Document:

exv10w1

 

Exhibit 10.1

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

by and among

NAVISITE, INC.,

as Parent,

NAVI ACQUISITION CORP.,

as Buyer,

and

ALABANZA, LLC and HOSTING VENTURES, LLC,

as the Sellers

August 10, 2007

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I — PURCHASE AND SALE OF ASSETS; CLOSING
	 	 	1	 
	Section 1.1. Purchase and Sale of Assets
	 	 	1	 
	Section 1.2. Consideration
	 	 	3	 
	Section 1.3. Assumption of Liabilities
	 	 	4	 
	Section 1.4. Time and Place of Closing
	 	 	6	 
	Section 1.5. Working Capital Adjustment
	 	 	6	 
	Section 1.6. Allocation
	 	 	8	 
	 
	 	 	 	 
	ARTICLE II — REPRESENTATIONS AND WARRANTIES OF THE SELLERS
	 	 	8	 
	Section 2.1. Existence; Good Standing; Authority; Subsidiaries
	 	 	8	 
	Section 2.2. No Conflict, Consents
	 	 	10	 
	Section 2.3. Financial Statements
	 	 	10	 
	Section 2.4. Absence of Certain Changes
	 	 	11	 
	Section 2.5. Consents and Approvals
	 	 	12	 
	Section 2.6. Litigation
	 	 	12	 
	Section 2.7. Taxes
	 	 	12	 
	Section 2.8. Employee Benefit Plans
	 	 	15	 
	Section 2.9. Real and Personal Property
	 	 	17	 
	Section 2.10 Labor and Employment Matters
	 	 	18	 
	Section 2.11. Customers; Vendors
	 	 	19	 
	Section 2.12. Contracts and Commitments
	 	 	19	 
	Section 2.13. Intellectual Property
	 	 	21	 
	Section 2.14. Environmental Matters
	 	 	24	 
	Section 2.15. Insurance
	 	 	25	 
	Section 2.16. Brokers
	 	 	25	 
	Section 2.17. Compliance with Laws
	 	 	25	 
	Section 2.18. Transactions with Affiliates
	 	 	26	 
	Section 2.19. Product Warranties and Liabilities
	 	 	26	 
	Section 2.20. Knowledge
	 	 	26	 
	 
	 	 	 	 
	ARTICLE III — REPRESENTATIONS AND WARRANTIES OF NAVISITE
	 	 	27	 
	Section 3.1. Existence; Good Standing; Authority
	 	 	27	 
	Section 3.2. No Conflict
	 	 	28	 
	Section 3.3. Consents and Approvals
	 	 	28	 
	Section 3.4. Brokers
	 	 	28	 
	Section 3.5. Financial Capabilities
	 	 	28	 
	Section 3.6. Knowledge
	 	 	28	 
	 
	 	 	 	 
	ARTICLE IV — CERTAIN COVENANTS OF THE PARTIES
	 	 	29	 
	Section 4.1. Confidentiality
	 	 	29	 
	Section 4.2. Further Action
	 	 	29	 
	Section 4.3. Press Releases
	 	 	29	 
	Section 4.4. Conveyance Taxes; Costs
	 	 	29	 

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	 	 	Page
	Section 4.5. Books and Records
	 	 	30	 
	Section 4.6. Approval of Transactions
	 	 	30	 
	Section 4.7. FIRPTA Certification
	 	 	30	 
	Section 4.8. Use of Name; Use of Network
	 	 	30	 
	Section 4.9. Endorsement of Checks, Etc
	 	 	30	 
	Section 4.10 Consents
	 	 	31	 
	Section 4.11. Certain Tax Matters
	 	 	31	 
	 
	 	 	 	 
	ARTICLE V — EMPLOYEE MATTERS
	 	 	32	 
	Section 5.1. Employees; Benefits
	 	 	32	 
	 
	 	 	 	 
	ARTICLE VI — CONDITIONS TO CLOSING
	 	 	33	 
	Section 6.1. Conditions to Obligations of the Sellers
	 	 	33	 
	Section 6.2. Conditions to Obligations of NaviSite
	 	 	34	 
	Section 6.3. Deliveries at Closing
	 	 	35	 
	 
	 	 	 	 
	ARTICLE VII — SURVIVAL; INDEMNIFICATION
	 	 	37	 
	Section 7.1. Survival
	 	 	37	 
	Section 7.2. Indemnification of NaviSite
	 	 	37	 
	Section 7.3. Indemnification of Sellers
	 	 	38	 
	Section 7.4. Procedure for Indemnification of NaviSite-Two Party Claims
	 	 	38	 
	Section 7.5. Procedure for Indemnification of Sellers — Two Party Claims
	 	 	39	 
	Section 7.6. Method of Asserting Third-Party Claims
	 	 	40	 
	Section 7.7. Remedies Exclusive
	 	 	41	 
	 
	 	 	 	 
	ARTICLE VIII — GENERAL PROVISIONS
	 	 	42	 
	Section 8.1. Notices
	 	 	42	 
	Section 8.2. Fees and Expenses
	 	 	43	 
	Section 8.3. Certain Definitions
	 	 	43	 
	Section 8.4. Interpretation
	 	 	43	 
	Section 8.5. Counterparts and Facsimile Signatures
	 	 	44	 
	Section 8.6. Amendments and Waivers
	 	 	44	 
	Section 8.7. Entire Agreement; Severability
	 	 	44	 
	Section 8.8. Third Party Beneficiaries
	 	 	44	 
	Section 8.9. Governing Law
	 	 	45	 
	Section 8.10. Assignment
	 	 	45	 
	Section 8.11. Consent to Jurisdiction
	 	 	45	 
	Section 8.12. Mutual Drafting
	 	 	45	 
	Section 8.13. Remedies
	 	 	45	 
	Section 8.14. Bulk Sales Law
	 	 	45	 

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EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Escrow Agreement
	Exhibit B

	 	Form of Non-Competition Agreement
	Exhibit C

	 	Form of Sublease
	Exhibit D

	 	Form of Assignment and Assumption Agreement
	Exhibit E

	 	Form of Bill of Sale
	Exhibit F

	 	Form of Transition Services Agreement

SCHEDULES

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EXECUTION VERSION

ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (this “Agreement”) is dated as of August 10, 2007 by and among
(i) NaviSite, Inc., a Delaware corporation (“Parent”); (ii) Navi Acquisition Corp., a Delaware
corporation (“Buyer”, and together with Parent, “NaviSite”); and (iii) Alabanza, LLC, a Maryland
limited liability company (“Alabanza”), and Hosting Ventures, LLC, a Maryland limited liability
company (“Hosting”, and together with Alabanza, the “Sellers” and each a “Seller”).

     WHEREAS, Sellers own and operate dedicated and shared web hosting businesses, including
without limitation that certain proprietary platform consisting of the major modules of Domain
System Manager, Control Panel Software and Security and System Administration Tools (the
“Businesses”); and

     WHEREAS, Sellers desires to sell, and NaviSite desires to buy, substantially all of the assets
of Sellers related to the Businesses, on the terms and subject to the conditions set forth herein;
and

     WHEREAS, as a condition and inducement to NaviSite to enter into this Agreement and Buyer to
assume the liabilities set forth herein, at the Closing (as defined in Section 1.4), NaviSite,
Sellers and the escrow agent named therein (the “Escrow Agent”) shall enter into an escrow
agreement substantially in the form attached hereto as Exhibit A (with such changes as the
Escrow Agent may reasonably request, the “Escrow Agreement”), pursuant to which Parent shall place
the Escrowed Funds (as defined in Section 1.2(a)(i)) in an escrow account (the “Escrow Account”) to
secure certain indemnification obligations to NaviSite.

     NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 ARTICLE I — PURCHASE AND SALE OF ASSETS; CLOSING

     Section 1.1. Purchase and Sale of Assets.

          (a) Except as otherwise provided below and subject to the terms and conditions of this
Agreement, Sellers shall sell, convey, transfer, assign and deliver to Buyer at the Closing, free
and clear of all Liens (as hereinafter defined), except for the Permitted Liens (as hereinafter
defined), all of the assets and properties of every kind, nature and description of Sellers related
to the Businesses (all of such assets and properties being referred to herein as the “Purchased
Assets”). The Purchased Assets shall include, but shall not be limited to, the following assets of
the Sellers:

                    (i) all of the tangible personal property, machinery, equipment, tools, machine and electric
parts, supplies, computers, appliances, office furniture and fixtures and vehicles, wherever
located, owned or used by Sellers primarily in connection with the Businesses;

 

                    (ii) all of the rights, tangible and intangible, of Sellers existing under the contracts,
agreements, leases, licenses, instruments or commitments of Sellers relating to the Businesses,
including without limitation those listed in Schedule 1.1(a)(ii) attached hereto, including
without limitation any contracts or agreements with Cybage Software Pvt. Ltd., all customer
contracts, and all signature authorizations given to any Seller permitting such Seller to charge
the credit cards of end-user customers to the extent such signature authorizations are legally and
contractually assignable (collectively, the “Assumed Contracts”), it being understood by the
parties that all of the Assumed Contracts listed on such Schedule 1.1(a)(ii) that are in
the name of Alabanza Corporation as of the date hereof shall be included in the Purchased Assets
and the Assumed Contracts, and Sellers shall cause Alabanza Corporation to execute an Assignment,
to transfer such assets to Buyer at the Closing;

                    (iii) all rights in and to any governmental and private permits, licenses, franchises and
authorizations, to the extent assignable, used in connection with the Businesses;

                    (iv) all raw materials, work-in progress and finished-goods inventories, and all repair and
replacement parts and materials, and all other parts and materials, used in or relating to the
Businesses, including, without limitation, all inventories of computer program code (in all media)
and materials and program documentation (collectively, the “Inventory”);

                    (v) all rights in and to any requirements, processes, formulations, methods, technology,
know-how, formulae, trade secrets, trade dress, designs, inventions and other proprietary rights
and all documentation embodying, representing or otherwise describing any of the foregoing, owned
or held by Sellers in connection with the Businesses, including without limitation all rights in
the Businesses’ proprietary platform consisting of the major modules of Domain System Manager,
Control Panel Software and Security and System Administration Tools (the assets described in
Sections 1.1(v) through 1.1(viii), which shall all be delivered by Sellers to Buyer in electronic
form to a computer(s) or server(s) designated by NaviSite, by remote telecommunication, are
referred to as the “Intangible Property Rights”);

                    (vi) all registered and pending patents, copyrights, domain names (including without
limitation “alabanza.com”), trade names, trademarks and service marks of Sellers used in the
Businesses, including without limitation those listed on Schedule 1.1(a)(vi), all
unregistered trade names, trademarks, brand names (including but not limited to “One on One
Internet” and “Linux Web Host”) and service marks of Sellers used in the Businesses, and all
documentation embodying, representing or otherwise describing any of the foregoing, and all
internet protocol address space associated with the Businesses to the extent owned by the Sellers;

                    (vii) all rights in and to the customer lists, parts lists, vendor lists, promotion lists,
marketing data and other compilations of names and data of Sellers developed in connection with the
Businesses, and which shall be delivered by or on behalf of Sellers to Buyer at or prior to the
Closing;

                    (viii) all of Sellers’ rights in and to the computer software programs (including software
licensed to Sellers) used in connection with the Businesses or developed or under development by,
or on behalf of, Sellers in connection with the Businesses, including without limitation those
identified on Schedule 1.1(a)(viii), including the source code and object

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code for such software, and all technical and descriptive materials (other than Inventory)
relating to the acquisition, design, development, use or maintenance of computer code and program
documentation and materials in any and all languages (“Technical Documentation”), in each case to
the extent that Sellers possess and have a right to possess and transfer the same;

                    (ix) all accounts and notes receivable, negotiable instruments of or made payable to Sellers,
advanced payments, claims for refunds and deposits and other prepaid items of Sellers, including
all customer security deposits and all security deposits made by Sellers pursuant to any vendor
contracts;

                    (x) all accounts receivable schedules, lists, files, books, publications, and other records
and data of Sellers used in connection with the Businesses;

                    (xi) all causes of action, claims, suits, proceedings, judgments or demands, of whatsoever
nature, of or held by Sellers against any third parties with respect to the Businesses; and

                    (xii) all goodwill of Sellers associated with the Businesses and the Purchased Assets,
including the Intangible Property Rights.

          (b) Notwithstanding the foregoing, Sellers shall not transfer to Buyer, and the Purchased
Assets shall not include, (i) the articles of organization, operating agreements, minute books,
record books, tax identification numbers, and other organizational documents of Sellers; (ii)
Sellers’ rights under this Agreement and any other agreement, document or instrument entered into
pursuant to this Agreement; and (iii) any of the assets listed on Schedule 1.1(b)
(collectively, “Excluded Assets”).

          (c) As used herein, “Liens” mean liens, rights or options of any third party to acquire
assets, security interests, mortgages, encumbrances and restrictions of any kind. As used herein,
“Permitted Liens” means (i) such imperfections of title, easements or Liens which do not materially
impair the current use of the Purchased Assets, (ii) materialmen’s, mechanics’, carriers’,
workmen’s, warehousemen’s, repairmen’s and other like Liens arising in the ordinary course of
business, or deposits to obtain the release of such Liens, (iii) Liens for taxes not yet due and
payable, or being contested in good faith, (iv) purchase money Liens incurred in the ordinary
course of business, and (v) the Liens listed on Schedule 1.1(c).

     Section 1.2. Consideration.

          (a) As consideration for the sale to Buyer of the Purchased Assets, Parent shall pay to
Sellers an aggregate amount equal to Six Million Eight Hundred Fifty Thousand Dollars ($6,850,000)
(the “Purchase Price”) (subject to adjustment as set forth in Section 1.5), payable as follows:

                    (i) Parent shall deliver to, and cause to be directly deposited with, Mellon Bank, N.A. (the
“Escrow Agent”), for the account and future potential benefit of Sellers, cash in the amount of Six
Hundred and Eighty Five Thousand ($685,000), which amount, together with all interest and other
amounts earned thereon, shall be referred to as the “Escrowed Funds”; and

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                    (ii) Parent shall pay the balance of the Purchase Price to the Sellers at Closing by wire
transfer of immediately available funds (the “Closing Payment”).

          (b) The Escrowed Funds shall be held by the Escrow Agent pursuant to the terms and conditions
of the Escrow Agreement for the purpose of satisfying working capital adjustments pursuant to
Section 1.5 hereof and indemnification claims pursuant to Article VII hereof. Unless disbursed in
accordance with Section 1.5 or Article VII, the Escrowed Funds shall be held by the Escrow Agent
until 5:00 p.m., Boston time, on that date which is the six-month anniversary of the Closing Date
(as defined in Section 1.4) and shall be maintained and used strictly in accordance with the terms
of this Agreement and the Escrow Agreement. At the six-month anniversary of the Closing Date, the
Escrowed Funds, with such adjustments as set forth in Section 1.5 and Article VII, shall be
disbursed to Sellers in accordance with the Escrow Agreement. Notwithstanding the foregoing, in
the event that a working capital adjustment to the Purchase Price is in dispute pursuant to Section
1.5 as of the time of such anniversary, or NaviSite has delivered written notice to Sellers of an
indemnification claim as set forth in Article VII and such claim has not been resolved in
accordance with Article VII prior to such anniversary, the amount necessary to satisfy such dispute
or claim shall not be disbursed and shall continue to be held by the Escrow Agent pursuant to the
Escrow Agreement until such dispute or claim is resolved as provided in Section 1.5 or Article VII,
as the case may be, and all other Escrowed Funds shall be disbursed to Sellers at that time.

     Section 1.3. Assumption of Liabilities.

          (a) Buyer shall assume only: (i) those Liabilities specifically set forth in Schedule
1.3(a) (collectively, the “Assumed Liabilities”); and (ii) those Liabilities arising after the
Closing Date under the Assumed Contracts (which, together with the Assumed Liabilities, shall
sometimes be referred to herein collectively as the “Assumed Obligations”). The Assumed
Obligations shall not include, and Sellers covenant that Buyer shall not be liable or responsible
for, any obligations or liabilities arising out of any act or omission of Sellers occurring prior
to Closing under any Assumed Contract, regardless of when such liability or obligation is asserted.
“Liabilities” include all debts, liabilities, commitments or obligations of any kind, character or
nature whatsoever, whether known or unknown, secured or unsecured, fixed, absolute, contingent or
otherwise, and whether due or to become due.

          (b) Except for the Assumed Obligations, Buyer shall not assume or perform, and Sellers shall
remain responsible for any and all Liabilities of Sellers, whether known or unknown, and regardless
of when such Liabilities arise or are asserted, including, without limitation, any obligations or
liabilities of Sellers with respect to the following (all Liabilities other than Assumed
Obligations shall be referred to herein as the “Excluded Liabilities”):

                    (i) any compensation or benefits payable to employees of Sellers, including, but not limited
to, any Liabilities arising under any employee pension or profit sharing plan or other employee
benefit plan, any severance pay or other termination costs due to employees of any Seller or any of
Sellers’ obligations to their employees for salaries and holiday and sick pay, accrued and unpaid
as of the Closing Date, other than as set forth in Section 5.1;

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                    (ii) all federal, state, local, non-U.S. or other taxes, including without limitation any
income, sales, use, personal property and other taxes which may become payable as a result of the
transactions contemplated by this Agreement;

                    (iii) injuries to or the death of any person, or any employee of any Seller, that (A) has
occurred or may occur, prior to Closing, in connection with the Businesses, or (B) has occurred
prior hereto or may occur hereafter in connection with any business other than the Businesses
conducted, or any operations other than the operations of the Businesses, engaged in by Sellers,
even if not discovered until after the Closing Date;

                    (iv) all liens, claims and encumbrances on any of the Purchased Assets (other than the
Permitted Liens assumed by the Buyer) and all obligations and liabilities secured thereby;

                    (v) all obligations of Sellers for borrowed money, or incurred in connection with the
purchase, lease or acquisition of any assets, and any obligations of a similar nature incurred by
Sellers;

                    (vi) any accounts or notes payable or similar indebtedness incurred by Sellers;

                    (vii) any claims, demands, actions, suits, legal proceedings, obligations or
liabilities arising from Sellers’ operation of the Businesses, including, but not limited to, those
set forth in Schedule 2.6, or arising from any other business or operations of Sellers
other than the Businesses, whether conducted prior to or after the Closing, whether such claims,
demands, actions, suits, legal proceedings, obligations or liabilities are presently pending or
threatened or are threatened or asserted at any time after the date hereof and whether before or
after the Closing;

                    (viii) fees payable to Sellers’ agents, brokers or representatives for strategic partnerings,
or other transactions, including without limitation any fees due to RBC Daniels L.P.;

                    (ix) any legal, accounting or other fees or expenses of Sellers or their members relating to
or arising from the transactions contemplated hereby; and

                    (x) any Liabilities set forth on Schedule 1.3(b).

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     Section 1.4. Time and Place of Closing. The closing (the “Closing”) of the purchase and
sale of the Purchased Assets and the other transactions contemplated by this Agreement shall be
held at the offices of Saul Ewing LLP, 222 Delaware Avenue, Wilmington, Delaware 19899, effective
as of the date hereof at 5:00pm, or at such other time as NaviSite and the Sellers may mutually
determine. The date on which the Closing actually occurs is sometimes referred to herein as the
“Closing Date.”

     Section 1.5. Working Capital Adjustment.

          (a) For purposes of this Agreement, “Net Working Capital” shall mean as of any particular date
(i) the value of all current assets, net of provision for bad debt, plus restricted cash (to the
extent not duplicative) of the Sellers as of that date, less (ii) the amount of all current
liabilities, including accrued current liabilities not yet due, of the Sellers as of that date
determined in each case in accordance with U.S. generally accepted accounting principles,
consistently applied (“GAAP”), and excluding (iii) cash accounts, inter-company
accounts, operating lease payments due after the Closing Date, obligations under capital leases,
deferred revenue, any accounts receivable related to Excluded Assets, accrued payroll and payroll
taxes due by the Sellers at the Closing Date and any vacation liabilities due by the Sellers for
employees not hired by the Buyer. A calculation of Net Working Capital as of June 30, 2007 based
on the June Balance Sheet (as defined in Section 2.3) is attached hereto as Schedule
1.5(a). Notwithstanding the foregoing, the Net Working Capital as of the Closing shall exclude
current liabilities pursuant to Sections 4.4 and 8.2 of this Agreement, and any bonuses paid or to
be paid to any employees of Sellers in connection with or in contemplation of the transactions
contemplated by this Agreement.

          (b) Within forty-five (45) days following the Closing Date, NaviSite shall deliver to Sellers
a written statement showing NaviSite’s calculation of the Net Working Capital as of the Closing
Date in accordance with GAAP and applying the same accounting principles, policies and practices
that were used in the creation of the June Balance Sheet and Schedule 1.6 (the “Closing
Statement”). NaviSite shall provide Sellers and their representatives with reasonable access to
such books and records relating to the Businesses through the Closing Date and NaviSite personnel
as Sellers reasonably request in order to permit Sellers to analyze the Closing Statement.

          (c) If, within ten (10) days following delivery of the Closing Statement to Sellers, Sellers
have not given NaviSite written notice of their objection as to the calculation of Net Working
Capital as of the Closing Date as reflected on the Closing Statement (which notice shall state the
basis of Sellers’ objection), then the Net Working Capital as of the Closing Date as so reflected
on the Closing Statement shall be binding and conclusive on the parties and shall be the “Closing
Net Working Capital.”

          (d) If Sellers give NaviSite written notice in accordance with Section 1.5(c) of objection to
the calculation of the Net Working Capital as of the Closing Date as reflected on the Closing
Statement, NaviSite and Sellers shall attempt in good faith to agree upon the Net Working Capital
as of the Closing Date, and if such agreement is reached the Net Working Capital so agreed upon
shall be the Closing Net Working Capital. If Sellers and NaviSite fail to resolve the issues
raised by such objection within ten (10) days of NaviSite’s receipt of such

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objection, Sellers and NaviSite shall submit the issues remaining in dispute to binding resolution by either (i) an
independent accounting firm selected within five (5) days thereafter by agreement of Sellers and
Buyer or (ii) in the event Sellers and NaviSite have been unable to select a firm by
agreement within the prescribed time period, a “Big Four” accounting firm selected by lot,
after eliminating any “Big Four” accounting firm that has, in the prior three years, been engaged
to provide accounting or tax advisory services to Sellers or NaviSite or any of their respective
subsidiaries or affiliates. The accounting firm selected in accordance with this Section 1.5(d) is
referred to herein as the “Review Accountants”. If issues are submitted to the Review Accountants
for resolution, (A) Sellers and NaviSite shall furnish or cause to be furnished to the Review
Accountants and to the other party such work papers and other documents and information relating to
the disputed issues as the Review Accountants may request and are available to that party or its
agents and shall be afforded the opportunity to present to the Review Accountants any material
relating to the disputed issues and to discuss the issues with the Review Accountants; (B) the
determination by the Review Accountants of the Net Working Capital as of the Closing Date, as set
forth in a notice to be delivered to both Sellers and NaviSite within sixty (60) days of the
submission to the Review Accountants of the issues remaining in dispute, shall be final, binding
and conclusive on the parties and shall be the Closing Net Working Capital; and (iii) NaviSite and
Sellers shall each pay one-half of the fees and expenses of any Review Accountants selected to
resolve any such dispute.

          (e) If, after the final determination according to this Section 1.5, the Closing Net Working
Capital is greater than Seventy-Five Thousand Dollars ($75,000) (the “Target Amount”), then the
Purchase Price shall be increased by an amount equal to the amount by which the Closing Net Working
Capital exceeds the Target Amount (the “Increase Amount”), and Parent shall promptly pay the
Increase Amount to Sellers by wire transfer of immediately available funds. Alternatively, if the
Closing Net Working Capital is less than the Target Amount, then the Purchase Price shall be
reduced by an amount equal to the amount by which the Target Amount exceeds the Closing Net Working
Capital (the “Reduction Amount”), and NaviSite and Sellers shall jointly direct the Escrow Agent to
offset the Reduction Amount, if any, against the Escrowed Funds and to promptly disburse the
Reduction Amount to Parent, all in accordance with the Escrow Agreement. Notwithstanding the
foregoing, the Reduction Amount shall in no event exceed the then remaining amount of the Escrowed
Funds and the sole source of recovery therefore shall be the Escrowed Funds under the Escrow
Agreement.

