|
$
|
987,179
|
|
Audit-Related Fees(2)
|
|
|
68,750
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
Audit and Audit-Related Fees
|
|
|
646,422
|
|
|
|
999,679
|
|
Tax Fees(3)
|
|
|
65,000
|
|
|
|
70,000
|
|
All Other Fees(4)
|
|
|
7,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
718,522
|
|
|
$
|
1,069,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consisted principally of fees for the audit in
accordance with the Standards of the Public Company Accounting
Oversight Board (United States) and quarterly reviews of the
consolidated financial statements. The audit fee for both fiscal
years also includes fees for the review of, and consents
included within, NaviSites registration statements and
other SEC filings. |
|
(2) |
|
Audit-related fees consisted principally of fees for accounting
consultation on proposed transactions and a SAS 70 report
(special purpose report on the internal controls of service
organizations). |
|
(3) |
|
Tax fees consisted principally of fees for tax compliance, tax
planning and tax advice. |
|
(4) |
|
All other fees consisted of fees for consultation on employment
tax matters. |
27
Policy on
Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting
Firm
The Audit Committees policy is to pre-approve all audit
and permissible non-audit services provided by the independent
registered public accounting firm. These services may include
audit services, audit-related services, tax services and other
services. Pre-approval is generally provided for up to one year
and any pre-approval is detailed as to the particular service or
category of services and is generally subject to a specific
budget. The independent registered public accounting firm and
management are required to periodically report to the Audit
Committee regarding the extent of services provided by the
independent registered public accounting firm in accordance with
this pre-approval, and the fees for the services performed to
date. The Audit Committee may also pre-approve particular
services on a
case-by-case
basis. During fiscal 2008 and fiscal 2007, all services rendered
by KPMG LLP to NaviSite were pre-approved by the Audit Committee.
Audit
Committee Financial Expert
The Board of Directors has determined that James Dennedy is an
audit committee financial expert as defined in
Item 407(d)(5) of
Regulation S-K.
Mr. Dennedy is independent as defined in applicable Nasdaq
listing standards.
Audit
Committee
The Audit Committee of the Board of Directors has reviewed and
discussed NaviSites audited financial statements for
fiscal year 2008 with NaviSites management. The Audit
Committee has discussed with KPMG LLP, NaviSites
independent registered public accounting firm, the matters
required to be discussed by the Statement on Auditing Standards
Nos. 61, 89 and 90, as amended. The Audit Committee has
received the written disclosures and the letter from KPMG LLP
required by the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communications with the Audit Committee
concerning independence, and has discussed with KPMG LLP its
independence. The Audit Committee also considered whether KPMG
LLPs provision of non-audit services to NaviSite is
compatible with maintaining KPMG LLPs independence. Based
on the review and discussions described above, among other
things, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in
NaviSites Annual Report on
Form 10-K
for fiscal year 2008.
AUDIT COMMITTEE
James Dennedy, Chairman
Larry Schwartz
Thomas R. Evans
The information contained in the foregoing report shall not be
deemed to be soliciting material or
filed or incorporated by reference into any of
NaviSites previous or future filings with the SEC, or
subject to the liabilities of Section 18 of the Exchange
Act, except to the extent specifically incorporated by reference
into a document filed under the Securities Act of 1933, as
amended (the Securities Act), or the Exchange Act.
Certain
Relationships and Related Transactions
The Audit Committee of our Board of Directors has the following
unwritten policies and procedures for the review and approval of
related-party transactions. Under the policy, related-party
transactions are defined as all transactions with related
persons that are required to be reported under Item 404(a)
of
Regulation S-K,
and related person generally means (i) any
director or executive officer of NaviSite, (ii) any nominee
for director, (iii) any immediate family member of a
director or executive officer of NaviSite, or of any nominee for
director, (iv) any security holder of NaviSite covered by
Item 403(a) of
Regulation S-K,
and (v) any immediate family member of any such security
holder of NaviSite covered by Item 403(a) of
Regulation S-K.