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     Section 1.6. Allocation. NaviSite and Sellers shall mutually allocate the purchase price
(and all other capitalized costs) among the Purchased Assets (and the Sellers shall allocate the
purchase price between each other) in accordance with Schedule 1.6, or as the parties
otherwise agree in writing no later than seventy-five (75) days after Closing. Such allocation
shall be made in accordance with the provisions of Section 1060 of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be binding upon NaviSite and Sellers for all purposes
(except to the extent that GAAP requires that NaviSite assign a different value to any asset for
financial reporting purposes). The fair market value of each of the Assets shall be equal to its
book value and any purchase price in excess of the book value shall be allocated to goodwill. In
the event that the Purchase Price is increased or decreased in accordance with Section 1.5(e),
Schedule 1.6 shall be amended, consistent with the intent of this Section 1.6, to reflect
such increase or decrease.

ARTICLE II —  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     The Sellers Disclosure Schedule shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Article II. The disclosures
in any section or subsection of the Sellers Disclosure Schedule shall qualify other sections and
subsections in this Article II to the extent it is reasonably apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and subsections. Disclosure
of any matter in the Sellers Disclosure Schedule shall not constitute an expression of a view that
such matter is material or is required to be disclosed pursuant to this Agreement. To the extent
that any representation or warranty set forth in this Agreement is qualified by the materiality of
the matter(s) to which the representation or warranty relates, the inclusion of any matter in the
Disclosure Schedule does not constitute a determination by any Seller that any such matter is
material. The disclosure of any information concerning a matter in the Disclosure Schedule does
not imply that any other undisclosed matter that has a greater significance or value is material.
Except as set forth in the Sellers Disclosure Schedule attached hereto and delivered by Sellers,
each of the Sellers hereby jointly and severally represents and warrants to NaviSite as of the date
hereof (or, if made as of a specified date, as of such date) and as of the Closing Date, as
follows:

     Section 2.1. Existence; Good Standing; Authority; Subsidiaries.

          (a) Each of the Sellers is a limited liability company duly formed, validly existing and in
good standing under the laws of the State of Maryland. Each of the Sellers has all requisite power
and authority and all necessary governmental licenses, authorizations, consents and approvals to
own, operate, lease and encumber its properties and carry on its business as currently operated and
conducted. Each of the Sellers is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of each other jurisdiction in which the
character or ownership of its properties or in which the transaction or character of its business
makes such qualification necessary, except where the failure to be so licensed or qualified or in
good standing would not, individually or in the aggregate, have a Material Adverse Effect.
Schedule 2.1 hereto sets forth a true, correct and complete list of all foreign
jurisdictions in which each Seller is so qualified or licensed and in good standing. The copies of
the articles of organization and operating agreements (collectively, the “Organizational
Documents”) of each Seller, each as amended to date and in full force and effect, have been

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provided or made available to NaviSite’s counsel, and are complete and correct, and no amendments
thereto are pending. Neither Seller is in violation of any provision of its Organizational
Documents. The books and records, minute books, membership unit record books and other similar
records of Sellers, all of which have been made available to NaviSite’s counsel and NaviSite, are
true, correct and complete.

          (b) Each of the Sellers has all power and authority to execute and deliver this Agreement and
each agreement, document and instrument to be executed and delivered by or on behalf of Sellers
pursuant to this Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement by each of the
Sellers, the performance by each of the Sellers of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by all requisite action on the
part of each of the Sellers. This Agreement has been duly executed and
delivered by each of the Sellers and, assuming the due authorization, execution and delivery
of this Agreement by NaviSite, this Agreement constitutes a legal, valid and binding obligation of
each of the Sellers, enforceable against each of the Sellers in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors’
rights and general principles of equity. No other action on the part of any Seller is necessary to
authorize the execution and delivery of this Agreement by the Sellers or the consummation by the
Sellers of the transactions contemplated hereby.

          (c) Neither of the Sellers has any subsidiaries or any ownership interest in any other
securities or in any other corporation, limited liability company, partnership, association or
other business entity.

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     Section 2.2. No Conflict, Consents. Neither the execution and delivery by Sellers of this
Agreement and the other agreements, documents and instruments contemplated hereby, nor the
consummation by Sellers of the transactions in accordance with the terms hereof and thereof,
conflicts with or results in a breach of any provisions of the Organizational Documents of Sellers.
Except as set forth on Schedule 2.2 and assuming the consents, approvals and
authorizations contemplated by Section 3.3 are obtained and are in full and effect and notices have
been duly given, none of the execution, delivery or the performance by Sellers of this Agreement
and the other agreements, documents and instruments contemplated hereby, nor the consummation by
the Sellers of the transactions contemplated hereby: (a) results in the creation or imposition of
any Lien on any of the property held by any of the Sellers; (b) requires consent to assignment or
otherwise, as a result of the transactions contemplated hereby (including without limitation to
maintain in full force and effect any of the Material Contracts (as defined in Section 2.12) as a
result of the transactions contemplated hereby), violates, or conflicts with, or results (or will
violate, conflict with or result) in a breach of any provision of, or constitutes a default (or an
event which, with or without notice or lapse of time or both, would constitute a default) or gives
rise to any right of termination, cancellation or acceleration, change of control rights,
modification, notification, enhancement of rights of third parties, revocation of grant of rights
or assets, placement into or release from escrow of any assets of any Seller or acceleration of any
right or obligation of any Seller or a loss of any benefit to which any Seller is entitled under
any of the terms, conditions or provisions of any Material Contract; or (c) violates any order,
writ, injunction, decree, statute, law, rule or regulation applicable to any Seller.

Section 2.3. Financial Statements.

          (a) Sellers have delivered to NaviSite the following financial statements of each Seller
(collectively, the “Financial Statements”):

                    (i) Unaudited consolidated balance sheets as of December 31, 2005 and December 31, 2006, and
consolidated statements of income and retained earnings and consolidated statements of cash flows
for each of the fiscal years then ended; and

                    (ii) Unaudited consolidated balance sheet as of June 30, 2007 (the “June Balance Sheet”), and
the related unaudited consolidated statements of income and retained earnings and cash flows for
the month and year to date period then ended.

          (b) Subject to the absence of footnotes and normal year-end audit adjustments with respect to
any unaudited Financial Statements which are consistent in nature and amount with adjustments made
in prior years, the Financial Statements have been (and those statements to be delivered for
periods ending subsequent to the date hereof will be) prepared from, and in accordance with, the
information contained in the books and records of Sellers, which have been regularly kept and
maintained in accordance with Sellers’ normal and customary practices and applicable legal and
accounting practices and fairly present, in all material respects, the financial condition of each
of the Sellers and the Businesses as of the dates thereof and results of operations and cash flows
for the periods referred to therein, and have been prepared in accordance with GAAP consistently
applied throughout all periods indicated, and present fairly (or when delivered will present
fairly) in all material respects the consolidated financial condition, cash flows and operating
results of each of the Sellers and the Businesses as of the

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dates and for the periods indicated
therein, and are consistent with the books and records of Sellers.

          (c) As of the date hereof, all liabilities of Sellers of a type that would be required to be
shown on the Financial Statements (including the notes thereto, where applicable) in accordance
with GAAP (whether direct, indirect, accrued, absolute, contingent, asserted, unasserted or
otherwise) have been (i) stated or adequately reserved or accrued against on the June Balance Sheet
or the notes thereto, (ii) reflected on Schedule 2.3, or (iii) incurred after the date of
the June Balance Sheet in the ordinary course of business consistent with past practices.

     Section 2.4. Absence of Certain Changes. Except as set forth on Schedule 2.4, from
the date of the June Balance Sheet to the date of this Agreement, the Sellers have operated only in
the ordinary course of business consistent with past practices and there has not been any:

          (a) to the knowledge of the Sellers, event, occurrence or development which would,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, other
than developments generally in the industry in which the Sellers operate;

          (b) to the knowledge of the Sellers, event or development that would, individually or in the
aggregate, reasonably be expected to prevent or materially delay the performance of this Agreement
or any of the Ancillary Agreements by Sellers;

          (c) exchange in, reclassification, split or subdivision of any of the Sellers’ authorized or
issued membership interests; grant of any option, right to purchase or similar right regarding the
membership interests of any Seller; or purchase, redemption, retirement, or other acquisition by
any Seller of any such membership interests; or

          (d) declaration or payment of any dividend or other distribution or payment in respect of the
membership interests of the Sellers.

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     Section 2.5. Consents and Approvals. Except as set forth on Schedule 2.5, the
execution, delivery and performance of this Agreement by Seller will not require any consent,
approval, permit, authorization, waiver or other action by, or filing with or notification to, any
federal, state, local, or any non-U.S. government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral body (a
“Governmental Authority”), except the notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), if applicable.

     Section 2.6. Litigation. Except as set forth on Schedule 2.6, as of the date of
this Agreement there is no litigation, action, suit, proceeding, inquiry, claim, arbitration or
investigation pending or, to the knowledge of any Seller, threatened in writing against any Seller
or any of its assets or property or any of its directors or officers in their capacities as such or
for which any Seller is obligated to indemnify a third party. Neither Seller is a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of any court or
Governmental Authority or any arbitration ruling or any settlement or similar agreement or written
arrangement with ongoing obligations relating to a dispute (or the resolution of a dispute) with
any third party.

Section 2.7. Taxes.

          (a) Except as set forth on Schedule 2.7:

                    (i) Each of the Sellers has timely filed, or will timely file, all material Tax Returns
required to be filed by such Seller with respect to the Businesses with respect to Taxes for any
period ending on or before the date of this Agreement, taking into account any extension of time to
file granted to or obtained on behalf of any Seller;

                    (ii) Each of the Sellers has paid or caused to be paid all Taxes and other assessments
reflected in such Tax Returns that have become due and payable. Each of the Sellers has made
provision, in accordance with GAAP, for all Taxes owed or accrued through the date of this
Agreement;

                    (iii) Each of the Sellers has withheld and paid all Taxes required to be withheld and paid in
connection with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party under all applicable Tax Laws, and all Forms W-2 and 1099 required
with respect thereto have been properly completed and timely filed and have, within the time and
manner prescribed by Law, registered for the purpose of each withholding Tax in the relevant
territory or jurisdiction;

                    (iv) There are no Liens for Taxes upon the assets or properties of the Sellers or the
Businesses except for statutory Liens for current Taxes not yet due;

                    (v) No Seller has requested any extension of time within which to file any Tax Return in
respect of any taxable year which has not since been filed, and no outstanding
waivers or comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns has been given by or on behalf of any Seller;

                    (vi) No Seller (A) is required to include in income in any taxable period ending after the
Closing any adjustment pursuant to Section 481(a) of the Code, by reason

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of any voluntary or
involuntary change in accounting method (nor has any Governmental Authority proposed any such
adjustment or change of accounting method); (B) has made an election, or is required, to treat any
of its assets as tax-exempt bond financed property or tax-exempt use property under Section 168 of
the Code or any comparable provision of non-U.S., state or local law; or (C) has filed a consent
pursuant to former Section 341(f) of the Code for (or any corresponding provision of state or local
law) or agreed to have former Section 341(f) of the Code (or any corresponding provision of state
or local law) applied to the disposition of any asset;

                    (vii) No power of attorney has been granted by or with respect to any Seller with respect to
any matter relating to Taxes;

                    (viii) No Seller is a party to any agreement, contract or arrangement that will result in the
payment of any “excess parachute payments” within the meaning of Section 280G of the Code and no
action by any Seller, whether pursuant to this Agreement or otherwise, shall result in the making
of any such payment;

                    (ix) No Seller has requested or received a ruling or determination from any Governmental
Authority or signed a closing or other agreement with any Governmental Authority, in either case
with respect to Taxes;

                    (x) No Seller is a party to, is bound by, or has any obligation under, any Tax sharing
agreement, Tax indemnification agreement or similar contract or arrangement (collectively, “Tax
Indemnification Agreements”); and as of the date of this Agreement, no Seller has knowledge of any
potential Liability to any Person as a result of, or pursuant to, any such Tax Indemnification
Agreement;

                    (xi) The Sellers have previously delivered or made available to NaviSite true, correct and
complete copies of (A) all audit reports, letter rulings, technical advice memoranda and similar
documents issued by a Governmental Authority relating to the United States federal, state, local or
non-U.S. Taxes due from or with respect to any Seller or the Businesses, (B) all United States
federal Tax Returns, and those state, local and non-U.S. Tax Returns filed by any Seller for tax
periods ending on or after December 31, 2001 and (C) all closing agreements entered into by any
Seller with any Governmental Authority with respect to Taxes; and the Sellers will deliver to
NaviSite all materials with respect to the foregoing for all matters arising after the date hereof.

                    (xii) No Seller has any Liability for Taxes of another Person under Section 1.1502-6 of the
Treasury regulations promulgated under the Code (the “Treasury Regulations”) or any similar
provision under state, local or non-U.S. Law, by contract or otherwise;

                    (xiii) No Seller has any deferred intercompany gain or loss arising as a result of a deferred
intercompany transaction within the meaning of Section 1.1502-13 of the Treasury Regulations (or
similar provision under state, local or non-U.S. Law) or any excess loss account under Section
1.1502-19 of the Treasury Regulations (or similar provision of state, local or non-U.S. Law);

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                    (xiv) Since December 31, 2006, no Seller has incurred any Liability for Taxes other than in
the ordinary course of business;

                    (xv) No claim has been made, nor does any Seller reasonably expect that a claim will be made
by a Governmental Authority in a jurisdiction where such Seller does not file Tax Returns that such
Seller is or may be subject to taxation by that jurisdiction;

                    (xvi) No Seller has been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period described in Section 897(c)(1)(A)(ii)
of the Code;

                    (xvii) Neither the Internal Revenue Service (the “IRS”) nor any other Governmental Authority
is asserting as of the date of this Agreement by written notice to any Seller or, to any Seller’s
knowledge, threatening in writing as of the date of this Agreement to assert against any Seller,
any deficiency or claim for any amount of additional Taxes; and

                    (xviii) No federal, state, local or non-U.S. audits or other administrative proceedings or
court proceedings are pending as of the date of this Agreement with regard to any Taxes or Tax
Returns of any Seller, and no Seller has received a written notice prior to the date of this
Agreement of any actual or threatened in writing audits or proceedings or is otherwise aware of any
such audits or proceedings.

                    (xix) Each of the Sellers qualifies as a “disregarded entity” for Federal income tax purposes.

          (b) For the purposes of this Agreement:

                    (i) “Taxes” shall mean any United States federal, state or local or non-U.S. income, gross
receipts, occupation, premium, environmental (including taxes under Code Section 59A), customs,
profits, registration, alternative or add-on minimum, estimated, withholding, payroll, employment,
unemployment, social security (or similar), excise, sales, use, value-added, occupancy, franchise,
real property, personal property, business and occupation, windfall profits, capital stock, stamp
or transfer tax or duty or any other tax, charge, fee or imposition in the nature of Taxes,
computed on a separate basis, including any interest, penalties, additions or assessments with
respect thereto, whether disputed or not;

                    (ii) “Tax Law” shall mean the Law (including any applicable regulations or any administrative
pronouncement) of any Governmental Authority relating to any Tax;

                    (iii) “Tax Returns” shall mean any U.S. federal, state, local or non-U.S. return, declaration,
report, claim for refund, amended return or information return, and any
schedule, exhibit, attachment or other materials submitted with any of the foregoing, and any
amendment thereto; and

                    (iv) “Law” means any non-U.S. or United States federal, state or local law, statute, rule,
regulation, ordinance, standard, requirement, administrative ruling, order or process (including
any zoning or land use law or ordinance, building code, Environmental Law,

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securities, stock
exchange, blue sky, civil rights, employment, labor or occupational health and safety law or
regulation or any law, order, rule or regulation applicable to federal contractors) or
administrative interpretation..

Section 2.8. Employee Benefit Plans.

          (a) Schedule 2.8 contains a true, correct and complete list of each deferred
compensation and each bonus or other incentive compensation, stock purchase, stock option and other
equity or equity based compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other “welfare plan,” fund
or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)); each profit sharing, stock bonus or other “pension plan,” fund or
program (within the meaning of Section 3(2) of ERISA); each employment, “change in control,”
termination or severance agreement; and each other employee benefit plan, fund, program, agreement
or arrangement, in each case, that is sponsored, maintained or contributed to or required to be
contributed to by any Seller or by any trade or business, whether or not incorporated (an “ERISA
Affiliate”), that together with any Seller would be deemed a “single employer” within the meaning
of Section 414(b), (c), (m) or (o) of the Code, or to which any Seller or an ERISA Affiliate is
party, whether written or oral, for the benefit of any employee or former employee of any Seller
(the “Employee Plans”); provided that with respect to Employee Plans established or maintained
primarily for employees or former employees working outside the United States only material
Employee Plans are listed. “Former Employee Plan” shall mean any Employee Plans of any Seller
sponsored, maintained, or contributed to within the last three years, notwithstanding that such
plans are not listed on Schedule 2.8. No Seller or ERISA Affiliate of any Seller has any
commitment or formal plan, whether legally binding or not, to create any additional material
employee benefit plans or modify or change, in any material way, any existing Employee Plans and no
condition exists which would prevent any Seller from terminating any Employee Plans (other than
Employee Plans required to be maintained under applicable Law) without material Liability to such
Seller (other than for benefits accrued at the time of such termination), except to the extent
limited by Law.

          (b) Each Employee Plan and Former Employee Plan intended to be “qualified” within the meaning
of Section 401(a) of the Code has received a favorable determination letter from the Internal
Revenue Service and the trusts maintained thereunder are exempt from taxation under Section 501(a)
of the Code and, to the knowledge of the Sellers, no event has occurred or circumstance exists that
would reasonably be expected to affect such qualified status. Each Employee Plan and Former
Employee Plan intended to satisfy the requirements of Section 501(c)(9) of the Code has satisfied
such requirements.

          (c) None of the Employee Plans or Former Employee Plans is a “multiemployer plan,” as such
term is defined in Section 3(37) of ERISA (a “Multiemployer Plan”), nor is or was any Employee Plan
or Former Employee Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code. No
Liability under Title IV or Section 302 of ERISA has been incurred by any Seller or ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a material risk to any
Seller or ERISA Affiliate of incurring any such Liability. No Seller or ERISA Affiliate sponsors,
maintains, contributes to or has an

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obligation to contribute to, or has at any time sponsored,
maintained, contributed to or had an obligation to contribute to, any Multiemployer Plan or any
pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA.

          (d) Except as set forth on Schedule 2.8, no Seller or, to the knowledge of any Seller,
any Employee Plan, any Former Employee Plan, any trust created thereunder, or any trustee or
administrator thereof, has engaged in a transaction in connection with which any Seller, any
Employee Plan, any Former Employee Plan, any such trust, or any trustee or administrator thereof,
or any party dealing with any Employee Plan or any Former Employee Plan or any such trust could be
subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
material tax imposed pursuant to Section 4975 or 4976 of the Code. To the knowledge of the
Sellers, there has been no prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code and other than a transaction that is exempt under a statutory or
administrative exemption) with respect to any Employee Plan or any Former Employee Plan that could
result in any material liability to any Seller or ERISA Affiliate.

          (e) Except as set forth on Schedule 2.8, each Employee Plan and Former Employee Plan
has been operated and administered in all material respects in accordance with its terms and
applicable Law, including but not limited to ERISA and the Code, and all contributions required to
be made under the terms of any of the Employee Plans or any Former Employee Plan as of the date of
this Agreement have been timely made or, if not yet due, have been properly reflected on the
Financial Statements except for any failure to do so which would not reasonably be expected to
result in any material liability to any Seller or ERISA Affiliate.

          (f) Except as set forth on Schedule 2.8, no Employee Plan or Former Employee Plan
provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of any Seller for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable Law, (ii) death benefits
under any “pension plan,” or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary). The Sellers and each ERISA Affiliate are in material
compliance with (A) the requirements of the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
regulations (including proposed regulations) thereunder and any similar state law and (B) the
applicable requirements of the Health Insurance Portability and Accountability Act of 1996, as
amended, and the regulations (including proposed regulations) thereunder.

          (g) Except as set forth on Schedule 2.8, the consummation of the transactions
contemplated hereby will not (i) entitle any current or former employee or officer of any Seller to
severance pay, unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation or benefits due any such employee
or officer or (iii) prevent any Seller from amending or terminating any Employee Plan or Former
Employee Plan.

          (h) Except as set forth on Schedule 2.8, there are no pending or, to the knowledge of
any Seller, threatened in writing or anticipated claims by or on behalf of any Employee Plan or
Former Employee Plan, by any employee or beneficiary covered under any

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such Employee Plan or Former
Employee Plan with respect to such plan, or otherwise involving any such Employee Plan or Former
Employee Plan, including any audit or inquiry by the IRS or United States Department of Labor
(other than routine claims for benefits).

                    (i) There are no Employee Plans or Former Employee Plans that are subject to the Law
of any jurisdiction outside the United States.

     Section 2.9. Real and Personal Property.

          (a) Schedule 2.9(a) sets forth a description of the real property and facilities
leased in connection with the Businesses (the “Leased Real Property”) and the address, approximate
square footage, annual base rent and expiration date thereof. A true and complete copy of the
lease for such Leased Real Property (including all amendments, subordination and non-disturbance
agreements, estoppel certificates and related documents) (together, the “Lease”) has been delivered
or made available to NaviSite. With respect to the Lease:

                    (i) Alabanza Corporation (the “Lessee”), which is the tenant under such Lease, has good, valid
and enforceable leasehold interests to the leasehold estate in the Leased Real Property used by
such Seller or Sellers, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors’ rights and general principles of equity; and

                    (ii) the Lease has been duly authorized and executed, is in full force and effect and there is
no existing material default by the Lessee under the Lease.

          (b) Schedule 2.9(b) sets forth a true, correct and complete list of all equipment,
fixtures and trade fixtures of the Sellers as of June 30, 2007. Except as set forth on
Schedule 2.9(b), each Seller has good title to all of its tangible personal property and
assets shown on the June Balance Sheet or acquired after the date of the June Balance Sheet, free
and clear of any mortgage, pledge, Lien, conditional sale agreement, security title, encumbrance or
other charge (collectively, “Encumbrances”), except for (i) assets which have been disposed of to
nonaffiliated third parties since June 30, 2007 in the ordinary course of business, (ii)
Encumbrances reflected in the June Balance Sheet, (iii) Encumbrances for current Taxes not yet due
and payable, and (iv) Permitted Liens. The assets set forth on Schedule 2.9(b) constitute
all of the tangible personal property assets necessary for the operation of the Businesses as
conducted by the Sellers immediately prior to Closing, other than the network infrastructure assets
which constitute Excluded Assets and certain other Excluded Assets (the benefit of which NaviSite
will be provided during the transition period under and in accordance with the terms of the
Transition Services Agreement, as hereinafter defined).

          (c) No Seller owns or has owned any real property.

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     Section 2.10. Labor and Employment Matters. Except as set forth in Schedule 2.10
hereto:

          (a) There is no:

                    (i) collective bargaining agreement or any other agreement, whether in writing or otherwise,
with any labor organization, union, group or association (“Labor Organization”) applicable to the
employees of any Seller and no Seller is subject to any charge, demand, petition or representation
proceeding seeking to compel, require or demand it to bargain with any labor union or labor
organization nor, as of the date of this Agreement, is there pending or, to any Seller’s knowledge,
threatened, any material labor strike, dispute, walkout, work stoppage, slow down or lockout
involving any Seller or action or dispute by or with respect to any employees of any Seller;

                    (ii) unfair labor practice complaint pending or, to the knowledge of any Seller, threatened in
writing against any Seller before the National Labor Relations Board or any other federal, state
local or non-U.S. agency;

                    (iii) pending or, to the knowledge of any Seller, threatened representation question or union
or labor organizing activities with respect to employees of any Seller.

          (b) During the past three years, no Seller has effectuated (i) a “plant closing” (as defined
in the WARN Act, which is defined in Section 5.1(d)) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of any Seller; or (ii)
a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of any
Seller; nor has any Seller been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state, local or non-U.S.
Law. No employees of any Seller have suffered an “employment loss” (as defined in the WARN Act)
since three months prior to the date of this Agreement.

          (c) Each of the Sellers has at all times and in all material respects properly classified each
of its respective employees as employees and each of its independent contractors as independent
contractors, as applicable, and no indication has been received from any Governmental Authority
that such contractors would be considered employees for employment law or tax purposes at any time.

          (d) Each of the Sellers has at all times paid its respective employees in conformance with
applicable federal, state, local and non-U.S. wage and hour laws. There are not presently pending,
or to the knowledge of the Sellers threatened, in writing, any claims with respect to working hours
or the payment of wages, overtime or any other form of employee compensation.

          (e) Each of the Sellers does not, formally or informally, have a custom or practice of making
ex gratia severance payments to employees.

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     Section 2.11. Customers; Vendors.

          (a) Schedule 2.11(a) sets forth a true, complete and correct list of the top 25
customers (and their known affiliates) of the Sellers and the Businesses (the “Top Customers”)
based on revenues for the period beginning January 1, 2007 and ended May 31, 2007. Sellers, to
their knowledge, have good working relationships with each of the Top Customers. None of the Top
Customers has terminated its relationship with Sellers or the Businesses or, to the knowledge of
Sellers, threatened in writing to do so. To the knowledge of the Sellers, none of the Top
Customers is reasonably likely to terminate its relationship with the Businesses as a result of the
transactions contemplated by this Agreement.

          (b) Schedule 2.11(b) sets forth a true, complete and correct list of the top ten
vendors (and their known affiliates) of the Sellers and the Businesses based on amounts paid to
such vendors for the period beginning January 1, 2007 and ended May 31, 2007, and any other vendors
(including without limitation vendors providing bandwidth, operating systems, electricity or
hardware) that are essential to the uninterrupted operation of the Businesses (the “Top Vendors”).
Sellers, to their knowledge, have good working relationships with each of the Top Vendors. None of
the Top Vendors has terminated its relationship with Sellers or the Businesses or, to the knowledge
of Sellers, threatened in writing to do so. To the knowledge of the Sellers, none of the Top
Vendors is reasonably likely to terminate its relationship with the Businesses as a result of the
transactions contemplated by this Agreement.

     Section 2.12. Contracts and Commitments.

          (a) Schedule 2.12 sets forth a true, complete and correct list (including all
amendments, modifications or supplements with respect thereto) of the following agreements (written
or oral) to which any Seller is a party to the extent any such agreement (i) is currently in effect
or (ii) has been terminated on or prior to the date hereof but contains provisions that survived
such termination and such provisions are currently in effect (other than provisions that
customarily survive such termination and do not relate to the principal business purpose of such
agreement and which do not create any material or ongoing financial or other liability to
NaviSite):

                    (i) any loan agreement, note, mortgage, indenture, security agreement and other agreement and
instrument relating to the borrowing of money;

                    (ii) any agreement (or group of related agreements) between any Seller and any Top Customer or
Top Vendor;

                    (iii) any agreement concerning the establishment or operation of a partnership, joint venture
or limited liability company (other than the Organizational Documents of the Sellers);

                    (iv) any agreement (or group of related agreements) under which any Seller has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations and operating lease commitments) involving more than $20,000 or under
which it has imposed (or may impose) an Encumbrance on any of the assets, tangible or intangible,
of any Seller or the Businesses;

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                    (v) any agreement for the disposition of any portion of the assets of the Sellers or the
Businesses (other than sales in the ordinary course of business) or any agreement for the
acquisition of the assets or business of any other entity (other than purchases in the ordinary
course of business);

                    (vi) any agreement concerning non-competition, exclusivity, non-solicitation, non-recruitment
or other such covenants that restricts any conduct of any business by any Seller, in each case with
respect to geographical area of operations or scope or type of business of any Seller, other than
(A) non-competition agreements entered into between any Seller and its employees or consultants and
which do not restrict any Seller with respect to non-competition or (B) customer contracts and
non-disclosure agreements with standard non-solicitation of employee provisions;

                    (vii) any employment or consulting agreement (other than offer letters for at-will employment
for employees that do not provide for any severance benefit upon such employee’s termination);

                    (viii) any collective bargaining or similar agreement;

                    (ix) any agreement involving any current officer, employee, director or shareholder of any
Seller or consulting agreement with an individual involving payments by any Seller in excess of
$50,000 per annum other than agreements entered into in connection with the issuance and exercise
of options;

                    (x) any buy-sell or barter agreement;

                    (xi) any derivative contract and other hedging arrangement;

                    (xii) any acquisition agreement, by means of asset purchase, merger, stock purchase, asset
purchase, consolidation or other similar transaction, of a person or business by any Seller (each,
an “Acquisition”); and

                    (xiii) any other material agreement, including a guarantee, not entered into in the ordinary
course of business or that requires the payment by any Seller in excess of $20,000.

          (b) All contracts, agreements and instruments required to be listed in Schedule 2.12
(the “Material Contracts”) are valid and are in full force and effect and constitute legal, valid
and binding obligations of the Sellers and, to the knowledge of the Sellers, of the other parties
thereto, and are enforceable in accordance with their respective terms subject, in each case, to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally and general principles of equity.
The Sellers have no knowledge of, and have not received, any notice regarding termination of any
Material Contracts and the Sellers have no knowledge of any Top Customer which has indicated that
it intends to terminate any Material Contract or not renew upon its expiration. No Seller is in
default and to the knowledge of the Sellers, no other party is in material default in complying
with any provisions of any Material Contract, and to the knowledge of the Sellers, no condition or
event or fact exists which, with notice, lapse of time or

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both, could constitute a material default thereunder on the part of any Seller. The Sellers
have delivered or made available to NaviSite a true, correct and complete copy of each of the
Material Contracts.

          (c) Sellers are not in material default under any Assumed Obligation.

     Section 2.13. Intellectual Property.

          (a) For purposes of this Agreement,

                    (i) “Intellectual Property Assets” means all of the following, to the extent owned or licensed
by the Sellers or their Affiliates and used in the Businesses (provided, however, that the
Intellectual Property Assets shall exclude any open source software used by the Sellers):

          (A) all patents, patent applications, patent rights, and inventions and
discoveries and invention disclosures (whether or not patented)
(collectively, “Patents”);

          (B) all trade names, trade dress, logos, packaging design, slogans,
Internet domain names, registered and unregistered trademarks and service
marks and applications (collectively, “Marks”);

          (C) all copyrights in both published and unpublished works, including
without limitation all compilations, databases and computer programs, and
all copyright registrations and applications, and all derivatives,
translations, adaptations and combinations of the above (collectively,
“Copyrights”);

          (D) all know-how, trade secrets, confidential or proprietary
information, research in progress, algorithms, data, designs, processes,
formulae, drawings, schematics, blueprints, flow charts, models, prototypes,
techniques, Seller-designed reports, Beta testing procedures and Beta
testing results (collectively, “Trade Secrets”);

          (E) all goodwill, franchises, licenses, permits, consents, approvals,
technical information, telephone numbers, and claims of infringement against
third parties (the “Rights”);

          (F) all customer lists and telephone numbers, names of potential sales
leads, business strategies, outside analysts’ plans and reports, outlooks,
forecasts and other similar documents (collectively, “Other Intangibles”);

          (G) those services (including web hosting and application management),
computer programs, solutions and related documentation sold, marketed, or
provided by the Sellers as of the date hereof, including without limitation
the proprietary platform consisting of

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the major modules of Domain System Manager, Control Panel Software and
Security and System Administration Tools(collectively, the “Products”).

          (b) Ownership of Intellectual Property Assets. The Sellers have the legal right to
use all of the Intellectual Property Assets, free and clear of all mortgages, pledges, charges,
Liens, equities, security interests, or other encumbrances created by the Sellers. No claim is
pending or, to the Sellers’ knowledge, threatened in writing against any Seller and/or its
directors, officers, employees, and consultants to the effect that (i) any Seller’s right, title
and interest in and to the Intellectual Property Assets is reduced, invalid or unenforceable by the
Seller or that any of the Intellectual Property Assets infringes, misappropriates, dilutes or
otherwise violates the rights of a third party, or (ii) challenging any Seller’s ownership or use
of, or the validity, enforceability or registerability of, any Intellectual Property Assets and, to
the knowledge of the Sellers, there is no reasonable basis for a claim regarding any of the
foregoing. There exists no prior act or current conduct or use by the Sellers or any third party
that would void or invalidate any Intellectual Property Assets owned by the Sellers that are used
or are necessary for the conduct of the Businesses as currently conducted, or give cause to any
licensor of Intellectual Property Assets licensed to the Sellers to terminate or otherwise impair
the rights of the Sellers pursuant to any such license agreement. Except as set forth in
Schedule 2.13, the Sellers have not brought or threatened a claim against any person (A)
alleging infringement, misappropriation, dilution or any other violation of the Intellectual
Property Assets, or (B) challenging any person’s ownership or use of, or the validity,
enforceability or registerability of, any Intellectual Property Assets and, to the knowledge of the
Sellers, there is no reasonable basis for a claim regarding any of the foregoing. Except as set
forth in Schedule 2.13, all former and current employees of the Sellers have executed
written instruments with the Sellers that assign to the Sellers all rights to any inventions,
improvements, discoveries or information relating to the Businesses. Except as set forth in
Schedule 2.13, no current or former member, director, officer, employee or contractor of
any Seller (or any of their respective predecessors in interest) has or will have, after giving
effect to the transactions contemplated by this Agreement, any legal or equitable right, title or
interest in or to, or any right to use, directly or indirectly, in whole or in part, any of the
Intellectual Property Assets owned by the Sellers. Except as set forth in Schedule 2.13,
all Intellectual Property Assets owned by the Sellers were developed by either (x) employees of the
Sellers within the scope of their employment, or (y) independent contractors who have assigned all
of their rights in such Intellectual Property Assets to the Sellers pursuant to a written
agreement.

          (c) Patents. Schedule 2.13 sets forth a complete and accurate list and
summary description of all Patents owned by the Sellers. All of the issued Patents owned by the
Sellers are currently in compliance with formal legal requirements (including without limitation
payment of filing, examination and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or Taxes or actions falling due within
ninety (90) days after the Closing Date. In each case where a Patent is held by any Seller by
assignment, the assignment has been duly recorded with the U.S. Patent and Trademark Office and all
other jurisdictions of registration. No issued Patent owned by the Sellers has been or is now
involved in any interference, reissue, re-examination or opposition proceeding. To the Sellers’
knowledge, there is no patent or patent application of any third party that would potentially
interfere with the operation of the Businesses by the Sellers.

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          (d) Trademarks. Schedule 2.13 sets forth a complete and accurate list and
summary description of all Marks owned by the Sellers. All Marks owned by the Sellers that have
been registered with the United States Patent and Trademark Office and/or any other jurisdiction
are currently in compliance with formal legal requirements (including without limitation the timely
post-registration filing of affidavits of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance fees or Taxes or actions falling due
within ninety (90) days after the Closing Date. In each case where a Mark is held by any Seller by
assignment, the assignment has been duly recorded with the U.S. Patent and Trademark Office and all
other jurisdictions of registration. No registered Mark owned by the Sellers has been or is now
involved in any opposition, invalidation or cancellation proceeding and, to the Sellers’ knowledge,
no such action is threatened in writing with respect to any of the Marks owned by the Sellers. All
products and materials of the Sellers containing a Mark owned by the Sellers bear the proper notice
where permitted by Law. No Marks have been abandoned by the Sellers, and no Marks are the subject
of a pending application for registration that is based on the Sellers’ use of, or bona fide intent
to use, such Marks. To the knowledge of the Sellers, there has been no prior use of Marks owned by
the Sellers by any third party which would confer upon said third party superior rights in such
Marks, and the Sellers have reasonably policed the Marks owned by the Sellers against third party
infringement so as to maintain the validity of such Marks.

          (e) Copyrights. Schedule 2.13 sets forth a complete and accurate list and
summary description of all Copyrights owned by the Sellers. Except as set forth in Schedule
2.13, all Copyrights owned by the Sellers that have been registered with the United States
Copyright Office are currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any fees or Taxes or actions falling due within ninety (90)
days after the Closing Date. In each case where a Copyright is held by any Seller by assignment,
the assignment has been duly recorded with the U.S. Copyright Office and all other jurisdictions of
registration. All products and materials of the Sellers containing material protected by
Copyrights owned by the Sellers bear the proper notice where permitted by Law. No Copyrights have
been released by the Sellers.

          (f) Products. None of the source or object code, algorithms, or structure developed
by the Sellers that is included in the Products owned by the Sellers is copied from, based upon, or
derived from any other source or object code, algorithm or structure in violation of the rights of
any third party. Any substantial similarity of any Products developed by Sellers to any computer
program owned by any third party did not result from the Products being copied from, based upon, or
derived from any such computer software program in violation of the rights of any third party.
Except as set forth in Schedule 2.13, the Sellers have no obligation to any other Person to
modify, improve or upgrade the Products.

          (g) Trade Secrets. Except as set forth in Schedule 2.13, Sellers have taken
all reasonable measures (including, without limitation, entering into appropriate confidentiality
and nondisclosure agreements with all officers, directors, employees, and consultants of the
Sellers and any other persons with access to the Trade Secrets) to protect the secrecy,
confidentiality and value of all Trade Secrets. Except as set forth in Schedule 2.13, to
the knowledge of the Sellers, there has not been any breach by any party to any such
confidentiality or non-disclosure agreement. The Trade Secrets have not been disclosed by the
Sellers to any person or entity

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other than employees or contractors of the Sellers who needed to know and use the Trade
Secrets in the course of their employment or contract performance, and then only pursuant to a
written agreement containing non-disclosure obligations that adequately protect the Sellers’
proprietary interests in such Trade Secrets. The Sellers have the right to use, free and clear of
claims of third parties, all Trade Secrets and, to the knowledge of the Sellers, no third party has
asserted that the use by the Sellers of any Trade Secret violates the rights of any third party.
To the knowledge of the Sellers, no third Person that is a party to any agreement with the Sellers
containing obligations of non-disclosure with respect to such Trade Secrets is in breach or default
thereof.

          (h) Other Intangibles. The Sellers have provided to NaviSite access to all of the
Other Intangibles used by the Sellers in connection with the Businesses.

          (i) Exclusivity of Rights. The Sellers have the exclusive right to use, license,
distribute, transfer and bring infringement actions with respect to the Intellectual Property
Assets owned by the Sellers. Except as set forth on Schedule 2.13, the Sellers (A) have
not licensed or granted to anyone rights of any nature to use, promote, market, sell, distribute or
license any of its Intellectual Property Assets; and (B) are not obligated to and do not pay
royalties or other fees to anyone for the Sellers’ ownership, use, license or transfer of any of
the Intellectual Property Assets owned by the Sellers. The Intellectual Property Assets owned by
the Sellers and, to the knowledge of the Sellers, the Intellectual Property Assets owned by third
Persons that are subject license agreements, have been duly maintained, are valid and subsisting,
are full force and effect and have not been cancelled, expired or abandoned.

          (j) Infringement. None of the Intellectual Property Assets or the Products or the
modifications made by the Sellers to the Products sold by the Sellers (excluding any third-party
rights or products incorporated into such Products for which the Sellers have a valid license)
infringes or is alleged to infringe any patent, trademark, service mark, trade name, copyright or
other proprietary right or is a derivative work based on the work of any other person.

          (k) Intellectual Property Assets Required in the Businesses. The Intellectual
Property Assets being transferred to the Buyer (taking into account the exclusion of the Excluded
Assets) under this Agreement (together with all rights to open source software used by the Sellers
in the Businesses) constitute all of the intellectual property assets necessary for the ongoing
operations of the Businesses conducted by the Sellers immediately prior to Closing.

     Section 2.14. Environmental Matters.

          (a) The Sellers are in material compliance with Environmental Laws (which compliance includes,
but is not limited to, the possession by the Company of all permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with the terms and
conditions thereof). The Sellers have not received any written notice, report or other information
regarding any actual or alleged material violation of Environmental Laws, or any material
liabilities or potential material liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), including any investigatory, remedial or corrective obligations, relating to the
Sellers, the Businesses or the Sellers’ facilities arising under Environmental Laws. There is no
Environmental Claim pending or, to the knowledge of

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the Sellers, threatened in writing against the Sellers. There are no past or present actions,
activities, circumstances, conditions, events or incidents which reasonably would be expected to
form the basis of an Environmental Claim against the Sellers.

          (b) “Environmental Claim” means any action, investigation or notice by any Person alleging
potential Liability (including potential Liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (i) the presence, release or threatened
release of any hazardous materials at any location, whether or not owned or operated by the
Sellers, or (ii) circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.

          (c) “Environmental Laws” means all applicable federal, state and local statutes or laws,
judgments, orders, regulations, licenses, permits, rules and ordinances relating to pollution or
protection of health, safety or the environment, including, but not limited to the Federal Water
Pollution Control Act (33 U.S.C. §1251 et seq.), Resource Conservation and Recovery Act (42
U.S.C. §6901 et. seq.), Safe Drinking Water Act (42 U.S.C. §3000(f) et. seq.),
Toxic Substances Control Act (15 U.S.C. §2601 et seq.), Clean Air Act (42 U.S.C. §7401
et. seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§9601 et seq.), and other similar state and local statutes.

     Section 2.15. Insurance. Schedule 2.15 sets forth a true and correct summary of
the insurance policies or binders held by, or for the benefit of, the Sellers and their directors,
officers, employees and agents with respect to the Businesses. Except as set forth in Schedule
2.15 hereto, (a) all such policies or binders are in full force and effect and no premiums due
and payable thereon are delinquent, (b) there are no pending material claims against such insurance
policies or binders by the Sellers as to which the insurers have denied Liability, (c) the Sellers
have complied in all material respects with the provisions of such policies and (d) there exist no
material claims of the Sellers under such insurance policies or binders that have not been properly
and timely submitted by the Sellers to their insurers. Schedule 2.15 sets forth a list of
all claims for all losses relating to the Businesses conducted by the Sellers exceeding $25,000
submitted to insurers during the 18-month period ending on the date of this Agreement.

     Section 2.16. Brokers. Except as set forth on Schedule 2.16 hereto, the Sellers
have not entered into any contract entitling any agent, broker, investment banker, financial
advisor or other firm or person to any broker’s, finder’s, success fee or any other commission or
similar fee in connection with the transactions contemplated hereby.

     Section 2.17. Compliance with Laws.

          (a) The Sellers are not in default or violation of, and to the knowledge of the Sellers, no
event has occurred with respect to the Sellers or the Businesses which, with the lapse of time or
the giving of notice or both, would result in the violation of or default under, any Law applicable
to Sellers or the Businesses or by which any property or asset of Sellers is bound, except for any
such conflicts, defaults or violations that would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has not received any written notice or

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written communication from any Governmental Authority alleging material noncompliance with any
applicable Law. The Company is not subject to reporting or registration under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).

          (b) To the knowledge of Sellers, neither the Sellers nor any of their respective directors,
officers, agents or employees have in the past three years (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to political activity, or
(ii) made any unlawful payment to non-U.S. or domestic government officials or employees or to
non-U.S. or domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

          (c) The Sellers are in possession of all authorizations, licenses, permits, certificates, and
approvals of any Governmental Authority necessary for the Sellers to own, lease and operate their
properties and to conduct the Businesses substantially as they are being conducted as of the date
hereof (the “Permits”), and all such Permits are valid, and in full force and effect, except where
the failure to have, or the suspension or cancellation of, or failure to be valid or in full force
and effect of, any of the Permits would not, individually or in the aggregate, reasonably be
expected to (i) prevent or materially delay consummation of the transactions contemplated hereby,
(ii) otherwise prevent or materially delay performance by the Sellers of any of their material
obligations under this Agreement or any Ancillary Agreement or (iii) result in a Material Adverse
Effect.

     Section 2.18. Transactions with Affiliates. Except as set forth on Schedule 2.18, there
are no loans, leases or other agreements or transactions between any Seller and any present or
former member, director, officer or employee of any Seller, or to the Sellers’ knowledge, any
person controlled by such officer, director, employee or member or his or her immediate family. To
the knowledge of the Sellers, as of the date hereof, none of such persons has any direct or
indirect ownership interest in any firm or entity, except for less than a 1% interest in any
publicly-held corporation, with which any Seller is affiliated or with which any Seller has a
business relationship, or any firm or corporation that competes with the Sellers. No employee,
officer or director of any Seller and no member of the immediate family of such persons is directly
or indirectly interested in any Material Contract or has or claims to have any interest in the
Intellectual Property Assets of the Sellers.

     Section 2.19. Product Warranties and Liabilities. Sellers have not given or made any
express warranties to third parties with respect to any products manufactured or sold or services
performed by Sellers, except for the limited warranties stated in the standard forms of warranty
used by it, as described in Schedule 2.19. Sellers do not have any knowledge of any fact
or of the occurrence of any event forming the basis of any present or future claim against Sellers,
whether or not fully covered by insurance, for liability arising out of the manufacture or sale of
products or the performance of services by Sellers, whether based on theories of negligence or
products liability or on account of any express or implied product warranty, except for warranty
obligations and product returns in the ordinary course of business and as set forth on Schedule
2.19.

     Section 2.20. Knowledge. Wherever there is a reference to the “knowledge” (or words of
similar import) of Sellers in this Agreement, such knowledge shall be deemed to refer only to

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the actual knowledge of the directors and executive officers of any Seller and the other persons
listed on Schedule 2.20 hereto (the “Designated Individuals”). Wherever there is a
reference to the “knowledge” (or words of similar import) of a particular Seller in this Agreement,
such knowledge shall be deemed to refer only to the actual knowledge of the directors and executive
officers of such Seller and any Designated Individual.

ARTICLE III — REPRESENTATIONS AND WARRANTIES OF NAVISITE

     The NaviSite Disclosure Schedule shall be arranged in sections and subsections corresponding
to the numbered and lettered sections and subsections contained in this Article III. The
disclosures in any section or subsection of the NaviSite Disclosure Schedule shall qualify other
sections and subsections in this Article III to the extent it is reasonably apparent from a reading
of the disclosure that such disclosure is applicable to such other sections and subsections.
Except as set forth in the NaviSite Disclosure Schedule attached hereto and delivered by NaviSite,
NaviSite hereby represents and warrants to the Sellers as of the date hereof (or, if made as of a
specified date, as of such date) and as of the Closing Date, as follows.

     Section 3.1. Existence; Good Standing; Authority.

          (a) Each of Buyer and Parent is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of Buyer and Parent has all requisite
corporate power and authority and all necessary governmental licenses, authorizations, consents and
approvals to own, operate, lease and encumber its properties and carry on its business as currently
operated and conducted. Each of Buyer and Parent is duly licensed or qualified to do business as a
foreign corporation, and is in good standing under the laws of any other jurisdiction in which the
character or ownership of its properties or in which the transaction or character of its business
makes such qualification necessary, except where the failure to be so licensed or qualified or in
good standing would not, individually or in the aggregate, have a Material Adverse Effect. Each of
Buyer and Parent is not in violation of any provision of its certificate of incorporation or
bylaws.