28
The Audit Committee reviews the material facts of any
related-party transaction and either approves or disapproves of
the entry into the transaction. In the course of reviewing the
related-party transaction, the Audit Committee considers whether
(i) the transaction is fair and reasonable to NaviSite,
(ii) under all of the circumstances the transaction is in,
or not inconsistent with, NaviSites best interests, and
(iii) the transaction will be on terms no less favorable to
NaviSite than it could have obtained in an arms length
transaction with an unrelated third party. If advance approval
of a related-party transaction is not feasible, then the
transaction will be considered and, if the Audit Committee
determines it to be appropriate, ratified by the Audit
Committee. No director may participate in the approval of a
transaction for which he or she is a related party.
When a related-party transaction is ongoing, any amendments or
changes are reviewed and the transaction is reviewed annually
for reasonableness and fairness to NaviSite.
ClearBlue
Technologies (UK) Limited and Global Marine Systems
Beginning April 1, 2004, we entered into an outsourcing
agreement with ClearBlue Technologies (UK) Limited
(ClearBlue) whereby, NaviSite provides certain
management services as well as manage the
day-to-day
operations as required by ClearBlues customers
contracts. NaviSite charges ClearBlue a monthly fee of
£4,700, plus 20% of gross profit (gross profit is revenue
collected from ClearBlue customers, less the monthly fee), but
in the event such calculation is less than $0, 100% of the gross
profit shall remain with ClearBlue. In addition, NaviSite
provides hosting services for Global Marine Systems. During the
fiscal year ended July 31, 2008, NaviSite charged ClearBlue
approximately $251,000 under these arrangements. ClearBlue and
Global Marine Systems are controlled by NaviSites Chairman
of the Board of Directors.
Vera
Wang
In fiscal years 2008, 2007 and 2006, we performed professional
services and hosting services for Vera Wang whose Chief
Executive Officer is the spouse of our Chief Executive Officer.
For the fiscal year ended July 31, 2008, revenue generated
from Vera Wang was approximately $121,000.
Sentrum III
Limited and Sentrum Services Limited
On February 4, 2008, our subsidiary NaviSite Europe
Limited, with NaviSite as guarantor, entered into a Lease
Agreement (the Lease) for approximately
10,000 square feet of data center space located in Watford,
Hertfordshire, England (the Data Center), with
Sentrum III Limited. The Lease has a ten year term.
NaviSite Europe Limited and NaviSite are also parties to a
Services Agreement with Sentrum Services Limited for the
provision of services within the data center. During fiscal year
2008, NaviSite paid $1.7 million under these arrangements.
The Chairman of our Board of Directors has a financial interest
in each of Sentrum III Limited and Sentrum Services Limited.
Sentrum IV
Limited
In November 2007, our subsidiary NaviSite Europe Limited, with
NaviSite as guarantor, entered into a lease option agreement for
data center space in Woking, Surrey, England with
Sentrum IV Limited. As part of this agreement NaviSite made
a fully refundable deposit of $5 million in order to secure
the right to lease the space upon the completion of the building
construction. In July 2008, the final lease agreement was
completed for approximately 11,000 square feet of data
center space. Subsequent to July 31, 2008 the deposit was
returned to NaviSite. The Chairman of our Board of Directors has
a financial interest in Sentrum IV Limited.
The Audit Committee of our Board of Directors approved or
ratified each of the transactions mentioned above.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires NaviSites
directors, executive officers and persons who own more than 10%
of a registered class of NaviSites equity securities
(collectively, Reporting Persons) to file reports of
beneficial ownership and changes in beneficial ownership with
the SEC. Based solely upon review
29
of copies of such reports, or other written representations from
Reporting Persons, NaviSite believes that, during the fiscal
year ended July 31, 2008, all Reporting Persons complied
with all applicable requirements of Section 16(a) of the
Exchange Act, except that each of Messrs. Dennedy, Evans,
Ruhan and Schwartz filed a Form 4 one day late, reporting
their annual grant of restricted stock. There are no known
failures to file a required Form 3, Form 4 or
Form 5.
Annual
Report on
Form 10-K
Concurrently with this Proxy Statement, NaviSite is sending a
copy of its 2008 Annual Report on
Form 10-K
without exhibits to all of its stockholders of record as of
October 20, 2008. The 2008 Annual Report contains
NaviSites audited consolidated financial statements for
the fiscal year ended July 31, 2008.