          (b) Each of Buyer and Parent has the corporate power and authority to execute and deliver this
Agreement and each agreement, document and instrument to be executed and delivered by or on behalf
of each of Parent and Buyer pursuant to this Agreement and the Ancillary Agreements and to carry
out the transactions contemplated hereby and thereby. The execution and delivery of this Agreement
by each of Buyer and Parent, the performance by each of Buyer and Parent of its obligations
hereunder and the consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of each of Buyer and Parent. This
Agreement has been duly executed and delivered by Buyer and Parent and, assuming the due
authorization, execution and delivery of this Agreement by the Sellers, this Agreement constitutes
a legal, valid and binding obligation of Buyer and Parent, enforceable against Buyer and Parent in
accordance with its terms. No other corporate or similar action on the part of each of Buyer and
Parent is necessary to authorize the execution and delivery of this Agreement by Buyer or Parent or
the consummation by Buyer or Parent of the transactions contemplated hereby.

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     Section 3.2. No Conflict. Neither the execution and delivery by Buyer or Parent of this
Agreement and the other agreements, documents and instruments contemplated hereby, nor the
consummation by Buyer or Parent of the transactions in accordance with the terms hereof and
thereof, conflicts with or results in a breach of any provisions of Buyer’s or Parent’s certificate
of incorporation or bylaws or other organizational documents. Except as set forth on Schedule
3.2, the execution and delivery by Buyer or Parent of this Agreement and the other agreements,
documents and instruments contemplated hereby, and the consummation by Buyer or Parent of the
transactions in accordance with the terms hereof and thereof, will neither (i) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, lease, contract or other
agreement to which Buyer or Parent is a party, or by which Buyer or Parent or any of their
properties are bound, except, in each case, as would not have a Material Adverse Effect, nor (ii)
violate any order, writ, injunction, decree, statute, law, rule or regulation applicable to Buyer
or Parent.

     Section 3.3. Consents and Approvals. Except as set forth on Schedule 3.3, the
execution, delivery and performance of this Agreement by NaviSite will not require any consent,
approval, permit, authorization or other action by, or filing with or notification to, any
Governmental Authority, except the notification requirements of the HSR Act, if applicable.

     Section 3.4. Brokers. NaviSite has not incurred or become liable for any broker’s
commission or finder’s fee relating to or in connection with this Agreement or the transactions
contemplated hereby.

     Section 3.5. Financial Capabilities. Buyer is, as of the date hereof, solvent and Buyer
knows of no facts or circumstances which are reasonably likely to render Buyer insolvent prior to
the Cut-Off Date. Buyer will not be rendered insolvent by any of the transactions contemplated by
this Agreement, and, as necessary, Parent shall provide Buyer with the financial resources in order
for Buyer to remain solvent. As used in this section, “insolvent” means that the sum of the debts
and other probable liabilities of Buyer exceeds the present fair market value of Buyer’s assets.
Immediately after giving effect to the consummation of the transactions contemplated by this
Agreement: (i) Buyer (with the financial reserves of the Parent) will be able to pay its
liabilities as they become due in the usual course of its business; (ii) Buyer (with the financial
reserves of the Parent) will not have unreasonably small capital with which to conduct its present
or proposed business; and (iii) Buyer (with the financial reserves of the Parent) will have assets
(calculated at fair market value) that exceed its liabilities.

     Section 3.6. Knowledge. Wherever there is a reference to the “knowledge” (or words of
similar import) of NaviSite, Parent or Buyer in this Agreement, such knowledge shall be deemed to
refer only to the actual knowledge of the directors and executive officers of Parent and Buyer and
any other persons listed on Schedule 3.6 hereto.

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ARTICLE IV — CERTAIN COVENANTS OF THE PARTIES 

     Section 4.1. Confidentiality. The parties shall adhere to the terms and conditions of that
certain Confidentiality Agreement dated as of April 27, 2007 by and between Parent and Sellers (the
“Confidentiality Agreement”).

     Section 4.2. Further Action. Each of the parties hereto shall use its respective
commercially reasonable efforts to take or cause to be taken all appropriate action, do or cause to
be done all things necessary, proper or advisable, and execute and deliver such documents and other
papers, as may be required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement. Notwithstanding any confidentiality
obligations pursuant to Section 4.1 or the Confidentiality Agreement, prior to Closing and without
the Sellers’ prior written consent, NaviSite shall be permitted to use the Sellers’ confidential
information (i) in any disclosures required to be made by Parent by Law or by the rules of any
applicable self-regulatory organization, including without limitation the Securities and Exchange
Commission (“SEC”); provided, however, that Parent will use its commercially reasonable efforts to
allow Sellers reasonable time to comment on the documents, or drafts of the documents, in which
such confidential information is to be used or disclosed, or (ii) in discussions or otherwise in
connection with any potential merger or acquisition transaction if the recipient of such
information executes a confidentiality agreement with Parent under which they agree to maintain the
confidentiality of such information.

     Section 4.3. Press Releases. The parties hereto will not, and will cause each of their
Affiliates and representatives not to, issue or cause the publication of any press release or other
public announcement with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of all of the parties hereto which consent shall not be unreasonably
withheld; provided, however, that Parent may, without the prior consent of the other parties
hereto, issue or cause publication of any such press release or public announcement to the extent
that Parent, in good faith, reasonably determines, after consultation with outside legal counsel,
such action to be required by Law or by the rules of any applicable self-regulatory organization,
including without limitation the SEC, in which event Parent will use its commercially reasonable
efforts to allow Sellers reasonable time to comment on such press release or public announcement in
advance of its issuance.

     Section 4.4. Conveyance Taxes; Costs. Subject to the terms of this Section
4.4, NaviSite, on the one hand, and the Sellers, on the other, shall each be liable for fifty
percent (50%) of any transfer, sales, use, value added, excise, stock transfer, stamp, recording,
registration and any similar taxes (collectively, “Sales Taxes” and each a “Sales Tax”) that become
payable in connection with the acquisition by Buyer of the Purchased Assets and other transactions
contemplated hereby, and the Sellers shall file such applications and documents as shall permit any
such Sales Taxes to be assessed and paid on or prior to the Closing Date in accordance with any
available pre-sale filing procedure. Sellers shall prepare and file the requisite Sales Tax
applications within forty-five (45) days after Closing. NaviSite shall pay Sellers for fifty
percent (50%) of the aggregate amount of any Sales Taxes pursuant to this Section 4.4 no
later than ten (10) days after receiving an invoice from the Sellers, which invoice shall be sent
to Craig Campbell at NaviSite by email at ccampbell@navisite.com, with a hard copy to
follow by mail, and shall include evidence of the amount of such Sales Taxes assessed and paid by
or on behalf of Sellers. Notwithstanding the foregoing, NaviSite shall not be liable

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for, and shall not be required to pay to Sellers, any amounts for Sales Taxes in excess of an
aggregate amount of twenty-five thousand dollars ($25,000) (50% of $50,000 paid by Sellers).

     Section 4.5. Books and Records. NaviSite shall, until the seventh anniversary of the
Closing Date, retain all books, records and other documents pertaining to the Purchased Assets or
the Businesses and make the same available for inspection and copying by the Sellers or any
representative of the Sellers at the expense of the Sellers during the normal business hours of
NaviSite upon reasonable request and upon reasonable notice.

     Section 4.6. Approval of Transactions. Sellers shall use their reasonable best efforts to
obtain, as promptly as practicable, all necessary approvals, either at a special meeting of members
or pursuant to a written consent executed by all of the holders of the membership interests of
Sellers, in accordance with the applicable requirements of the Maryland Limited Liability Act (the
“Maryland LLC Act”). Copies of any written consent of Sellers’ members pursuant to the Maryland
LLC Act shall be delivered to NaviSite with a certificate of Sellers’ secretary certifying as to
the accuracy of the written consent and that the written consent has been received by Sellers and
included in the books and records of Sellers.

     Section 4.7. FIRPTA Certification. Prior to the Closing Date, each of Sellers shall
deliver to NaviSite an affidavit from such Seller, also delivered to the Internal Revenue Service,
that such Seller is not, and has not been, a “U.S. real property holding corporation” in accordance
with the Treasury Regulations under Section 897 and 1445 of the Code, so that Buyer is exempt from
withholding any portion of the Purchase Price.

     Section 4.8. Use of Name; Use of Network. Except as otherwise set forth below, following
the Closing, NaviSite shall have the exclusive right to use the names “Alabanza” and “Hosting
Ventures,” and any derivations thereof, and Sellers shall use their best efforts to cease using
such names as soon as reasonably practical after the Closing Date and shall take all actions
reasonably necessary, including changing the legal name of each Seller to a name that is not
similar to such name within thirty (30) business days after the Closing, to allow NaviSite to
exercise such right. In addition (a) the Sellers shall be permitted to maintain the Non-profit
“Guadalupe” accounts within the current network for thirty (30) days after the Closing, to allow
Sellers to move such accounts to a different technical environment; and (b) the Sellers shall be
permitted to use the internet protocol addresses included in the Purchased Assets for a period of
thirty (30) days after Closing, to allow Sellers to transition to alternative addresses.

     Section 4.9. Endorsement of Checks, Etc. Each Seller hereby authorizes
NaviSite following the Closing to endorse for deposit only its name on and collect for NaviSite’s
account any checks received in payment of any accounts included in the Purchased Assets, and any
refunds of deposits, prepaid expenses and similar amounts included in the Purchased Assets. If any
amounts due to NaviSite are received by Sellers or Alabanza Corporation, Sellers will turn the same
over to NaviSite or cause Alabanza Corporation to turn the same over to NaviSite, as the case may
be, within ten (10) business days after the Sellers’ or Alabanza Corporation’s receipt thereof.
Sellers will, and will cause Alabanza Corporation to, hold such funds in trust exclusively for the
benefit of NaviSite, and Sellers will promptly deliver or cause Alabanza Corporation to deliver
such funds to NaviSite within ten (10) business days after the Sellers’ or Alabanza Corporation’s
receipt thereof. In the event that Sellers do not deliver, or cause

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Alabanza Corporation to deliver, any such funds to NaviSite prior to expiration
of the ten (10) business day period, Sellers shall immediately pay to NaviSite (a) a penalty of
five percent (5%) of the amount of such funds and (b) interest on the amount of such funds at the
rate of twelve percent (12%) per annum until the funds are remitted to NaviSite.

     Section 4.10. Consents. After the Closing Date, Sellers and NaviSite will cooperate and
will each use commercially reasonable efforts to obtain all consents required in connection with
the transactions contemplated by this Agreement, including without limitation those consents listed
on Schedules 2.2 and 2.5 that are not obtained prior to the Closing Date.
Notwithstanding anything to the contrary herein, this Agreement shall not operate to assign any
agreement, lease, contract, license, commitment, understanding or undertaking, or any claim, right
or benefit arising thereunder or resulting therefrom, if an attempted assignment thereof, without
the consent of another party thereto, would constitute a breach, default or other contravention
thereof or in any way adversely affect the rights of Sellers or NaviSite thereunder. In the event
that a consent required to assign any such agreement, lease, contract, license, commitment,
understanding or undertaking is not obtained on or prior to the Closing Date or if an asset or
assets are otherwise not assignable hereunder (each such asset a “Non-Transferable Asset”), then,
from and after the Closing and, with respect to each such Non-Transferable Asset, until the earlier
to occur of (a) such time as such Non-Transferable Asset shall be properly and lawfully transferred
or assigned to NaviSite or (b) such time as the material benefits intended to be transferred or
assigned to NaviSite have been procured by alternative means pursuant hereto, (i) the
Non-Transferable Assets shall be held by Sellers in trust exclusively for the benefit of NaviSite
to the extent permitted under applicable Law, and Sellers shall use commercially reasonable efforts
to perform and discharge all of the liabilities and other obligations of Sellers under the terms of
all such Non-Transferable Assets in effect as of the Closing at NaviSite’s expense and (ii) Sellers
shall use commercially reasonable efforts to provide or cause to be provided to NaviSite all of the
benefits of Sellers under the terms of such Non-Transferable Assets in effect as of the Closing,
including by promptly paying to NaviSite any monies received by Sellers from and after the Closing
under such Non-Transferable Assets attributable thereto. In the event that Sellers are unable to
obtain any consent from any person under any Non-Transferable Asset after the Closing Date through
the use of commercially reasonable efforts, NaviSite shall be entitled to procure the material
rights and benefits of Sellers under the terms of such Non-Transferable Asset in effect as of the
Closing by alternative means, including, without limitation, by entering into new contracts with
third persons or otherwise; provided, however, that in the event that NaviSite shall exercise its
rights under this Section 4.10 in respect of any Non-Transferable Asset, the obligations of Sellers
and NaviSite under this Section 4.10 in respect of such Non-Transferable Asset shall thereupon
cease and expire.

     Section 4.11. Certain Tax Matters.

          (a) Sellers shall prepare and timely file all Tax Returns, if any, required to be filed on or
after the Closing Date for any time periods prior to the Closing Date with respect to the
Businesses, including without limitation the Purchased Assets, and shall duly and timely pay all
such Taxes due with respect to such Tax Returns.

          (b) Each of NaviSite and Sellers shall provide the other party with such assistance as may
reasonably be requested by the other party in connection with the preparation

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of any Tax Return, any audit or other examination by any taxing authority, or any judicial or
administrative proceedings related to liability for Taxes, and each will retain and provide the
requesting party with any records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to this Section
4.11(b) or pursuant to any other Section hereof providing for the sharing of information or review
of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties
hereto.

ARTICLE V — EMPLOYEE MATTERS

     Section 5.1. Employees; Benefits.

          (a) Pursuant to the terms as set forth in this Section 5.1, NaviSite shall offer
employment effective as of the Closing Date to all of the employees of the Sellers (or employees of
Alabanza Corporation) related to the Businesses, as listed on Schedule 5.1 (the
“Employees”), on terms and conditions, including provision of salary and benefits, which are no
less favorable, taken as a whole, than employees of NaviSite that are at similar job levels.
NaviSite and Sellers shall inform the Employees of the Closing and the transactions contemplated by
this Agreement at an employee meeting to be held jointly by NaviSite and Sellers at Sellers’
offices no later than during the next business day after the Closing Date (the “Employee Meeting”).
Sellers and NaviSite shall use their best efforts to keep this Agreement, and the transactions
contemplated by this Agreement, including without limitation the effect of the transactions on the
employment of the Employees, confidential from such Employees until the Employee Meeting. NaviSite
shall make employment offers to the Employees at such Employee Meeting and shall immediately inform
the Sellers of the employees who accept such offer of employment (the “Retained Employees”). The
Retained Employees shall be deemed to be employed by NaviSite effective as of the Closing Date.

          (b) From and after the Closing Date, NaviSite shall provide the Retained Employees with
benefits (including, without limitation, retirement and welfare benefits) that are no less
favorable than the benefits provided by NaviSite to its existing employees.

          (c) From and after the Closing Date, NaviSite shall pay severance to the Retained Employees
terminated other than for cause, and shall establish appropriate agreements with management
consistent with NaviSite policy.

          (d) From and after the Closing Date, NaviSite shall assume all accrued and unpaid vacation
relating to all Retained Employees. NaviSite shall not assume or otherwise be responsible for (i)
any sick leave of such employees that accrued prior to the Closing Date, or (ii) any accrued and
unpaid vacation or severance relating to employees that are not Retained Employees.

          (e) NaviSite shall not, at any time prior to ninety-one (91) days after the Closing Date,
effect a “plant closing” or “mass layoff”, as those terms are defined in the Worker Adjustment and
Retraining Notification Act of 1988, as amended (the “WARN Act”), or take any other action
affecting in whole or in part any site of employment of NaviSite which could result in any
liability to Sellers without fully complying with all of the requirements of the

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WARN Act and any other applicable non-U.S., federal, state or other law (a “WARN Act
Violation”); provided, however, if NaviSite engages in a WARN Act Violation, it shall indemnify and
hold harmless Sellers against and in respect of any damages, claims, losses, expenses, costs,
obligations or liabilities arising from such WARN Act Violation.

          (f) NaviSite shall offer health plan coverage to all of the Retained Employees. For purposes
of providing such coverage, to the extent permitted by NaviSite’s existing benefit plans, NaviSite
shall waive all preexisting condition limitations and shall provide such health care coverage
effective as of the Closing Date without the application of any eligibility or waiting period for
coverage.

          (g) NaviSite shall provide each Retained Employee credit for eligibility and vesting purposes
for all service of the Retained Employee with the Sellers prior to the Closing Date under any
employees benefit plan or arrangement maintained or established by NaviSite.

ARTICLE VI — CONDITIONS TO CLOSING

     Section 6.1. Conditions to Obligations of the Sellers. The obligations of the Sellers to
consummate the transactions contemplated by this Agreement for the Closing shall be subject to the
satisfaction or waiver, at or prior to the Closing, of each of the following conditions:

          (a) All covenants contained in this Agreement to be complied with by Buyer or Parent on or
before the Closing shall have been complied with in all material respects, and Sellers shall have
received a certificate of each of Buyer and Parent to such effect signed by a duly authorized
officer of Buyer or Parent, as applicable.

          (b) The representations and warranties of Buyer and Parent contained in this Agreement that
are qualified as to materiality, “Material Adverse Effect” or other words of similar effect shall
be true and correct in all respects, and all other representations and warranties of Parent and
Buyer contained in this Agreement shall be true and correct in all material respects (giving effect
only to the materiality qualifications or material adverse effect qualifications set forth
therein), in each case as of the date of this Agreement and as of the time of Closing, with the
same force and effect as though such representations and warranties had been made on and as of time
of Closing (except for representations and warranties that are made as of a specified date or time,
which shall be true and correct only as of such specific date or time) and Sellers shall have
received a certificate to such effect signed by an authorized officer of Parent.

          (c) No Governmental Authority or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and has the effect of making the
transactions contemplated by this Agreement for the Closing illegal or otherwise restraining or
prohibiting consummation of such transactions.

          (d) There shall be no pending action, suit, investigation or other proceeding before any court
or by any governmental body or other authority, whether brought against any of Sellers or NaviSite,
seeking to prevent the consummation of the transactions contemplated by this Agreement, and no such
litigation shall have been threatened in writing nor shall there be in effect any order restraining
or prohibiting the consummation of the transactions contemplated by

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this Agreement nor any proceedings pending with respect thereto. There shall be no pending or
threatened (in writing) litigation, or asserted or unasserted claims, assessments, or other loss
contingencies, materially affecting the Businesses or any of the Purchased Assets, other than as
disclosed in the Schedules delivered pursuant hereto as of the date of this Agreement.

          (e) This Agreement and the transactions contemplated hereby shall have been approved by the
holders of all of the membership units of each of the Sellers.

          (f) NaviSite shall have delivered to Sellers the NaviSite Deliverables set forth in Section
6.3(b).

     Section 6.2. Conditions to Obligations of NaviSite. The obligations of NaviSite to
consummate the transactions contemplated by this Agreement for the Closing shall be subject to the
satisfaction or waiver, at or prior to the Closing, of each of the following conditions:

          (a) All covenants contained in this Agreement to be complied with by Sellers on or before the
Closing shall have been complied with in all material respects, and NaviSite shall have received a
certificate of each of the Sellers to such effect signed by a duly authorized officer of each of
the Sellers.

          (b) The representations and warranties of Sellers contained in this Agreement that are
qualified as to materiality, “Material Adverse Effect” or other words of similar effect shall be
true and correct in all respects, and all other representations and warranties of the Sellers
contained in this Agreement shall be true and correct in all material respects (giving effect only
to the materiality qualifications or material adverse effect qualifications set forth therein), in
each case as of the date of this Agreement and as of the time of Closing, with the same force and
effect as though such representations and warranties had been made on and as of time of Closing
(except for representations and warranties that are made as of a specified date or time, which
shall be true and correct only as of such specific date or time) and NaviSite shall have received a
certificate to such effect signed by an authorized officers of each Seller.

          (c) No Governmental Authority or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect of making the
transactions contemplated by this Agreement for the Closing illegal or otherwise restraining or
prohibiting consummation of such transactions.

          (d) There shall be no pending action, suit, investigation or other proceeding before any court
or by any governmental body or other authority, whether brought against any of Sellers or NaviSite,
seeking to prevent the consummation of the transactions contemplated by this Agreement, and no such
litigation shall have been threatened in writing nor shall there be in effect any order restraining
or prohibiting the consummation of the transactions contemplated by this Agreement nor any
proceedings pending with respect thereto. There shall be no pending or threatened (in writing)
litigation, or asserted or unasserted claims, assessments, or other loss contingencies, materially
affecting the Businesses or any of the Purchased Assets, other than as disclosed in the Schedules
delivered pursuant hereto as of the date of this Agreement.

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          (e) Sellers shall have delivered to NaviSite the Sellers Deliverables set forth in Section
6.3(a).

     Section 6.3. Deliveries at Closing.

          (a) At the Closing, Sellers will deliver or cause to be delivered to NaviSite the following
(collectively, the “Sellers Deliverables”):

                    (i) executed copies of all consents, approvals and authorizations of any Governmental
Authority set forth in Schedule 2.5;

                    (ii) executed copies of all other consents set forth in Schedule 6.3(a) (the
“Necessary Consents”);

                    (iii) the Escrow Agreement, executed by Sellers and the Escrow Agent;

                    (iv) a Non-Competition and Non-Solicitation Agreement in the form of Exhibit B hereto
(the “Non-Competition Agreement”), executed by Sellers and the other parties thereto;

                    (v) a Sublease Agreement in the form of Exhibit C hereto (the “Sublease”), executed by
Sellers;

                    (vi) an assignment and assumption agreement in the form of Exhibit D hereto (the
“Assignment and Assumption Agreement”), executed by Sellers;

                    (vii) any assignment documents necessary to transfer ownership of the Intellectual Property
Assets to Buyer (the “IP Assignment Documents”), executed by Sellers;

                    (viii) a bill of sale in the form of Exhibit E hereto (the “Bill of Sale” and
collectively with the Escrow Agreement, Non-Competition Agreement, Sublease, IP Assignment
Documents and Assignment and Assumption Agreement, the “Ancillary Agreements”), executed by
Sellers;

                    (ix) certificates of good standing of each of the Sellers, dated as of a recent date, from the
Maryland State Department of Assessments and Taxation, and similar certificates of the appropriate
state agencies of each other state in which Sellers are qualified to do business;

                    (x) certificates signed by the Secretary of each Seller and dated as of the Closing Date, as
to the incumbency of each officer of each Seller executing this Agreement and the other agreements
being delivered pursuant hereto, and certifying the effectiveness, accuracy and completeness of the
copies attached to such certificate of resolutions duly adopted by each Seller’s board and its
holders of membership interests, authorizing the execution and delivery of this Agreement and the
Ancillary Agreements by each Seller, and the performance by each Seller of its respective
obligations hereunder and thereunder and the consummation of the transactions contemplated hereby
and thereby;

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                    (xi) UCC Termination Statements and such other releases as NaviSite may reasonably request,
duly completed and executed by each person having any security interest, lien, claim or other
encumbrances or adverse interests in or on any of the Purchased Assets, in order to evidence the
termination thereof;

                    (xii) the transition services agreement (the “Transition Services Agreement”) executed by the
Sellers, in the form of Exhibit F hereto;

                    (xiii) each of the certificates, instruments and other documents required to be delivered to
NaviSite at the Closing pursuant to Section 6.2 hereof;

                    (xiv) in electronic form to a computer(s) or server(s) designated by NaviSite, by remote
telecommunication, all Intangible Property Rights; and

                    (xv) such other documents and instruments as NaviSite or NaviSite’s counsel may reasonably
request to better evidence or effectuate the transactions contemplated hereby.

          (b) At the Closing, Buyer or Parent, as applicable, will deliver or cause to be delivered to
Sellers the following (collectively, the “NaviSite Deliverables”):

                    (i) evidence of deposit with the Escrow Agent of the Escrowed Funds;

                    (ii) the Closing Payment;

                    (iii) executed copies of all consents, approvals and authorizations of any Governmental
Authority set forth in Schedule 3.3;

                    (iv) the Escrow Agreement, executed by NaviSite and the Escrow Agent;

                    (v) the Bill of Sale, executed by NaviSite;

                    (vi) the Assignment and Assumption Agreement, executed by NaviSite;

                    (vii) the Sublease, executed by NaviSite;

                    (viii) the Transition Services Agreement, executed by NaviSite;

                    (ix) certificates of good standing of each of Buyer and the Parent, dated as of a recent date,
from the Secretary of State of the State of Delaware;

                    (x) certificates signed by the Secretary of each of Buyer and Patent dated as of the Closing
Date, as to the incumbency of each officer of each Buyer and Parent executing this Agreement and
the other agreements being delivered pursuant hereto, and certifying the effectiveness, accuracy
and completeness of the copies attached to such certificate of resolutions duly adopted by each
Buyer’s and Parent’s board, authorizing the execution and

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delivery of this Agreement and the Ancillary Agreements by each of Buyer and Parent, and the
performance by each of Buyer and Parent of its respective obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby;

                    (xi) each of the certificates and other documents required to be delivered at the Closing
pursuant to Section 6.1 hereof; and

                    (xii) such other documents and instruments as Sellers or Sellers’ counsel may reasonably
request to better evidence or effectuate the transactions contemplated hereby.

ARTICLE VII — SURVIVAL; INDEMNIFICATION

     Section 7.1. Survival. The representations, warranties, covenants and agreements contained
in this Agreement shall survive the Closing until six months after the Closing Date (the “Cut-Off
Date”). No claim for indemnification hereunder may be brought after the Cut-Off Date, except for
claims (a) of which the Sellers have been notified in writing with reasonable specificity by
NaviSite prior to the Cut-Off Date, and (b) of which NaviSite has been notified in writing with
reasonable specificity by the Sellers prior to the Cut-Off Date.

     Section 7.2. Indemnification of NaviSite. Subject to Section 7.1, NaviSite shall be
indemnified and held harmless by the Sellers against and in respect of any and all damages, claims,
demands, losses, expenses, costs, obligations and liabilities, including without limitation
reasonable attorneys’ fees (collectively, “Losses”), which arise or result from (i) any breach of
any of the representations or warranties contained in Article II, (ii) the failure of the Sellers
to perform any of their covenants or agreements contained herein, or (iii) the Excluded
Liabilities. Notwithstanding the foregoing,

          (a) there shall be no indemnification of NaviSite until the aggregate amount of Losses
incurred by NaviSite exceeds Fifty Thousand Dollars ($50,000) (the “Threshold”), at which time the
amount of Losses incurred in excess of the Threshold shall be subject to indemnification hereunder;

          (b) there shall be no indemnification payments hereunder that exceed in the aggregate ten
percent (10%) of the Purchase Price (the “Indemnification Cap”);

          (c) there shall be no indemnification of NaviSite with respect to Losses arising out of
breaches of the representations or warranties contained in Article II to the extent that the
Company has made a corresponding reserve for such Losses on the June Balance Sheet, provided that
such reserves are specifically identified on such balance sheet; and

          (d) there shall be no indemnification of NaviSite for punitive damages, speculative damages,
special damages, incidental damages or lost profits.

          In determining the foregoing thresholds and in otherwise determining the amount of any Losses for
which NaviSite is entitled to assert a claim for indemnification hereunder, the amount of any such
Losses shall be determined after deducting therefrom the amount of any insurance proceeds and other
third party recoveries received by NaviSite in respect of such Losses (which recoveries

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NaviSite shall use commercially reasonable efforts to obtain). If an indemnification disbursement
is received by NaviSite pursuant to this Article VII, and NaviSite later receives insurance
proceeds or other third party recoveries in respect of the related Losses, NaviSite shall
immediately pay to the Sellers a sum equal to the lesser of (i) the actual amount of such insurance
proceeds or other third party recoveries or (ii) the actual amount of the indemnification
disbursement previously made with respect to such Losses.

     Section 7.3. Indemnification of Sellers. Subject to Section 7.1, Sellers shall be
indemnified and held harmless by NaviSite against and in respect of any and all Losses, which arise
or result from (i) any breach of any of the representations or warranties contained in Article III,
(ii) the failure of NaviSite to perform any of their covenants or agreements contained herein, or
(iii) any Losses arising from, out of, or in respect of NaviSite’s operation of the Businesses from
and after the Closing, including (without limitation) Losses arising from, out of, or in respect of
the Assumed Obligations. Notwithstanding the foregoing,

          (a) there shall be no indemnification of Sellers until the aggregate amount of Losses incurred
by the Sellers exceeds Fifty Thousand Dollars ($50,000), at which time the amount of Losses
incurred in excess of the Threshold shall be subject to indemnification hereunder;

          (b) there shall be no indemnification payments hereunder that exceed in the aggregate ten
percent (10%) of the Purchase Price;

          (c) there shall be no indemnification of Sellers for punitive damages, speculative damages,
special damages, incidental damages or lost profits.

          If an indemnification disbursement is received by Sellers pursuant to this Article VII, and Sellers
later received insurance proceeds or other third party recoveries in respect of the related Losses,
Sellers shall immediately pay to NaviSite a sum equal to the lesser of (i) the actual amount of
such insurance proceeds or other third party recoveries or (ii) the actual amount of the
indemnification disbursement previously made with respect to such Losses.

     Section 7.4. Procedure for Indemnification of NaviSite-Two Party Claims.

          (a) In the event NaviSite should have a claim against Sellers hereunder that does not involve
a claim or demand being asserted against or sought to be collected from it by a third party,
NaviSite shall deliver to the Escrow Agent and Sellers a certificate signed by any officer of
NaviSite (a “NaviSite Certificate”):

                    (i) stating that Losses exist in an aggregate amount greater than the Threshold for claims
against the Escrow Account (as defined in the Escrow Agreement), and

                    (ii) specifying in reasonable detail the individual items included in the amount of Losses in
such claim, the date each such item, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item is related.

          (b) In the event that the Sellers disagree with the claim for indemnification made by NaviSite
in the NaviSite Certificate, the Sellers shall have thirty (30) days after receipt

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of such NaviSite Certificate by the Sellers to deliver a certificate signed by an officer of a
Seller to the Escrow Agent and to NaviSite that specifies in reasonable detail the nature of such
objection and the basis therefore (the “Written Escrow Objection”).

          (c) In the event that Sellers deliver the Written Escrow Objection to the Escrow Agent and
NaviSite pursuant to Section 7.4(b), NaviSite shall have twenty (20) days after receipt of the
Written Escrow Objection by NaviSite to respond in a written statement addressed to the Escrow
Agent and the Sellers. If after such twenty-day period there remains a dispute as to any claims,
the Sellers and NaviSite shall attempt in good faith for twenty (20) days to agree upon the rights
of the respective parties with respect to each of such claims. If the Sellers and NaviSite should
so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties
and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and shall make any disbursements agreed upon in such memorandum from the Escrowed Funds
to NaviSite as contemplated by Section 7.4(e).

          (d) If no agreement regarding the rights of the respective parties can be reached after good
faith negotiation, either the Sellers or NaviSite may seek to resolve such dispute or claim in a
court of competent jurisdiction or seek other legal or equitable resolution in accordance with this
Agreement. Notwithstanding the foregoing, either the Sellers or NaviSite may at any time apply to
any court of competent jurisdiction for injunctive relief in connection with a claim for
indemnification or otherwise to prevent irreparable harm.

          (e) As soon as practicable following the earlier of: (i) receipt of written authorization
from the Sellers and NaviSite with respect to the disposition of such claim or receipt of written
notice of a final decision or order of a court of competent jurisdiction with respect to such claim
(in either case, a “Distribution Directive”); or (ii) the close of business on the thirtieth (30th)
day following receipt by the Sellers and the Escrow Agent of a NaviSite Certificate to which the
Sellers have not delivered a Written Escrow Objection in accordance with this Section 7.4, the
Escrow Agent shall disburse to NaviSite from the Escrowed Funds an amount equal to: (A) in the
event of its receipt of a Distribution Directive, the amount of the Losses stipulated in the
Distribution Directive or, (B) in the event that a Written Escrow Objection is not received by the
close of business on the thirtieth (30th) day following the Escrow Agent’s receipt of a NaviSite
Certificate, the amount of the Losses set forth in the NaviSite Certificate.

     Section 7.5. Procedure for Indemnification of Sellers — Two Party Claims.

          (a) In the event either Seller should have a claim against NaviSite that does not involve a
claim or demand being asserted against or sought to be collected from it by a third party, Sellers
shall deliver to NaviSite a certificate signed by any officer of a Seller (a “Seller Certificate”):

               (i) stating that Losses exist in an aggregate amount greater than the Threshold, and

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               (ii) specifying in reasonable detail the individual items included in the amount of Losses in
such claim, the date each such item, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item is related.

          (b) In the event that NaviSite disagrees with the claim for indemnification made by Sellers in
the Seller Certificate, NaviSite shall have thirty (30) days after receipt of such Seller
Certificate by NaviSite to deliver a certificate signed by an officer of NaviSite to the Sellers
that specifies in reasonable detail the nature of such objection and the basis therefore (the
“Written Objection”).

          (c) In the event that NaviSite delivers the Written Objection to the Sellers pursuant to
Section 7.5(b), Sellers shall have twenty (20) days after receipt of the Written Objection by the
Sellers to respond in a written statement addressed to NaviSite. If after such twenty-day (20)
period there remains a dispute as to any claims, the Sellers and NaviSite shall attempt in good
faith for twenty (20) days to agree upon the rights of the respective parties with respect to each
of such claims. If the Sellers and NaviSite should so agree, NaviSite shall pay such agreed-upon
amount to Sellers within thirty (30) days after such agreement. If NaviSite does not deliver a
Written Objection to the Sellers in accordance with Section 7.5(b) within thirty (30) days after
receipt of the Seller Certificate, NaviSite shall pay the amount of the Losses set forth in the
Seller Certificate to Sellers within forty-five (45) days after receipt of such Seller Certificate.

          (d) If no agreement regarding the rights of the respective parties can be reached after good
faith negotiation, either the Sellers or NaviSite may seek to resolve such dispute or claim in a
court of competent jurisdiction or seek other legal or equitable resolution in accordance with this
Agreement. Notwithstanding the foregoing, either the Sellers or NaviSite may at any time apply to
any court of competent jurisdiction for injunctive relief in connection with a claim for
indemnification or otherwise to prevent irreparable harm.

     Section 7.6. Method of Asserting Third-Party Claims.

          (a) Subject to the terms of this Article VII, in the event any claim or demand for which
Sellers would be liable to NaviSite is asserted against or sought to be collected from NaviSite by
a third party, NaviSite shall promptly notify Sellers of such claim or demand in writing,
specifying the nature and estimated amount of the claim (which estimate shall not be conclusive of
the final amount of the claim and demand) (the “Claim Notice”). Sellers shall have twenty (20)
days from the actual receipt of the Claim Notice (the “Notice Period”) to notify NaviSite in
writing, (a) whether or not it disputes its liability to NaviSite hereunder with respect to that
claim or demand and (b) notwithstanding any dispute, whether or not it desires, at its sole cost
and expense, to defend NaviSite against that claim or demand.

          (b) If Sellers dispute their liability with respect to the claim or demand or the amount
thereof (whether or not Sellers desire to defend NaviSite against claim or demand as provided
below), any dispute shall be resolved in accordance with Section 8.11 unless satisfied by Sellers.
Pending the resolution of any dispute by Sellers of their liability with respect to any claim or
demand, that claim or demand shall not be settled without the prior written consent of NaviSite,
which consent shall not be unreasonably withheld, delayed or conditioned.

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          (c) In the event that Sellers notify NaviSite within the Notice Period that they desire to
defend NaviSite against the claim or demand then, except as hereinafter provided, Sellers shall
have the right to defend NaviSite by appropriate proceedings; provided, however, Sellers shall not,
without the prior written consent of NaviSite, consent to the entry of any judgment against
NaviSite or enter into any settlement or compromise which (i) does not include, as an unconditional
term, the giving by the claimant or plaintiff to NaviSite of a release, in form and substance
satisfactory to NaviSite, from all liability in respect of such claim or litigation, or (ii)
requires more than a monetary payment for which NaviSite is fully indemnified by Sellers, or (iii)
contains an admission of wrongdoing on the part of NaviSite or has any other adverse effect on any
other claims that may be made against NaviSite. If NaviSite desires to participate in, but not
control, any defense or settlement with counsel other than the counsel chosen by Sellers to
represent both Sellers and NaviSite in connection with such claim or demand, it may do so at its
sole cost and expense.

          (d) If any claim or demand or the litigation or resolution of any claim or demand involves an
issue or matter which would have an adverse effect on the business, operations, assets or
properties of NaviSite, then NaviSite shall have the right to control the defense or settlement of
that claim or demand and its reasonable costs and expenses (including expenses of counsel to
NaviSite) shall be included as part of the indemnification obligation of Sellers, if any; provided,
however, that NaviSite shall not, without the prior written consent of the Sellers, consent to the
entry of any judgment against the Sellers or enter into any settlement or compromise which (i) does
not include, as an unconditional term, the giving by the claimant or plaintiff to the Sellers of a
release, in form and substance satisfactory to the Sellers, from all liability (other than the
agreed to liability of Sellers pursuant to this Section 7.6) in respect of such claim or
litigation, or (ii) requires a monetary payment from Sellers (or, would subject the Sellers to
claims from NaviSite for indemnification under this Article VII as the result of any
monetary payment made by NaviSite upon consent to the entry of any judgment against the Sellers or
as part of any settlement or compromise), or (iii) contains an admission of wrongdoing on the part
of the Sellers or has any other adverse effect on any other claims that may be made against the
Sellers. If NaviSite should elect to exercise such right, and Sellers desire to participate in,
but not control, any defense or settlement with counsel other than counsel chosen by NaviSite in
connection with such claim or demand, it may do so at its sole cost and expense.

          (e) All claims for indemnification by Sellers against NaviSite relating to third party claims
under this Agreement shall be asserted and resolved under the procedures set forth above,
substituting in the appropriate place “NaviSite” for “Sellers” and “Sellers” for “NaviSite.”

     Section 7.7. Remedies Exclusive. The remedies provided in this Article VII shall be the
exclusive remedies of NaviSite and Sellers after the Closing in connection with the transactions
contemplated by this Agreement, including without limitation any breach or non-performance of any
representation or warranty contained herein. Neither NaviSite nor Sellers may commence any suit,
action or proceeding against the other party with respect to the subject matter of this Agreement,
whether in contract, tort or otherwise, except to enforce NaviSite’s or Sellers express rights
under this Article VII, or by Sellers to recover or release Escrowed Funds, or by either party to
collect a working capital adjustment pursuant to Section 1.5 from the Escrowed Funds (in the case
of a Reduction Amount due to Parent) or the other party (in the case of an Increase Amount due to
Sellers). After the Closing, the Escrow Account

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shall be NaviSite’s sole source for satisfaction of the indemnification obligations under this
Article VII. Notwithstanding the foregoing, either party may seek to specifically enforce any
covenant contained herein.

ARTICLE VIII — GENERAL PROVISIONS

     Section 8.1. Notices. All notices, requests, claims, demands and other communications
under this Agreement will be in writing and will be deemed given if delivered personally, or the
next business day if sent by overnight courier (providing proof of delivery), or on the same
business day if sent via facsimile on a business day during normal business hours to the parties at
the following addresses (or at such other address for a party as specified by like notice):

If to the Sellers, to:

Alabanza LLC and Hosting Ventures, LLC

c/o Alabanza Corporation

10 E. Baltimore Street

Suite 1000

Baltimore, MD 21202

Attn: Thomas V. Cunningham

Facsimile: (410) 779-1501

with a copy to:

Saul Ewing LLP

500 East Pratt Street

Suite 800

Baltimore, Maryland 21202

Attn: Eric G. Orlinsky, Esq.

Telephone: (410) 332-8687

Fax: (410) 332-8688

If to NaviSite, to:

NaviSite, Inc.

400 Minuteman Road

Andover, MA 01810

Attn: Monique Cormier, Esq.

Facsimile: (978) 946-7803

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with a copy to:

BRL Law Group LLC

31 St. James Avenue, Suite 850

Boston, MA 02116

Attn: Thomas B. Rosedale, Esq.

Facsimile: (617) 399-6930

     Section 8.2. Fees and Expenses. Except as provided otherwise herein, each of NaviSite, on
the one hand, and Sellers, prior to Closing, on the other hand, shall bear its own expenses
(including without limitation expenses of legal counsel, accountants and other advisors) in
connection with the negotiation and the consummation of the transactions contemplated by this
Agreement. If either party files suit to enforce its rights under this Agreement, the
substantially prevailing party shall be entitled to recover from the other party all expenses
incurred by it in preparing for and in trying the case, including, but not limited to,
investigative costs, court costs and reasonable attorneys’ fees (including expenses incurred to
collect those expenses).

     Section 8.3. Certain Definitions. For purposes of this Agreement:

          (a) An “Affiliate” shall mean any affiliate, as defined in Rule 12b-2 under the Exchange Act;

          (b) “Effect” means any change, event, violation, inaccuracy, circumstance or effect;

          (c) “Material Adverse Effect” means any Effect that (i) is materially adverse to the business,
assets (including intangible assets), capitalization, financial condition or results of operations
of a party (taking the Sellers, as a whole), together with its subsidiaries taken as a whole or
(ii) materially impedes such party’s authority to consummate the transactions contemplated hereby
in accordance with the terms hereof and applicable Laws, provided that in no event shall any of the
following, alone or in combination, be deemed to constitute, nor shall any of the following be
taken into account in determining whether there has been or shall be, a Material Adverse Effect:
(A) any Effect directly related to the announcement or pendency of the transactions contemplated
hereby, including, but not limited to, a decline in Parent’s stock price; (B) any Effect that
results from changes affecting any of the industries in which such party operates generally or the
United States economy generally which does not have a disproportionate effect on such party; (C)
any Effect that results from changes affecting general worldwide economic or capital market
conditions which does not have a disproportionate effect on such party; or (D) changes in Laws or
regulations or the interpretation thereof;

          (d) “Person” means an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other entity; and

     Section 8.4. Interpretation. When a reference is made in this Agreement to an Article,
Section, Schedule or Exhibit, such reference will be to an Article or Section of, or a Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table of contents and

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headings contained in this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they will be deemed to be followed by the words “without
limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in
this Agreement will refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings ascribed to them
herein. The definitions contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or in any agreement
or instrument that is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. References to a Person
are also to its permitted successors and assigns.

     Section 8.5. Counterparts and Facsimile Signatures. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same agreement and will become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement may be executed by facsimile signature.

     Section 8.6. Amendments and Waivers. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except by a writing duly
and validly executed by NaviSite and the Sellers or in the case of a waiver, the party waiving
compliance. No waiver by any party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence.

     Section 8.7. Entire Agreement; Severability. This Agreement (including the exhibits,
schedules, documents and instruments referred to herein) and the Confidentiality Agreement
constitute the entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this Agreement. If any
term, condition or other provision of this Agreement is found to be invalid, illegal or incapable
of being enforced by virtue of any rule of law, public policy or court determination, all other
terms, conditions and provisions of this Agreement shall nevertheless remain in full force and
effect. If the final judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so modified.

     Section 8.8. Third Party Beneficiaries. Except as expressly provided in this Agreement,
each party hereto intends that this Agreement shall not benefit or create any right or

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cause of action in or on behalf of any Person other than the parties hereto and their respective
successors and permitted assigns.

     Section 8.9. Governing Law. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Delaware regardless of the laws that might
otherwise govern under applicable principles of conflict of laws.

     Section 8.10. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned, in whole or in part, by operation of law or
otherwise by the parties hereto without the prior written consent of the other party; provided that
the Sellers may assign their rights under this Agreement to their members in connection with a
merger or dissolution of the Sellers; and provided further that Buyer may collaterally assign this
Agreement or a portion thereof to lenders in connection with the financing of the transactions
contemplated hereby (or any amendments, supplements, restatements or refinancings thereof). Any
assignment in violation of the preceding sentence will be void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties
and their respective successors and assigns

     Section 8.11. Consent to Jurisdiction. Each of the parties consent to the jurisdiction of
all state and federal courts sitting in the State of Delaware, and the venue of the U.S. District
Court for Delaware and all actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in a state or federal court in Delaware.

     Section 8.12. Mutual Drafting. The parties hereto are sophisticated and have been
represented by attorneys throughout the transactions contemplated hereby who have carefully
negotiated the provisions hereof. As a consequence, the parties do not intend that the
presumptions of Laws relating to the interpretation of contracts against the drafter of any
particular clause should be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.

     Section 8.13. Remedies. It is specifically understood and agreed that any breach of the
provisions of this Agreement or any other agreement executed and delivered pursuant to this
Agreement by any party hereto will result in irreparable injury to the other parties hereto, that
the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any
other remedies which they may have, such other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by Law).

     Section 8.14. Bulk Sales Law. NaviSite waives compliance by Sellers with the provisions of
any applicable bulk sales, fraudulent conveyance or other Law for the protection of creditors in
connection with the transactions contemplated hereby.

<Remainder of page intentionally left blank>

-45-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first written above.

	 	 	 	 	 	 	 
	 	 	SELLERS:

ALABANZA, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ Thomas V. Cunningham
 

Name: Thomas V. Cunningham
	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HOSTING VENTURES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ Thomas V. Cunningham	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Thomas V. Cunningham	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BUYER:

NAVI ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ James W. Pluntze	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: James W. Pluntze	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PARENT:
NAVISITE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ James W. Pluntze	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: James W. Pluntze	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 

Asset Purchase Agreement Signature Pageexv10w2

 

Exhibit 10.2

STOCK PURCHASE AGREEMENT

by and among

JUPITER HOSTING, INC.,

THE STOCKHOLDERS LISTED ON

SCHEDULE I ATTACHED HERETO,

and

NAVISITE, INC.

August 10, 2007

 

 

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (the “Agreement”) is made as of the 10th day of August, 2007 by
and among (i) NaviSite, Inc., a Delaware corporation (“Buyer”); (ii) Jupiter Hosting, Inc., a
Delaware corporation (the “Company”); and (iii) the stockholders of the Company listed on
Schedule I attached hereto (individually, a “Stockholder” and collectively, the
“Stockholders”), who own all of the issued and outstanding capital stock of the Company.

     WHEREAS, each of the Stockholders owns the number of issued and outstanding shares
(collectively, the “Shares”) of the common stock, $0.01 par value per share (the “Common Stock”),
of the Company set forth opposite his name on Schedule I attached hereto, which Shares in
the aggregate represent all of the issued and outstanding shares of capital stock of the Company;
and

     WHEREAS, the Buyer desires to purchase, and the Stockholders desire to sell, the Shares for
the consideration set forth below, subject to the terms and conditions of this Agreement.

     NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I. PURCHASE AND SALE OF THE SHARES

     1.01 Purchase of the Shares from the Stockholders. Subject to and upon the terms and
conditions of this Agreement, at the closing of the transactions contemplated by this Agreement
(the “Closing”), each Stockholder shall sell, transfer, convey, assign and deliver to the Buyer,
and the Buyer shall purchase, acquire and accept from each Stockholder, all the Shares owned by
such Stockholder, as set forth opposite such Stockholder’s name on Schedule I attached
hereto. At the Closing, each Stockholder shall deliver to the Buyer certificates evidencing the
Shares owned by such Stockholder duly endorsed in blank or with stock powers duly executed by such
Stockholder.

     1.02 Further Assurances. At any time and from time to time after the Closing, at the
Buyer’s request and without further consideration, each of the Stockholders shall promptly execute
and deliver such instruments of sale, transfer, conveyance, assignment and confirmation, and take
all such other action as the Buyer may reasonably request, necessary to transfer, convey and assign
to the Buyer, and to confirm the Buyer’s title to, all of the Shares owned by such Stockholder.