A copy of NaviSites Annual Report on
Form 10-K
(with all exhibits) for the fiscal year ended July 31, 2008
filed with the SEC may be accessed from the SECs website
(www.sec.gov) or may be obtained without charge upon written
request to NaviSite, Inc., 400 Minuteman Road, Andover,
Massachusetts 01810, Attention: Investor Relations.
Other
Matters
The Board of Directors does not know of any other matters which
may come before the Annual Meeting. However, if any other
matters are properly presented to the meeting, it is the
intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on
such matters. Discretionary authority for them to do so is
contained in the enclosed proxy card.
An adjournment of the Annual Meeting may be made from time to
time by the chairman of the Annual Meeting or by approval of the
holders of shares representing a majority of the votes present
in person or by proxy at the Annual Meeting, whether or not a
quorum exists. In their discretion, the proxies named in the
proxy card are authorized to vote upon any adjournment of the
Annual Meeting. However, no proxies voted against
Proposal No. 2 will be voted in favor of adjournment
of the Annual Meeting for the purpose of soliciting additional
proxies with respect to such proposal.
Stockholder
Proposals
Proposals of stockholders intended to be presented in
NaviSites proxy statement and form of proxy for the 2009
Annual Meeting of Stockholders in accordance with
Rule 14a-8
under the Exchange Act
(Rule 14a-8),
must be received by NaviSite no later than July 22, 2009 in
order to be included in NaviSites proxy statement and form
of proxy relating to that meeting.
Under NaviSites By-Laws, proposals of stockholders
intended to be submitted for a formal vote at NaviSites
2009 Annual Meeting of Stockholders (other than proposals
intended to be included in NaviSites proxy statement and
form of proxy in accordance with
Rule 14a-8)
may be made only by a stockholder of record who has given notice
of the proposal to the Secretary of NaviSite at its principal
executive offices no earlier than September 22, 2009 and no
later than October 7, 2009.
By order of the Board of Directors,
Thomas B. Rosedale
Secretary
November 19, 2008
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
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x |
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Annual Meeting Proxy Card
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▼
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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A
Proposals A vote FOR the director nominees and FOR Proposal 2 is recommended by the Board of Directors.
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1. |
Election of Directors: |
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Withhold |
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Withhold |
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01 - Andrew Ruhan
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02 - Arthur P. Becker
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03 - James Dennedy
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04 - Larry Schwartz
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05 - Thomas R. Evans
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For |
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2.
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Ratification of the selection of KPMG LLP as independent registered public accounting firm for the fiscal year ending July 31, 2009.
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IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT THEREOF. |
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B Non-Voting
Items |
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Change of Address
Please print new address below.
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Comments Please print your comments below. |
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C |
Authorized
Signatures
This section must be completed for your vote to be counted.
Date and Sign Below
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Please sign this proxy exactly as your name appears hereon. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation or partnership, this signature should be that of an authorized officer who should state his or her title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box. |
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/ / |
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Dear Stockholder:
Please take note of the important information enclosed with this proxy. There are a number of issues related to the operation of NaviSite that require your immediate attention. Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be voted. Then sign the card, detach it and return your proxy in the enclosed postage-paid envelope.
Thank you in advance for your prompt consideration of these matters.
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
Proxy NAVISITE, INC.
400 MINUTEMAN ROAD
ANDOVER, MA 01810
SOLICITED BY THE BOARD OF DIRECTORS
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned, having received notice of the Annual Meeting of Stockholders and the Board of Directors proxy statement therefor, and revoking all prior proxies, hereby appoint(s) Arthur P. Becker and James W. Pluntze, and each of them singly,
with the power to appoint his substitute, and hereby authorizes each of them to
represent and to vote, as designated on the reverse side, all shares of common stock or
preferred stock, as applicable, of NaviSite, Inc. (NaviSite) held of record by the
undersigned on October 20, 2008 at the Annual Meeting of Stockholders to be held on December 11, 2008 and any
adjournments thereof. None of the following proposals are conditioned upon the approval of any other proposal.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.