     1.03 Base Purchase Price for the Shares.

1

 

          (a) The purchase price to be paid by the Buyer for the Shares shall be Eight Million Six
Hundred Ninety Eight Thousand ($8,698,000) (the “Purchase Price”), subject to adjustment pursuant
to Article VII hereof. The Purchase Price shall be payable in the manner described in paragraph
(b) of this Section 1.03.

          (b) At the Closing, the Buyer shall deliver:

               (i) the sum of Seven Million Nine Hundred Seventy Eight Thousand ($7,978,000) (the “Closing
Payment”) in cash, by wire transfer of immediately available funds as set forth on Schedule
1.03 attached hereto (which Schedule 1.03 shall set forth the payment of any amounts
due and payable to any party disclosed on Schedule 3.18 hereto, which payments to such
brokers or finders shall be the sole responsibility and obligation of the Stockholders and not the
Company).

               (ii) to U.S. Bank National Association, as escrow agent (the “Escrow Agent”), the sum of Seven
Hundred Twenty Thousand Dollars ($720,000) in cash (the “Escrowed Funds”), by wire transfer of
immediately available funds to an account designated by the Escrow Agent, to be held in an
interest-bearing escrow account (the “Escrow Account”) pursuant to the terms of the Escrow
Agreement attached hereto as Exhibit A (the “Escrow Agreement”), to satisfy all or part of
any claims for indemnity pursuant to Article VII hereof.

     1.04 Escrow. The Escrowed Funds shall be held by the Escrow Agent pursuant to the
terms and conditions of the Escrow Agreement for the purpose of satisfying all or part of any
claims for indemnity pursuant to Article VII hereof. Unless disbursed in accordance with Article
VII, the Escrowed Funds shall be held by the Escrow Agent until 5:00 p.m., Boston time, on that
date which is the nine-month anniversary of the Closing Date (as defined in Section 1.07) and shall
be maintained and used strictly in accordance with the terms of this Agreement and the Escrow
Agreement. At the nine-month anniversary of the Closing Date, the Escrowed Funds, with such
adjustments as set forth in Article VII, shall be disbursed to the Stockholders’ Representative in
accordance with the Escrow Agreement, for distribution to the Stockholders in proportion to their
respective interests as set forth on Schedule I hereto. Notwithstanding the foregoing, in
the event Buyer has delivered written notice to the Stockholders’ Representative of an
indemnification claim as set forth in Article VII and such claim has not been resolved in
accordance with Article VII prior to such anniversary, the amount necessary to satisfy such dispute
or claim shall not be disbursed and shall continue to be held by the Escrow Agent pursuant to the
Escrow Agreement until such dispute or claim is resolved as provided in Article VII.

          1.05 Intentionally Left Blank.

     1.06 Stockholders’ Representative.

          (a) In order to efficiently administer the defense and/or settlement of any claims for which
the Stockholders may be required to indemnify the Buyer pursuant to Article

2

 

VII hereof, the Stockholders hereby designate Joseph Lackey as their representative (the
“Stockholders’ Representative”).

          (b) The Stockholders hereby authorize the Stockholders’ Representative (i) to take all action
necessary in connection with the defense and/or settlement of any claims for which the Stockholders
may be required to indemnify the Buyer pursuant to Article VII hereof, (ii) to give and receive all
notices required to be given under this Agreement, and (iii) to take any and all additional action
as is contemplated to be taken by or on behalf of the Stockholders by the terms of this Agreement.

          (c) In the event that the Stockholders’ Representative dies, becomes unable to perform his
responsibilities hereunder or resigns from such position, Stockholders holding, prior to the
Closing, a majority of the Shares as set forth on Schedule I attached hereto shall select
another representative to fill such vacancy and such substituted representative shall be deemed to
be the Stockholders’ Representative for all purposes of this Agreement.

          (d) All decisions and actions by the Stockholders’ Representative, including, without
limitation, any agreement between the Stockholders’ Representative and the Buyer relating to any
adjustments to the Purchase Price, or the defense or settlement of any claims for which the
Stockholders may be required to indemnify the Buyer pursuant to Article VII hereof, shall be
binding upon all of the Stockholders, and no Stockholder shall have the right to object, dissent,
protest or otherwise contest the same.

          (e) By their execution of this Agreement, the Stockholders agree that:

               (i) the Buyer shall be able to rely conclusively on the instructions and decisions of the
Stockholders’ Representative as to the determination of any adjustments to the Purchase Price, or
the settlement of any claims for indemnification by the Buyer or the Company pursuant to Article
VII hereof or any other actions required to be taken by the Stockholders’ Representative hereunder,
and no party hereunder shall have any cause of action against the Buyer for any action taken by the
Buyer in reliance upon the instructions or decisions of the Stockholders’ Representative;

               (ii) all actions, decisions and instructions of the Stockholders’ Representative shall be
conclusive and binding upon all of the Stockholders and no Stockholder shall have any cause of
action against the Stockholders’ Representative for any action taken, decision made or instruction
given by the Stockholders’ Representative under this Agreement, except for fraud or willful breach
of this Agreement by the Stockholders’ Representative;

               (iii) the provisions of this Section 1.06 are independent and severable, are irrevocable and
coupled with an interest and shall be enforceable notwithstanding any rights or remedies that any
Stockholder may have in connection with the transactions contemplated by this Agreement;

3

 

               (iv) remedies available at law for any breach of the provisions of this Section 1.06 are
inadequate; therefore, the Buyer and the Company shall be entitled to temporary
and permanent injunctive relief without the necessity of proving damages if either the Buyer
or the Company brings an action to enforce the provisions of this Section 1.06; and

               (v) the provisions of this Section 1.06 shall be binding upon the executors, heirs, legal
representatives and successors of each Stockholder, and any references in this Agreement to a
Stockholder or the Stockholders shall mean and include the successors to the Stockholders’ rights
hereunder, whether pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.

          (f) All fees and expenses incurred by the Stockholders’ Representative shall be paid by the
Stockholders in proportion to their ownership of Shares as set forth on Schedule I attached
hereto.

     1.07 Closing. The closing (the “Closing”) of the purchase and sale of the Shares and
the other transactions contemplated by this Agreement shall be held at the offices of BRL Law Group
LLC, 31 St. James Avenue, Suite 850, Boston, Massachusetts, on the date hereof or at such other
place, time or date as may be mutually agreed upon in writing by the parties. The date on which the
Closing actually occurs is sometimes referred to herein as the “Closing Date.” The transfer of the
Shares by the Stockholders to the Buyer shall be deemed to occur at 2:00 p.m., Boston Time, on the
Closing Date.

ARTICLE II. REPRESENTATIONS OF THE STOCKHOLDERS 

REGARDING THE SHARES

     2.01 Each Stockholder, jointly and severally, represents and warrants to the Buyer as of the
date hereof as follows:

          (a) Such Stockholder has good and marketable title to the Shares which are to be transferred
to the Buyer by such Stockholder pursuant hereto, free and clear of any and all Encumbrances.
Schedule I attached hereto sets forth a true and correct description of all Shares owned by
such Stockholder.

          (b) Such Stockholder has the right, power and authority to enter into this Agreement and to
transfer, convey and sell to the Buyer at the Closing the Shares to be sold by such Stockholder
hereunder and, upon consummation of the purchase contemplated hereby, such Stockholder will convey
to the Buyer good and marketable title to such Shares, free and clear of all Encumbrances.

          (c) Such Stockholder is not a party to, subject to or bound by any agreement or any judgment,
order, writ, prohibition, injunction or decree of any court or other governmental body which would
prevent the execution or delivery of this Agreement by such Stockholder or

4

 

the transfer, conveyance and sale of the Shares to be sold by such Stockholder to the Buyer pursuant to the terms hereof.

          (d) Except as set forth on Schedule 3.18 hereto, no broker or finder has acted for
such Stockholder in connection with this agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder’s fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by or on behalf of
such Stockholder.

ARTICLE III. REPRESENTATIONS OF THE COMPANY REGARDING THE COMPANY

     The Company Disclosure Schedule shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Article III. The disclosures
in any section or subsection of the Company Disclosure Schedule shall qualify other sections and
subsections in this Article III to the extent it is reasonably apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and subsections. Except as
set forth in the Company Disclosure Schedule attached hereto and delivered by the Company, the
Company represents and warrants to the Buyer as of the date hereof as follows:

     3.01 Existence; Good Standing; Authority.

          (a) The Company is a corporation duly formed, validly existing and in good standing under the
laws of the State of Delaware. The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of each other jurisdiction in which the
character or ownership of its properties or in which the transaction or character of its business
makes such qualification necessary, except where the failure to be so licensed or qualified or in
good standing would not, individually or in the aggregate, have a Material Adverse Effect.
Schedule 3.01 hereto sets forth a true, correct and complete list of all foreign
jurisdictions in which the Company is so qualified or licensed and in good standing. The copies of
the certificate of incorporation and bylaws (collectively, the “Organizational Documents”) of the
Company, each as amended to date and in full force and effect, have been provided or made available
to Buyer’s counsel, and are complete and correct, and no amendments thereto are pending. The
Company is not in violation of any provision of its Organizational Documents. The books and
records, minute books, stock record books and other similar records of the Company, all of which
have been delivered or made available to Buyer’s counsel and Buyer, are true, correct and complete.

          (b) The Company has the corporate power and authority to execute and deliver this Agreement
and each agreement, document and instrument to be executed and delivered by or on behalf of the
Company pursuant to this Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder and the consummation of the transactions
contemplated hereby have been

5

 

duly authorized by all requisite corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and the Stockholders
and, assuming the due authorization, execution and delivery of this Agreement by Buyer, this
Agreement constitutes a legal, valid and binding obligation of the Company and the Stockholders,
enforceable against the Company and the Stockholders in accordance with its terms. No other
action on the part of the Company is necessary to authorize the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions contemplated
hereby.

     3.02 Capitalization of the Company. The Company’s authorized capital stock consists
of 15,000,000 shares of Common Stock, $0.01 par value per share, of which 4,100,000 shares are
issued and outstanding on the date hereof and held of record and beneficially by the Stockholders
as set forth on Schedule I. All such issued and outstanding shares of Common Stock have
been and on the Closing Date will be duly and validly issued and are, or will be on such date,
fully paid and non-assessable. There are not, and on the Closing Date there will not be,
outstanding (a) any options, warrants or other rights to purchase from the Company any capital
stock of the Company; (b) any securities convertible into or exchangeable for shares of such stock;
or (c) any other commitments of any kind for the issuance of additional shares of capital stock or
options, warrants or other securities of the Company. No shares of the issued and outstanding
shares of Common Stock are held in the treasury of the Company. The Company has never issued or
granted any stock options to any of its employees, directors or consultants.

     3.03 Subsidiaries.

          (a) Schedule 3.03 attached hereto sets forth;

               (i) the name and percentage ownership by the Company of each corporation, partnership, joint
venture or other entity in which the Company has, directly or indirectly, an equity interest
representing 50% or more of the capital stock thereof or other equity interests therein
(individually, a “Subsidiary” and, collectively, the “Subsidiaries”);

               (ii) the jurisdiction of incorporation, capitalization and ownership of each Subsidiary;

               (iii) the names of the officers and directors of each Subsidiary; and

               (iv) the jurisdictions in which each Subsidiary is qualified or holds licenses to do business
as a foreign corporation.

          (b) Except as set forth in Schedule 3.03, the Company owns of record and beneficially
all of the outstanding shares of capital stock of each of the Subsidiaries free and clear of all
Encumbrances, other than Permitted Liens.

          (c) Each of the Subsidiaries is a corporation duly formed, validly existing and in good
standing under the laws of its state of incorporation. The copies of the Organizational

6

 

Documents of each of the Subsidiaries, each as amended to date and in full force and effect, have been
provided or made available to Buyer’s counsel, and are complete and correct, and no amendments
thereto are pending. Each of the Subsidiaries is not in violation of any provision of its
Organizational Documents. The books and records, minute books, stock record books and
other similar records of each of the Subsidiaries, all of which have been made available to
Buyer’s counsel and Buyer, are true, correct and complete. The Company does not own any capital
stock of or other equity interest in any corporation, partnership or other entity, other than the
Subsidiaries. The shares of capital stock of each Subsidiary as set forth in Schedule 3.03
have been duly and validly issued and are fully paid and non-assessable.

          (d) Except as set forth in Schedule 3.03, none of the Subsidiaries holds shares of its
capital stock in its treasury, and there are not, and on the Closing Date there will not be,
outstanding any (i) options, warrants or other rights with respect to the capital stock of any of
the Subsidiaries, (ii) any securities convertible into or exchangeable for shares of such stock, or
(iii) any other commitments of any kind for the issuance of additional shares of capital stock or
options, warrants or other securities of any of them.

     3.04 No Conflict. Neither the execution and delivery by the Company and the
Stockholders of this Agreement and the other agreements, documents and instruments contemplated
hereby, nor the consummation by the Company and the Stockholders of the transactions in accordance
with the terms hereof and thereof, conflicts with or results in a breach of any provisions of the
Organizational Documents of the Company. Except as set forth on Schedule 3.04 and assuming
the consents, approvals and authorizations contemplated by Sections 3.07 are obtained and
are in full and effect and notices have been duly given, none of the execution, delivery or the
performance by the Company and the Stockholders of this Agreement and the other agreements,
documents and instruments contemplated hereby, nor the consummation by the Company and the
Stockholders of the transactions contemplated hereby: (a) results in the creation or imposition of
any Encumbrance on any of the property held by the Company; (b) violates, or conflicts with, or
results (or will violate, conflict with or result) in a breach of any provision of, or constitutes
a default (or an event which, with or without notice or lapse of time or both, would constitute a
default) or gives rise to any right of termination, cancellation or acceleration, change of control
rights, modification, notification, enhancement of rights of third parties, revocation of grant of
rights or assets, placement into or release from escrow of any assets of the Company or
acceleration of any right or obligation of the Company or a loss of any benefit to which the
Company is entitled under any of the terms, conditions or provisions of any Material Contract; or
(c) violates any order, writ, injunction, decree, statute, law, rule or regulation.

     3.05 Financial Statements.

          (a) The Stockholders have delivered or made available to Buyer the following financial
statements of the Company and the Subsidiaries (collectively, the “Financial Statements”):

7

 

               (i) Audited unconsolidated balance sheet as of December 31, 2005 and audited consolidated
balance sheet as of December 31, 2006, and statements of income and retained earnings and
statements of cash flows for each of the fiscal years then ended; and

               (ii) Unaudited consolidated balance sheet as of June 30, 2007 (the “June Balance Sheet”), and
the related unaudited consolidated statements of income and retained earnings and cash flows for
the month and year-to-date period then ended.

          (b) Subject to the absence of footnotes and normal year-end audit adjustments with respect to
any unaudited Financial Statements which are consistent in nature and amount with adjustments made
in prior years, the Financial Statements have been prepared from, and in accordance with, the
information contained in the books and records of the Company and the Subsidiaries, which have been
regularly kept and maintained in accordance with the Company’s normal and customary practices and
applicable legal and accounting practices and fairly present, in all material respects, the
financial condition of the Company and the Subsidiaries as of the dates thereof and results of
operations and cash flows for the periods referred to therein, and have been prepared in accordance
with GAAP consistently applied throughout all periods indicated.

          (c) As of the date hereof, all liabilities of the Company and the Subsidiaries of a type that
would be required to be shown on the Financial Statements (including the notes thereto, where
applicable) in accordance with GAAP (whether direct, indirect, accrued, absolute, contingent,
asserted, unasserted or otherwise) have been (i) stated or adequately reserved or accrued against
on the June Balance Sheet or the notes thereto, (ii) reflected on Schedule 3.05, or (iii)
incurred after the date of the June Balance Sheet in the ordinary course of business consistent
with past practices.

     3.06 Absence of Certain Changes and Undisclosed Liabilities. Except as set forth on
Schedule 3.06, from the date of the June Balance Sheet to the date of this Agreement, the
Company and its Subsidiaries have operated only in the ordinary course of business consistent with
past practices and there has not been any:

          (a) event, occurrence or development which would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, other than developments generally in the industry in
which the Company and the Subsidiaries operate;

          (b) event or development that would, individually or in the aggregate, reasonably be expected
to prevent or materially delay the performance of this Agreement or any of the Ancillary Agreements
by the Company or the Stockholders;

          (c) exchange in, reclassification, split or subdivision of any of the Company’s authorized or
issued capital stock; grant of any option, right to purchase or similar right regarding the capital
stock of the Company; or purchase, redemption, retirement, or other acquisition by the Company of
any such capital stock; or

8

 

          (d) declaration or payment of any dividend or other distribution or payment in respect of the
capital stock of the Company.

     3.07 Consents and Approvals. Except as set forth on Schedule 3.07, the
execution, delivery and performance of this Agreement by the Company and the Stockholders will not
require any consent, approval, permit, authorization, waiver or other action by, or filing with or
notification to, any federal, state, local, or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body
(a “Governmental Authority”) or other Person (including, but not limited to, with respect to the
Material Contracts), except the notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), if applicable.

     3.08 Litigation. Except as set forth on Schedule 3.08, as of the date of this
Agreement (a) there is no action, suit or proceeding to which the Company or any of the
Subsidiaries is a party (either as a plaintiff or defendant) pending or, to the knowledge of the
Stockholders, threatened in writing before any court or governmental agency, authority,
body or arbitrator; (b) neither the Company nor any of the Subsidiaries, nor, to the knowledge of
the Stockholders, any officer, director or employee of any of the foregoing, has been permanently
or temporarily enjoined by any order, judgment or decree of any court or any governmental agency,
authority or body from engaging in or continuing any conduct or practice in connection with the
business, assets, or properties of the Company or any of the Subsidiaries; and (c) there is not in
existence on the date hereof any order, judgment or decree of any court, tribunal or agency
enjoining or requiring the Company or any of the Subsidiaries to take any action of any kind with
respect to its business, assets or properties.

     3.09. Taxes.

          (a) Except as set forth on Schedule 3.09:

               (i) Each of the Company and its Subsidiaries has timely filed all material Tax Returns
required to be filed by such entity before the date of this Agreement, taking into account any
extension of time to file granted to or obtained on behalf of such entity;

               (ii) Each of the Company and its Subsidiaries has paid or caused to be paid all Taxes and
other assessments reflected in such Tax Returns that have become due and payable. Each of the
Company and its Subsidiaries has made provision, in accordance with GAAP, for all Taxes owed or
accrued through the date of this Agreement;

               (iii) Each of the Company and its Subsidiaries has withheld and paid all Taxes required to be
withheld and paid in connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party under all applicable Tax Laws, and all Forms W-2 and
1099 required with respect thereto have been properly completed and timely filed and have, within
the time and manner prescribed by Law, registered for the purpose of each withholding Tax in the
relevant territory or jurisdiction;

9

 

          (iv) There are no Encumbrances for Taxes upon the assets or properties of the Company and its
Subsidiaries except for statutory Encumbrances for current Taxes not yet due;

          (v) Neither the Company nor any Subsidiary has requested any extension of time within which to
file any Tax Return in respect of any taxable year which has not since been filed, and no
outstanding waivers or comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Tax Returns has been given by or on behalf of the Company or any
Subsidiary;

          (vi) Neither the Company nor any Subsidiary is required to include in income in any taxable
period ending after the Closing any adjustment pursuant to Section 481(a) of the Code, by reason of
any voluntary or involuntary change in accounting method (nor has any Governmental Authority
proposed any such adjustment or change of accounting method);;

          (vii) No power of attorney has been granted by or with respect to the Company or any
Subsidiary with respect to any matter relating to Taxes;

          (viii) Neither the Company nor any Subsidiary is a party to any agreement, contract or
arrangement that will result, separately or in the aggregate, in the payment of any “excess
parachute payments” within the meaning of Section 280G of the Code and no action by the Company or
any Subsidiary, whether pursuant to this Agreement or otherwise, shall result in the making of any
such payment;

          (ix) Neither the Company nor any Subsidiary has requested or received a ruling or
determination from any Governmental Authority or signed a closing or other agreement with any
Governmental Authority, in either case with respect to Taxes;

          (x) Neither the Company nor any Subsidiary is a party to, is bound by, or has any obligation
under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement
(collectively, “Tax Indemnification Agreements”);

          (xi) The Stockholders have previously delivered or made available to the Buyer true, correct
and complete copies of (A) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Authority relating to the United States federal, state,
local or foreign Taxes due from or with respect to the Company and the Subsidiaries and (B) all
United States federal Tax Returns, and those state, local and foreign Tax Returns filed by or on
behalf of the Company or any Subsidiary for tax periods ending on or after December 31, 2001 and
(C) all closing agreements entered into by the Company and any Subsidiary with any Governmental
Authority with respect to Taxes; and the Stockholders will deliver to the Buyer all materials with
respect to the foregoing for all matters arising after the date hereof.

          (xii) Neither the Company nor any Subsidiary has any liability for Taxes of another Person
under Section 1.1502-6 of the Treasury regulations promulgated under

10

 

the Code (the “Treasury Regulations”) or any similar provision under state, local or foreign
Law, by contract or otherwise;

               (xiii) Neither the Company nor any Subsidiary has any deferred intercompany gain or loss
arising as a result of a deferred intercompany transaction within the meaning of Section 1.1502-13
of the Treasury Regulations (or similar provision under state, local or foreign Law) or any excess
loss account under Section 1.1502-19 of the Treasury Regulations (or similar provision of state,
local or foreign Law);

               (xiv) Since June 30, 2007, neither the Company nor any Subsidiary has incurred any liability
for Taxes other than in the ordinary course of business;

               (xv) No claim has been made, nor does any Stockholder reasonably expect that a claim will be
made by a Governmental Authority in a jurisdiction where the Company or any Subsidiary does not
file Tax Returns that such Company or Subsidiary is or may be subject to taxation by that
jurisdiction;

               (xvi) No Company or Subsidiary has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period described in
Section 897(c)(1)(A)(ii) of the Code;

               (xvii) Neither the Internal Revenue Service (the “IRS”) nor any other Governmental Authority
is asserting as of the date of this Agreement by written notice to the Company or any Subsidiary
or, to any Stockholder’s knowledge, threatened in writing as of the date of this Agreement to
assert against the Company or any Subsidiary, any deficiency or claim for any amount of additional
Taxes; and

               (xviii) No federal, state, local or foreign audits or other administrative proceedings or
court proceedings are pending as of the date of this Agreement with regard to any Taxes or Tax
Returns of the Company or any Subsidiary, and neither the Company nor any Subsidiary has received a
written notice prior to the date of this Agreement of any actual or threatened audits or
proceedings or is otherwise aware of any such audits or proceedings.

          (b) For the purposes of this Agreement:

               (i) “Taxes” shall mean any United States federal, state or local or non-U.S. income, gross
receipts, license, severance, occupation, premium, environmental (including taxes under Code
Section 59A), customs duties, profits, disability, registration, alternative or add-on minimum,
estimated, withholding, payroll, employment, unemployment, social security (or similar), excise,
sales, use, value-added, occupancy, franchise, real property, personal property, business and
occupation, windfall profits, capital stock, stamp, transfer or other tax, charge, fee or
imposition in the nature of Taxes, whether computed on a separate, consolidated, unitary, combined
or other basis, including any interest, penalties, additions or assessments with respect thereto,
whether disputed or not;

11

 

               (ii) “Tax Law” shall mean the Law (including any applicable regulations or any precedential
administrative pronouncement) of any Governmental Authority relating to any Tax;

               (iii) “Tax Returns” shall mean any U.S. federal, state, local or foreign return, declaration,
report, claim for refund, amended return, declaration of estimated Tax or information return or
statement relating to Taxes, and any schedule, exhibit, attachment or other materials submitted
with any of the foregoing, and any amendment thereto; and

               (iv) “Law” means any non-U.S. or United States federal, state or local law, statute, rule,
regulation, ordinance, standard, requirement, precedential administrative ruling, order or process
(including any zoning or land use law or ordinance, building code, Environmental Law, securities,
stock exchange, blue sky, civil rights, employment, labor or occupational health and safety law or
regulation or any law, order, rule or regulation applicable to federal contractors) or
administrative interpretation thereof, and any court, or arbitrator’s order or process.

     3.10 Employee Benefit Plans.

          (a) Schedule 3.10 contains a true, correct and complete list of each deferred
compensation and each bonus or other incentive compensation, stock purchase, stock option and other
equity or equity based compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other “welfare plan,” fund
or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)); each profit sharing, stock bonus or other “pension plan,” fund or
program (within the meaning of Section 3(2) of ERISA); each employment, “change in control,”
termination or severance agreement; and each other material employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or any Subsidiary or by any trade or business, whether
or not incorporated (an “ERISA Affiliate”), that together with the Company or any Subsidiary would
be deemed a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code, or
to which the Company or any Subsidiary or an ERISA Affiliate is party, whether written or oral, for
the benefit of any employee or former employee of any Seller (the “Employee Plans”); provided that
with respect to Employee Plans established or maintained primarily for employees or former
employees working outside the United States only material Employee Plans are listed. “Former
Employee Plan” shall mean any Employee Plans of any Seller sponsored, maintained, or contributed to
within the last three years, notwithstanding that such plans are not listed on Schedule
3.10. Neither the Company nor any Subsidiary or ERISA Affiliate has any commitment or formal
plan, whether legally binding or not, to create any additional material employee benefit plans or
modify or change, in any material way, any existing Employee Plans and no condition exists which
would prevent any Seller from terminating any Employee Plans (other than Employee Plans required to
be maintained under applicable Law) without material liability to such Seller (other than for
benefits accrued at the time of such termination), except to the extent limited by Law.

12

 

          (b) With respect to each Employee Plan, the Stockholders have heretofore delivered or made
specifically available to the Buyer a current, true, correct and complete copy (or, to the extent
no such copy exists, an accurate description in all material respects) thereof (including any
amendments thereto) and, to the extent applicable: (i) any related trust agreement or other
funding instrument; (ii) the most recent IRS determination letter; (iii) the most recent summary
plan descriptions or other reports and summaries required under ERISA or the Code; (iv) any
material written communication (or a description of any material oral communications) to
participants since January 1, 2004 concerning the Employee Plans; and (v) for the most recent year
for which such documents are available, the Form 5500 and attached schedules, audited financial
statements and actuarial valuation reports and any attorney response to any auditor request. Each
Employee Plan and Former Employee Plan intended to be “qualified” within the meaning of Section
401(a) of the Code has received a favorable determination letter from the Internal Revenue Service
and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code and,
to the knowledge of the Stockholders, no event has occurred or circumstance exists that would
reasonably be expected to affect such qualified status. Each Employee Plan and Former Employee Plan
intended to satisfy the requirements of Section 501(c)(9) of the Code has satisfied such
requirements.

          (c) None of the Employee Plans or Former Employee Plans is a “multiemployer plan,” as such
term is defined in Section 3(37) of ERISA (a “Multiemployer Plan”), nor is or was any Employee Plan
or Former Employee Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code. No
liability under Title IV or Section 302 of ERISA has been incurred by the Company or any Subsidiary
or ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or any Subsidiary or ERISA Affiliate of incurring any such liability.
Neither the Company nor any Subsidiary or ERISA Affiliate sponsors, maintains, contributes to or
has an obligation to contribute to, or has at any time sponsored, maintained, contributed to or had
an obligation to contribute to, any Multiemployer Plan or any pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA.

          (d) Except as set forth on Schedule 3.10, neither the Company nor any Subsidiary or,
to the knowledge of any Stockholders, any Employee Plan, any Former Employee Plan, any trust
created thereunder, or any trustee or administrator thereof, has engaged in a transaction in
connection with which the Company or any Subsidiary, any Employee Plan, any Former Employee Plan,
any such trust, or any trustee or administrator thereof, or any party dealing with any Employee
Plan or any Former Employee Plan or any such trust could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code.

          (e) Except as set forth on Schedule 3.10, each Employee Plan and Former Employee Plan
has been operated and administered in all material respects in accordance with its terms and
applicable Law, including but not limited to ERISA and the Code, and all contributions required to
be made under the terms of any of the Employee Plans or any Former Employee Plan as of the date of
this Agreement have been timely made or, if not yet due, have

13

 

been properly reflected on the Financial Statements except for any failure to do so which
would not reasonably be expected to result in any material liability to any Seller or ERISA
Affiliate.

          (f) Except as set forth on Schedule 3.10, no Employee Plan or Former Employee Plan
provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company or any Subsidiary for periods extending beyond their
retirement or other termination of service, other than (i) coverage mandated by applicable Law or
(ii) benefits the full cost of which is borne by the current or former employee (or his or her
beneficiary). The Company and each Subsidiary and ERISA Affiliate are in material compliance with
(A) the requirements of the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the regulations thereunder
and any similar state law and (B) the applicable requirements of the Health Insurance Portability
and Accountability Act of 1996, as amended, and the regulations thereunder.

          (g) Except as set forth on Schedule 3.10, the consummation of the transactions
contemplated hereby will not (i) entitle any current or former employee or officer of the Company
or any Subsidiary to severance pay, unemployment compensation or any other payment, (ii) accelerate
the time of payment or vesting, or increase the amount of compensation or benefits due any such
employee or officer or (iii) prevent the Company or any Subsidiary from amending or terminating any
Employee Plan or Former Employee Plan.

          (h) Except as set forth on Schedule 3.10, there are no pending or, to the knowledge of
any Stockholder, claims threatened in writing by or on behalf of any Employee Plan or
Former Employee Plan, by any employee or beneficiary covered under any such Employee Plan or Former
Employee Plan with respect to such plan, or otherwise involving any such Employee Plan or Former
Employee Plan, including any audit or inquiry by the IRS or United States Department of Labor
(other than routine claims for benefits).

          (i) With respect to each Employee Plan and Former Employee Plan that is subject to the Law of
any jurisdiction outside the United States (each, a “Foreign Benefit Plan”):

               (A) all employer and employee contributions to each Foreign Benefit Plan required by Law or by
the terms of such Foreign Benefit Plan have been timely made in all material respects, or, if
applicable, accrued, in accordance with applicable accounting practices;

               (B) each Foreign Benefit Plan has been maintained in all material respects in accordance with
all applicable Laws and, if intended to qualify for special tax treatment, each Foreign Benefit
Plan meets all requirements for such treatment, except for any failure to do so which would not
result in any material liability to the Company or any Subsidiary; and

14

 

               (C) each Foreign Benefit Plan required to be registered has been registered and has been
maintained in good standing with applicable Governmental Authorities.

     3.11 Real and Personal Property.

          (a) Schedule 3.11(a) sets forth a list of all real property leased by the Company and
the Subsidiaries (the “Leased Real Property”) and all addresses, approximate square footage, annual
base rent and expiration dates thereof. True and complete copies of the leases (including all
amendments, subordination and non-disturbance agreements, estoppel certificates and related
documents) (each, a “Lease” and collectively, the “Leases”) have been delivered or made available
to the Buyer. With respect to each Lease required to be listed on Schedule 3.11(a):

               (i) the Company or Subsidiary that is party to such Lease has a good, valid and enforceable
leasehold interest in the Leased Real Property granted to such entity pursuant to each pertinent
Lease, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors’ rights and general principles of equity;

               (ii) each of said Leases has been duly authorized and executed by the Company or Subsidiary
party to such Lease and is in full force and effect and there is no existing material default by
the Company or any Subsidiary under any of the Leases; and

               (iii) neither the Company nor any of the Subsidiaries is obligated to pay any leasing or
brokerage commission relating to any Lease and, except as set forth on Schedule 3.11(a),
will not have any obligation to pay any leasing or brokerage commission upon the renewal of any
Lease. Except as set forth on Schedule 3.11(a), no construction, alteration or other
leasehold improvement work with respect to any of the Leases remains to be paid for or to be
performed by the Company or any of the Subsidiaries. The Financial Statements contain adequate
reserves to provide for the restoration of the property subject to the Leases at the end of the
respective Lease terms, to the extent required by the Leases.

          (b) Schedule 3.11(b) sets forth a true, correct and complete list of all equipment,
fixtures and trade fixtures of the Company and the Subsidiaries as of June 30, 2007. Except as set
forth on Schedule 3.11(b), the Company and the Subsidiaries have good title to all of the
tangible personal property and assets shown on the June Balance Sheet or acquired after the date of
the June Balance Sheet, free and clear of any mortgage, pledge, lien, conditional sale agreement,
security interest, encumbrance or other charge (collectively, “Encumbrances”), except for (i)
assets which have been disposed of to nonaffiliated third parties since June 30, 2007 in the
ordinary course of business, (ii) Encumbrances reflected in the June Balance Sheet, (iii)
Encumbrances for current Taxes not yet due and payable, and (iv) Permitted Liens.

          (c) Neither the Company nor any Subsidiary owns or has owned any real property.

     3.12 Labor and Employment Matters.

15

 

          (a) There is no:

               (i) collective bargaining agreement or any other agreement, whether in writing or otherwise,
with any labor organization, union, group or association (“Labor Organization”) applicable to the
employees of the Company or any Subsidiary and neither the Company nor any Subsidiary is subject to
any charge, demand, petition or representation proceeding seeking to compel, require or demand it
to bargain with any labor union or labor organization nor, as of the date of this Agreement, is
there pending or, to any Stockholder’s knowledge, threatened, any material labor strike, dispute,
walkout, work stoppage, slow down or lockout involving the Company or any Subsidiary or action,
dispute or employment related complaint by or with respect to any employees of the Company or any
Subsidiary;

               (ii) unfair labor practice complaint pending or, to the knowledge of any Stockholder,
threatened in writing against the Company or any Subsidiary before the National Labor Relations
Board or any other federal, state local or foreign agency;

               (iii) pending or, to the knowledge of any Stockholder, threatened representation question or
union or labor organizing activities with respect to employees of the Company or any Subsidiary.

          (b) During the past three years, neither the Company nor any Subsidiary has effectuated (i) a
“plant closing” (as defined in the Worker Adjustment and Retraining Notification Act of 1988, as
amended (the “WARN Act”)) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or any Subsidiary; or (ii) a “mass
layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or
any Subsidiary; nor has the Company or any Subsidiary been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger application of any similar
state, local or foreign Law. No employees of the Company or any Subsidiary have suffered an
“employment loss” (as defined in the WARN Act) since three months prior to the date of this
Agreement.

          (c) Each of the Company or its Subsidiaries has at all times and in all material respects
properly classified each of its respective employees as employees and each of its independent
contractors as independent contractors, as applicable, and no written notice has been received by
the Company from any Governmental Authority that such contractors would be considered employees for
employment law or tax purposes at any time.

          (d) Each of the Company or its Subsidiaries has at all times paid its respective employees in
conformance with applicable federal, state, local and foreign wage and hour laws. There are not
presently pending, or to the knowledge of the Stockholders threatened in writing, any claims with
respect to working hours or the payment of wages, overtime or any other form of employee
compensation.

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          (e) Except as set forth on Schedule 3.11, each of the Company or its Subsidiaries does
not, formally or informally, have a custom or practice of paying ex-gratia severance payments to
employees.

          (f) Schedule 3.12(f) sets forth a true, correct and complete list of the current
employees of the Company and the Subsidiaries, including the titles and annual salary or hourly
wage rates of each of such employees, showing separately for each such person the amounts paid
as salary and bonus payments for the fiscal year ended December 31, 2006 and the six-month period
ended June 30, 2007, and there have not been any changes since June 30, 2007.

          (g) For purposes of this Section 3.12, the term “employee” shall be construed to include sales
agents and other independent contractors who spend a majority of their working time on the business
of the Company or any of the Subsidiaries.

     3.13 Customers.

          (a) Schedule 3.13 sets forth a true, complete and correct list of the top 25 customers
of the Company and the Subsidiaries (the “Top Customers”) based on revenues for the fiscal year
ended December 31, 2006.

          (b) Except as set forth on Schedule 3.13, none of the Top Customers has terminated its
relationship with the Company or the Subsidiaries or threatened in writing to do so.

     3.14 Contracts and Commitments.

          (a) Schedule 3.14 sets forth a true, complete and correct list (including all
amendments, modifications or supplements with respect thereto) of the following agreements (written
or oral) to which the Company or any Subsidiary is a party to the extent any such agreement (i) is
currently in effect or (ii) has been terminated on or prior to the date hereof but contains
provisions that survived such termination and such provisions are currently in effect (other than
provisions that customarily survive such termination and do not relate to the principal business
purpose of such agreement and which do not create any material or ongoing financial or other
liability to the Buyer):

               (i) any loan agreement, note, mortgage, indenture, security agreement and other agreement and
instrument relating to the borrowing of money;

               (ii) any agreement (or group of related agreements) between the Company or any Subsidiary and
any Top Customer;

               (iii) any agreement concerning the establishment or operation of a partnership, joint venture
or limited liability company;

17

 

               (iv) any agreement (or group of related agreements) under which the Company or any Subsidiary
has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness (including capitalized lease obligations) involving more than $10,000 or under which
it has imposed (or may impose) an Encumbrance (other than Permitted Liens) on any of the assets,
tangible or intangible, of the Company or any Subsidiary;

               (v) any agreement for the disposition of a material portion of the assets of the Company or
any Subsidiary (other than sales in the ordinary course of business) or any agreement for the
acquisition of the assets or business of any other entity (other than purchases in the ordinary
course of business);

               (vi) any agreement concerning non-competition, exclusivity, non-solicitation, non-recruitment
or other such covenants that restricts any conduct of any business by the Company or any
Subsidiary, in each case with respect to geographical area of operations or scope or type of
business of the Company or any Subsidiary, other than (A) non-competition agreements entered into
between the Company or any Subsidiary and its employees or consultants and which do not restrict
the Company or any Subsidiary with respect to non-competition or (B) customer contracts and
non-disclosure agreements with standard non-solicitation of employee provisions;

               (vii) any employment or consulting agreement (other than offer letters for at-will employment
for employees that do not provide for any severance benefit upon such employee’s termination);

               (viii) any collective bargaining or similar agreement;

               (ix) any agreement involving any current officer, employee, director or shareholder of the
Company or any Subsidiary or consulting agreement with an individual involving payments by the
Company or any Subsidiary in excess of $50,000 per annum other than agreements entered into in
connection with the issuance and exercise of options;

               (x) any barter agreement;

               (xi) any derivative contract and other hedging arrangement;

               (xii) any operating lease (as defined by GAAP) requiring payments of greater than $10,000 in
any year;

               (xiii) any agreement or arrangement for the provision of bandwidth, relating to operating
systems or with respect to the acquisition or leasing of hardware, including agreements with Level
3 Communications Inc. and Dell, Inc.; and

               (xiv) any other material agreement, including a guarantee, not entered into in the ordinary
course of business or that requires the payment by the Company or any Subsidiary in excess of
$10,000.

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          (b) All contracts, agreements and instruments required to be listed in Schedule 3.14
(the “Material Contracts”) are valid and are in full force and effect and constitute legal, valid
and binding obligations of the Company and the Subsidiaries and, to the knowledge of the
Stockholders, of the other parties thereto, and are enforceable in accordance with their respective
terms subject, in each case, to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to or affecting the rights of creditors
generally. The Company has not received any written notice regarding termination of any Material
Contracts. Neither the Company nor any Subsidiary is in default and to the knowledge of the
Stockholders, no other party is in material default in complying with any provisions of any
Material Contract, and to the knowledge of the Stockholders, no condition or event or fact exists
which, with notice, lapse of time or both, could constitute a material default thereunder on the
part of the Company or any Subsidiary. The Stockholders have delivered or made available to the
Buyer a true, correct and complete copy of each of the Material Contracts.

     3.15 Intellectual Property.

          (a) For purposes of this Agreement,

               (i) “Intellectual Property Assets” means all of the following, to the extent owned, licensed
or used by the Company or any Subsidiary:

                    (A) all patents, patent applications, patent rights, and inventions and discoveries and
invention disclosures (whether or not patented) (collectively, “Patents”);

                    (B) all trade names, trade dress, logos, packaging design, slogans, Internet domain names,
registered and unregistered trademarks and service marks and applications (collectively, “Marks”);

                    (C) all copyrights in both published and unpublished works, including without limitation all
compilations, databases and computer programs, and all copyright registrations and applications,
and all derivatives, translations, adaptations and combinations of the above (collectively,
“Copyrights”);

                    (D) all know-how, trade secrets, confidential or proprietary information, research in
progress, algorithms, data, designs, processes, formulae, drawings, schematics, blueprints, flow
charts, models, prototypes, techniques, Company-designed reports, Beta testing procedures and Beta
testing results (collectively, “Trade Secrets”);

                    (E) all goodwill, franchises, licenses, permits, consents, approvals, technical information
and claims of infringement against third parties (the “Rights”);

                    (F) all customer lists and telephone numbers, names of potential sales leads, business
strategies, outside analysts’ plans and reports, outlooks, forecasts and other similar documents
(collectively, “Other Intangibles”); and

19

 

                    (G) those services (including web hosting and application management), computer programs,
solutions and related documentation sold, marketed, or provided by the Company or any Subsidiary as
of the date hereof (collectively, the “Products”).

          (b) Ownership of Intellectual Property Assets. The Company and the Subsidiaries have
a valid license to use, or are the exclusive owners of, and have good, valid and marketable title
to, all of the Intellectual Property Assets free and clear of all Encumbrances, other than
Permitted Liens. No claim is pending or, to the Stockholders’ knowledge, threatened in writing
against the Company or any Subsidiary and/or its directors, officers, employees, and consultants,
in their capacity as such, to the effect that (i) the right, title and interest of the Company in
and to the Intellectual Property Assets is invalid or unenforceable by the Company or any
Subsidiary or that any of the Intellectual Property Assets infringes, misappropriates, dilutes or
otherwise violates the rights of a third party, or (ii) challenging the Company’s or any
Subsidiary’s ownership or use of, or the validity, enforceability or registerability of, any
Intellectual Property Assets. To the knowledge of the Stockholders, there exists no prior act or
current conduct or use by Company or any Subsidiary that would give cause to any licensor of
Intellectual Property Assets licensed to the Company or any Subsidiary to terminate or otherwise
impair the rights of the Company or any Subsidiary pursuant to any such license agreement. Neither
the Company nor any Subsidiary has brought or threatened in writing a claim against any person (A)
alleging infringement, misappropriation, dilution or any other violation of the Intellectual
Property Assets, or (B) challenging any person’s ownership or use of, or the validity,
enforceability or registerability of, any Intellectual Property Assets and, to the knowledge of the
Stockholders, there is no reasonable basis for a claim regarding any of the foregoing. All former
and current employees of the Company and the Subsidiaries have executed written instruments with
the Company or any Subsidiary that assign to the Company or any Subsidiary such employee’s rights
to any inventions, improvements, discoveries or information relating to the business of the Company
and the Subsidiaries. No current or former stockholder, director, officer, employee or contractor
of Company or any Subsidiary (or any of their respective predecessors in interest) has or will
have, after giving effect to the transactions contemplated by this Agreement, any right, title or
interest in or to any of the Intellectual Property Assets. All Intellectual Property Assets were
developed by either (x) employees of the Company and the Subsidiaries within the scope of their
employment, or (y) independent contractors who have assigned all of their rights in such
Intellectual Property Assets to the Company or any Subsidiary pursuant to a written agreement.

          (c) Patents. Schedule 3.15 sets forth a complete and accurate list of all
Patents. All of the issued Patents owned by the Company or any Subsidiary are currently in
compliance with formal legal requirements (including without limitation payment of filing,
examination and maintenance fees and proofs of working or use), are valid and enforceable, and are
not subject to any maintenance fees or Taxes or actions falling due within ninety (90) days after
the Closing Date. In each case where a Patent is held by the Company or any Subsidiary by
assignment, the assignment has been duly recorded with the U.S. Patent and Trademark Office. No
issued Patent has been or is now involved in any interference, reissue, re-examination or

20

 

opposition proceeding. To the Stockholders’ knowledge, there is no interfering patent or patent
application of any third party.

          (d) Trademarks. Schedule 3.15 sets forth a complete and accurate list of all
Marks. All Marks that have been registered in the United States and/or any other jurisdiction are
currently in compliance with formal legal requirements (including without limitation the timely
post-registration filing of affidavits of use and incontestability and renewal applications), are
valid and enforceable, and are not subject to any maintenance fees or Taxes or actions falling due
within ninety (90) days after the Closing Date. In each case where a Mark is held by the Company
or any Subsidiary by assignment, the assignment has been duly recorded with the U.S. Patent and
Trademark Office. No registered Mark has been or is now involved in any opposition, invalidation
or cancellation proceeding and, to the Stockholders’ knowledge, no such action is threatened in
writing with respect to any of the Marks. All products and materials containing a Mark bear the
proper notice where permitted by Law. No Marks have been abandoned by the Company or any
Subsidiary. To the knowledge of the Stockholders, there has been no prior use of the Marks by any
third party which would confer upon said third party superior rights in such Marks, and the Company
and the Subsidiaries have adequately policed the Marks against third party infringement so as to
maintain the validity of such Marks.

          (e) Copyrights. Schedule 3.15 sets forth a complete and accurate list of all
Copyrights. All Copyrights that have been registered with the United States Copyright Office are
currently in compliance with formal legal requirements, are valid and enforceable, and are not
subject to any fees or Taxes or actions falling due within ninety (90) days after the Closing Date.
In each case where a Copyright is held by the Company or any Subsidiary by assignment, the
assignment has been duly recorded with the U.S. Copyright Office.

          (f) Products. None of the source or object code, algorithms, or structure included in
the Products is copied from, based upon, or derived from any other source or object code, algorithm
or structure in violation of the rights of any third party. Except as set forth in Schedule
3.15, the Company and the Subsidiaries have no obligation to any other Person to maintain,
modify, improve or upgrade the Products.

          (g) Trade Secrets. The Company and the Subsidiaries have taken all commercially
reasonable measures to protect the secrecy, confidentiality and value of the Trade Secrets,
including, without limitation, entering into appropriate confidentiality agreements with all
officers, directors, employees and consultants of the Company and the Subsidiaries and any other
persons with access to the Trade Secrets. To the knowledge of the Stockholders, there has not been
any breach by any party to any such confidentiality or non-disclosure agreement. The Trade Secrets
have not been disclosed by the Company or any Subsidiary to any person or entity other than
employees or contractors of the Company and the Subsidiaries who needed to know and use the Trade
Secrets in the course of their employment or contract performance, and then only pursuant to a
written agreement containing non-disclosure obligations that adequately protect the Company’s and
the Subsidiaries’ proprietary interests in such Trade Secrets.

21

 

          (h) Other Intangibles. The Company and the Subsidiaries have provided to Buyer access
to all of the Other Intangibles used by the Company and the Subsidiaries in connection with their
businesses.

          (i) Exclusivity of Rights. The Company and the Subsidiaries have the exclusive right
to use, license, distribute, transfer and bring infringement actions with respect to the
Intellectual Property Assets owned by the Company and the Subsidiaries. Except as set forth on
Schedule 3.15, the Company and the Subsidiaries (A) have not licensed or granted to anyone
rights to use, offer for sale, sell, distribute or license any of its Intellectual Property Assets;
and (B) are not obligated to and do not pay royalties or other fees to anyone for the Company’s and
the Subsidiaries’ ownership, use, license or transfer of any of its Intellectual Property Assets.
The Intellectual Property Assets owned by the Company and the Subsidiaries, and, to the knowledge
of the Stockholders, the Intellectual Property Assets owned by third Persons that are the subject
of a license agreement, have been duly maintained, are valid and subsisting, are full force and
effect and have not been cancelled, expired or abandoned.

          (j) Infringement. None of the Intellectual Property Assets of the Company and the
Subsidiaries or the Products or the modifications made by the Company or any Subsidiary to the
Products (excluding any third-party rights or products incorporated into such Products for which
the Company or any Subsidiary has a valid license) infringes or is alleged to infringe any patent,
trademark, service mark, trade name, copyright, trade secrets or other proprietary right or is a
derivative work based on the work of any other person.

     3.16 Environmental Matters.

          (a) The Company and the Subsidiaries are in material compliance with applicable Environmental
Laws. The Company and the Subsidiaries have not received any written notice regarding any actual
or alleged material violation of applicable Environmental Laws, or any material liabilities
or potential material liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations, relating to the
Company or any Subsidiary, or the businesses or facilities of the Company or any Subsidiary arising
under Environmental Laws. There is no Environmental Claim pending or, to the knowledge of the
Stockholders, threatened in writing against the Company or any Subsidiary. To the
knowledge of the Stockholders, there are no past or present actions, activities, circumstances,
conditions, events or incidents which reasonably would be expected to form the basis of an
Environmental Claim against the Company or any Subsidiary.

          (b) “Environmental Claim” means any action, investigation or written notice by any Person
alleging potential liability (including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (i) the presence, release or threatened
release of any hazardous materials at any location, whether or not owned or operated by the Company
or any Subsidiary, or (ii) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.

22

 

          (c) “Environmental Laws” means all applicable federal, state and local statutes or laws,
judgments, orders, regulations, licenses, permits, rules and ordinances relating to pollution or
protection of health, safety or the environment, including, but not limited to the Federal Water
Pollution Control Act (33 U.S.C. §1251 et seq.), Resources Conservation and
Recovery Act (42 U.S.C. §6901 et. seq.), Safe Drinking Water Act (42 U.S.C. §3000(f)
et. seq.), Toxic Substances Control Act (15 U.S.C. §2601 et seq.), Clean Air Act
(42 U.S.C. §7401 et. seq.), Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. §9601 et seq.), and other similar state and local statutes.

     3.17 Insurance . Schedule 3.17 sets forth a true and correct list of the
insurance policies or binders held by, or for the benefit of, the Company and the
Subsidiaries and their directors, officers, employees and agents, including the underwriter
of such policies and the amount of coverage thereunder. The Stockholders have delivered or
made available to the Buyer true, correct and complete copies of such policies and binders.
Except as set forth in Schedule 3.17 hereto, (a) all such policies or binders are in
full force and effect and no premiums due and payable thereon are delinquent, (b) there are
no pending material claims against such insurance policies or binders by the Company or any
Subsidiary as to which the insurers have denied liability, (c) the Company and the
Subsidiaries have complied in all material respects with the provisions of such policies and
(d) there exist no material claims under such insurance policies or binders that have not
been properly and timely submitted by the Company and the Subsidiaries to their insurers.
Except as set forth in Schedule 3.17 hereto, the insurance coverage provided by such
policies or insurance will not terminate or lapse by reason of the transactions contemplated
by this Agreement. Schedule 3.17 sets forth a list of all claims for losses
exceeding $15,000 submitted to insurers during the 18-month period ending on the date of
this Agreement.

     3.18 Brokers . Except as set forth on Schedule 3.18 hereto, neither the
Company nor any Stockholder has entered into any contract entitling any agent, broker,
investment banker, financial advisor or other firm or person to any broker’s, finder’s or
success fee or any other commission or similar fee in connection with the transactions
contemplated hereby.

     3.19 Compliance with Laws.

          (a) The Company and the Subsidiaries are not in default or violation of, and to the knowledge
of the Stockholders, no event has occurred with respect to the Company or any Subsidiary which,
with the lapse of time or the giving of notice or both, would result in the violation of or default
under, any Law applicable to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound, except for any such conflicts, defaults or violations that
would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company
nor any Subsidiary has received any written notice from any Governmental Authority alleging
noncompliance with any applicable Law. Neither the Company nor any Subsidiary is subject to
reporting or registration under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).

23

 

          (b) To the knowledge of the Stockholders, neither the Company nor any Subsidiary nor any
of their respective directors, officers, agents or employees have in the past three years (i) used
any Company funds for unlawful contributions, gifts, entertainment or other unlawful expenses
related to political activity, (ii) made any unlawful payment of Company funds to foreign
or domestic government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other unlawful payment of Company funds.

          (c) The Company and the Subsidiaries are in possession of all authorizations, licenses,
permits, certificates, and approvals of any Governmental Authority necessary for the Company and
the Subsidiaries to own, lease and operate their properties and to conduct their businesses
substantially as they are being conducted as of the date hereof (the “Permits”), and all such
Permits are valid, and in full force and effect, except where the failure to have, or the
suspension or cancellation of, or failure to be valid or in full force and effect of, any of the
Permits would not, individually or in the aggregate, reasonably be expected to (i) prevent or
materially delay consummation of the transactions contemplated hereby, (ii) otherwise prevent or
materially delay performance by the Stockholders of any of their material obligations under this
Agreement or any Ancillary Agreement or (iii) result in a Material Adverse Effect.

     3.20 Transactions with Affiliates. Except as set forth on Schedule 3.20
hereto: (a) there are no loans, leases or other agreements or transactions between the Company or
any Subsidiary and any present or former stockholder, director, officer or employee of the Company
or any Subsidiary, or to the Stockholders’ knowledge, any person controlled by such officer,
director, employee or stockholder or his or her immediate family; (b) to the knowledge of the
Stockholders, as of the date hereof, none of such persons has any direct or indirect ownership
interest in any firm or entity, except for less than a 1% interest in any publicly-held
corporation, with which the Company or any Subsidiary is affiliated or with which the Company or
any Subsidiary has a business relationship, or any firm or corporation that competes with the
Company or any Subsidiary; and (c) no employee, officer or director of the Company or any
Subsidiary and no member of the immediate family of such persons is directly or indirectly
interested in any Material Contract or has or claims to have any interest in the Intellectual
Property Assets of the Company or any Subsidiary.

     3.21 Bank Accounts. Schedule 3.21 sets forth the names and locations of all
banks, trust companies, savings and loan associations and other financial institutions at which the
Company and the Subsidiaries maintain safe deposit boxes, checking accounts or other accounts of
any nature the available balance of which customarily exceeds $5,000, and from which it has
obtained a letter of credit, line of credit, equity line or other such financing.

     3.22 Product Warranties and Liabilities. The Company and the Subsidiaries have not
given or made any express warranties to third parties with respect to any products manufactured or
sold or services performed by the Company and the Subsidiaries, except for the limited
warranties stated in the standard forms of warranty used by it, complete and correct copies of
which are attached to Schedule 3.22.

24

 

     3.23 Accounts Receivable. Schedule 3.23 attached hereto sets forth a true,
correct and complete list of the accounts and notes receivable of the Company and the Subsidiaries
(the “Accounts Receivable"), including the aging thereof as of July 31, 2007. There have not been
any changes to the information set forth on Schedule 3.23 since July 31, 2007, except in
the ordinary course of business consistent with past practice. All Accounts Receivable arose out
of the sales of inventory or services in the ordinary course of business and are collectible in the
face value thereof using normal collection procedures, net of the reserve for doubtful accounts set
forth thereon, which reserve is adequate and was calculated in accordance with generally accepted
accounting principles consistently applied.

     3.24 Prepayments and Deposits. Schedule 3.24 attached hereto sets forth all
prepayments and deposits, which have been received by the Company or any of the Subsidiaries as of
July 31, 2007, from customers for products to be shipped, or services to be performed, after the
Closing Date. There have not been any changes to the information set forth on Schedule
3.24 since July 31, 2007, except in the ordinary course of business consistent with past
practice.

ARTICLE IV. REPRESENTATIONS OF THE BUYER

     The Buyer Disclosure Schedule shall be arranged in sections and subsections corresponding to
the numbered and lettered sections and subsections contained in this Article IV. The disclosures
in any section or subsection of the Buyer Disclosure Schedule shall qualify other sections and
subsections in this Article IV to the extent it is reasonably apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and subsections. Except as
set forth in the Buyer Disclosure Schedule attached hereto and delivered by Buyer, Buyer hereby
represents and warrants to the Stockholders as of the date hereof as follows:

     4.01 Existence; Good Standing; Authority.

          (a) Buyer is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Buyer has all requisite corporate power and authority and all
necessary governmental licenses, authorizations, consents and approvals to own, operate, lease and
encumber its properties and carry on its business as currently operated and conducted. Buyer is
duly licensed or qualified to do business as a foreign corporation, and is in good standing under
the laws of any other jurisdiction in which the character or ownership of its properties or in
which the transaction or character of its business makes such qualification necessary, except where
the failure to be so licensed or qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. Buyer is not in violation
of any provision of its certificate of incorporation or bylaws.

          (b) Buyer has the corporate power and authority to execute and deliver this Agreement and each
agreement, document and instrument to be executed and delivered by or on behalf of Buyer pursuant
to this Agreement and the Ancillary Agreements and to carry out the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the performance by Buyer of its
obligations hereunder and the consummation of the transactions

25

 

contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has
been duly executed and delivered by Buyer and, assuming the due authorization, execution and
delivery of this Agreement by the Company and the Stockholders, this Agreement constitutes a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. No
other action on the part of Buyer is necessary to authorize the execution and delivery of this
Agreement by Buyer or the consummation by Buyer of the transactions contemplated hereby.

     4.02 No Conflict. Neither the execution and delivery by Buyer of this Agreement and
the other agreements, documents and instruments contemplated hereby, nor the consummation by Buyer
of the transactions in accordance with the terms hereof and thereof, conflicts with or results in a
breach of any provisions of Buyer’s certificate of incorporation or by-laws or other organizational
documents. Except as set forth on Schedule 4.02, none of the execution, delivery
or performance by Buyer of this Agreement and the other agreements, documents and instruments
contemplated hereby, and the consummation by Buyer of the transactions in accordance with the terms
hereof and thereof, will not violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or both, would constitute
a default) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, lease, contract or other agreement to which Buyer is a party, or by which Buyer or
any of its properties is bound, except, in each case, as would not have a Material Adverse Effect.

     4.03 Consents and Approvals. Except as set forth on Schedule 4.03, the
execution, delivery and performance of this Agreement by Buyer will not require any consent,
approval, permit, authorization or other action by, or filing with or notification to, any
Governmental Authority or other Person, except the notification requirements of the HSR Act, if
applicable.

     4.04 Brokers. Buyer has not incurred or become liable for any broker’s commission or
finder’s fee relating to or in connection with this Agreement or the transactions contemplated
hereby.

     4.05 Investment Representation. The Buyer is acquiring the Shares from each
Stockholder for its own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing or selling the same;
and, except as contemplated by this Agreement and the agreements contemplated herein, the Buyer has
no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition
thereof.

ARTICLE V. CERTAIN COVENANTS OF THE PARTIES

          5.01 Further Action. Each of the parties hereto shall use its respective commercially
reasonable efforts to take or cause to be taken all appropriate action, do or cause to be done all
things necessary, proper or advisable, and execute and deliver such documents and

26

 

other papers, as
may be required to carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated by this Agreement.

          5.02 Press Releases. The parties hereto will not, and will cause each of their
Affiliates and representatives not to, issue or cause the publication of any press release
or other public announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of all of the parties hereto which consent shall
not be unreasonably withheld; provided, however, that Buyer may, without the prior consent
of the other parties hereto, issue or cause publication of any such press release or public
announcement to the extent that Buyer, in good faith, reasonably determines, after
consultation with outside legal counsel, such action to be required by Law or by the rules
of any applicable self-regulatory organization, including without limitation the SEC, in
which event Buyer will use its commercially reasonable efforts to allow the Company
reasonable time to comment on such press release or public announcement in advance of its
issuance.

          5.03 Books and Records. Buyer shall, until the seventh anniversary of the
Closing Date, retain all books, records and other documents pertaining to the Company and
the Subsidiaries prior to the Closing Date and to make the same available for inspection and
copying by the Stockholders or any representative of the Stockholders at the expense of the
Stockholders during the normal business hours of the Company upon reasonable request and
upon reasonable notice.

          5.04 Certain Tax Matters.

          (a) Buyer shall prepare and timely file all Tax Returns required to be filed on or after the
Closing Date with respect to the Company, and shall duly and timely pay all such Taxes shown to be
due on such Tax Returns. Buyer’s preparation of any such Tax Returns shall be subject to approval
of the Stockholders’ Representative for those periods prior to the Closing, which approval shall
not be unreasonably withheld. Buyer shall make such Tax Returns available for the Stockholders’
Representative’s review and approval no later than fifteen (15) business days prior to the due date
for filing such Tax Return.

          (b) Each of Buyer and the Stockholders shall provide the other party with such assistance as
may reasonably be requested by the other party in connection with the preparation of any Tax
Return, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings related to liability for Taxes, and each will retain
and provide the requesting party with any records or information which may be relevant to such
return, audit or examination, proceedings or determination. Any information obtained pursuant to
this Section 5.04(b) or pursuant to any other Section hereof providing for the sharing of
information or review of any Tax Return or other schedule relating to Taxes shall be kept
confidential by the parties hereto.

          5.05 Director and Officer Indemnification. The Company and Buyer agree that all
rights to indemnification and exculpation from liability for acts or omissions occurring on or

27

 

prior to the Closing now existing in favor of the current or former directors, officers or
employees of the Company and the Subsidiaries, as provided in the organizational documents of the
Company and the Subsidiaries, shall survive the Closing and shall continue in full force in
accordance with their respective terms for a period of not less than six years from the Closing
Date.

ARTICLE VI. CLOSING

     6.01 Deliveries at Closing.

          (a) At the Closing, the Stockholders will deliver or cause to be delivered to Buyer the
following:

               (i) the stock certificates representing the Shares duly endorsed in accordance with Section
1.01 of this Agreement;

               (ii) executed copies of all consents required to be set forth in Schedule 3.07;

               (iii) the Escrow Agreement, executed by the Stockholders;

               (iv) an Employment Agreement in the form of Exhibit B hereto (the “Employment
Agreement” and collectively with the Escrow Agreement, the “Ancillary Agreements"), executed by Ray
D. Taft, providing for two months of transition services by Mr. Taft to the Buyer;

               (v) certificates of good standing of the Company and any Subsidiary, dated as of a recent
date, from the Secretary of State of the State of Delaware, the Secretary of State of the State of
California (with respect to the Company only) and the California Franchise Tax Board (with respect
to the Company only);

               (vi) certificate of the Secretary of the Company attesting to the incumbency of the Company’s
officers, the authenticity of the resolutions authorizing the transactions contemplated by this
Agreement, and the authenticity and continuing validity of the Organizational Documents delivered
to the Buyer;

               (vii) written resignations of all members of the Company’s Board of Directors; and

               (viii) a cross receipt executed by the Buyer and the Stockholders (the “Cross Receipt").

          (b) At the Closing, Buyer will deliver or cause to be delivered to the Stockholders the
following (collectively, the “Buyer Deliverables"):

28

 

               (i) evidence of deposit with the Escrow Agent of the Escrowed Funds;

               (ii) the Closing Payment, paid in accordance with Schedule I;

               (iii) executed copies of all consents, approvals and authorizations set forth in Schedule
4.03;

               (iv) the Escrow Agreement, executed by the Buyer and the Escrow Agent; and

               (v) the Employment Agreement, executed by the Buyer.

     ARTICLE VII. SURVIVAL; INDEMNIFICATION

          7.01 Survival. The parties agree that the representations and warranties
contained in this Agreement shall survive the Closing until nine (9) months after the
Closing Date (the “Cut-Off Date”). No claim for indemnification hereunder may be brought
after the Cut-Off Date, except for claims of which the Stockholders’ Representative has been
notified in writing with reasonable specificity by Buyer prior to the Cut-Off Date.

          7.02 Indemnification of Buyer. Subject to Section 7.01, Buyer shall be
indemnified and held harmless against and in respect of any and all damages, claims,
demands, losses, expenses, costs, obligations and liabilities, including without limitation
reasonable attorneys’ fees (collectively, “Losses”), which arise or result from any breach
of any of the representations or warranties contained in Article II and Article III or the
failure of the Stockholders to perform any of their covenants or agreements contained
herein. Notwithstanding the foregoing,

          (a) there shall be no indemnification of Buyer until the aggregate amount of Losses incurred
by Buyer exceeds $90,000 (the “Threshold”), at which time only the amount of Losses incurred in
excess of the Threshold shall be subject to indemnification hereunder;

          (b) there shall be no indemnification payments hereunder that exceed in the aggregate the
amount of the Escrowed Funds;

          (c) there shall be no indemnification of Buyer with respect to Losses arising out of breaches
of the representations or warranties contained in Article III to the extent that the Company has
made a corresponding reserve for such Losses on the June Balance Sheet, provided that such reserves
are specifically identified on such balance sheet; and

          (d) there shall be no indemnification of Buyer for punitive damages, indirect or speculative
damages, special damages, incidental damages or lost profits.

     In determining the foregoing thresholds and in otherwise determining the amount of any Losses
for which Buyer is entitled to assert a claim for indemnification hereunder, the amount of

29

 

any such
Losses shall be determined after deducting therefrom the amount of (i) any insurance proceeds and
other third party recoveries received by Buyer in respect of such Losses (which recoveries Buyer
agrees to use commercially reasonable efforts to obtain) and (ii) any cash Tax benefit actually
received by Buyer. If an indemnification disbursement is received by Buyer pursuant to this
Article VII, and Buyer later receives insurance proceeds or other third party recoveries or a cash
Tax benefit in respect of the related Losses, Buyer shall immediately pay to the Stockholders’
Representative a sum equal to the lesser of (i) the actual amount of such insurance proceeds or
other third party recoveries or such cash Tax benefit, as the case may be, or (ii) the actual
amount of the indemnification disbursement previously made with respect to such Losses.

          7.03 Procedure for Indemnification of Buyer.

          (a) Buyer shall deliver to the Escrow Agent and the Stockholders’ Representative a certificate
signed by any officer of Buyer (a “Buyer Certificate”):

               (i) stating that Losses exist in an aggregate amount greater than the Threshold for claims
against the Escrow Account (as defined in the Escrow Agreement), and

               (ii) specifying in reasonable detail the individual items included in the amount of Losses in
such claim, the date each such item was paid, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item is related.

          (b) In the event that the Stockholders’ Representative disagrees with the claim for
indemnification made by Buyer in the Buyer Certificate, the Stockholders’ Representative shall have
thirty (30) days after receipt of such Buyer Certificate by the Escrow Agent to deliver a
certificate signed by the Stockholders’ Representative to the Escrow Agent and to Buyer that
specifies in reasonable detail the nature of such objection and the basis therefore (the “Written
Escrow Objection”).

          (c) In the event that the Stockholders’ Representative delivers the Written Escrow Objection
to the Escrow Agent and Buyer pursuant to Section 7.03(b), Buyer shall have twenty (20) days after
receipt of the Written Escrow Objection by the Escrow Agent to respond in a written statement
addressed to the Escrow Agent and the Stockholders’ Representative. If after such twenty-day
period there remains a dispute as to any claims, the Stockholders’
Representative and Buyer shall attempt in good faith for twenty (20) days to agree upon the
rights of the respective parties with respect to each of such claims. If the Stockholders’
Representative and Buyer should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent. The Escrow Agent
shall be entitled to rely on any such memorandum and shall make the disbursements from the Escrowed
Funds to Buyer as contemplated by Section 7.03(e).

          (d) If no agreement regarding the rights of the respective parties can be reached after good
faith negotiation, either the Stockholders’ Representative or Buyer may seek

30

 

to resolve such
dispute or claim in a court of competent jurisdiction or seek other legal or equitable resolution
in accordance with this Agreement. Notwithstanding the foregoing, either the Stockholders’
Representative or Buyer may at any time apply to any court of competent jurisdiction for injunctive
relief in connection with a claim for indemnification or otherwise to prevent irreparable harm.

          (d) As soon as practicable following the earlier of: (i) receipt of written authorization
from the Stockholders’ Representative and Buyer with respect to the disposition of such claim or
receipt of written notice of a final decision or order of a court of competent jurisdiction with
respect to such claim (in either case, a “Distribution Directive”); or (ii) the close of business
on the thirtieth (30th) day following receipt by the Escrow Agent of a Buyer Certificate to which
the Stockholders’ Representative have not delivered a Written Escrow Objections in accordance with
this Section 7.03, the Escrow Agent shall disburse to Buyer from the Escrowed Funds an amount equal
to: (A) in the event of its receipt of a Distribution Directive, the amount of the Losses
stipulated in the Distribution Directive or, (B) in the event that a Written Escrow Objection is
not received by the close of business on the thirtieth (30th) day following the Escrow Agent’s
receipt of a Buyer Certificate, the amount of the Losses set forth in the Buyer Certificate.

          7.04 Buyer’s Remedies Exclusive. The remedies provided in this Article VII shall be
the exclusive remedies of Buyer after the Closing in connection with the transactions contemplated
by this Agreement, including without limitation any breach or non-performance of any representation
or warranty contained herein. Buyer may not commence any suit, action or proceeding against the
Stockholders’ Representative with respect to the subject matter of this Agreement, whether in
contract, tort or otherwise, except to enforce Buyer’s express rights under this Article VIII.
After the Closing, the Escrow Account shall be Buyer’s sole source for satisfaction of the
indemnification obligations under this Article VII. Notwithstanding the foregoing, Buyer may seek
to specifically enforce any covenant contained herein.

          7.05 Purchase Price Adjustment. The parties agree to treat any payments under this
Article VII as an adjustment to the Purchase Price for Tax purposes.

ARTICLE VIII. POST-CLOSING AGREEMENTS

The Stockholders agree that from and after the Closing Date:

          8.01 Proprietary Information.

          (a) Each of the Stockholders and each of their Affiliates shall hold in confidence and shall
use their commercially reasonable efforts to cause all officers, directors and personnel who
continue after the Closing to be employed by any such Stockholder or any Affiliate thereof to hold
in confidence all knowledge and information of a secret or confidential nature with respect to the
business of the Company and the Subsidiaries and not to disclose,

31

 

publish or make use of the same
without the consent of the Buyer, except (i) to the extent that such information shall have become
public knowledge other than by breach of this Agreement by the Stockholders or (ii) as may
otherwise be required by applicable law or regulation or by any authorized administrative or
governmental agency.

          (b) If (i) the employment of an officer, director or other employee of a Stockholder or any
Affiliate thereof, to whom secret or confidential knowledge or information concerning the business
of the Company or the Subsidiaries has been disclosed, is terminated and (ii) such individual is
subject to an obligation to maintain such knowledge or information in confidence after such
termination, the Stockholders shall, upon request by the Buyer, take all reasonable steps at their
expense to enforce such confidentiality obligation in the event of an actual or threatened breach
thereof. Any legal counsel retained by any such Stockholder in connection with any such
enforcement or attempted enforcement shall be selected by such Stockholder, but shall be subject to
the approval of the Buyer, which approval shall not be unreasonably withheld.

          (c) Each Stockholder agrees that the remedy at law for any breach of this Section 8.01 would
be inadequate and that the Buyer shall be entitled to injunctive relief in addition to any other
remedy it may have upon breach of any provision of this Section 8.01.

          8.02 No Solicitation or Hiring of Former Employees. Except as provided by law, for a
period of 3 years after the Closing Date, no Stockholder nor any Affiliate thereof shall solicit
any person who was an employee of either the Company or any of the Subsidiaries on the date hereof
or the Closing Date to terminate his employment with the Buyer (or the Company or any of the
Subsidiaries, as the case may be) or to become an employee of such Stockholder or Affiliate,
provided that the foregoing restriction shall not apply to (a) general searches not targeted
towards such employees of the Company or any of the Subsidiaries or (b) employees whose employment
has been terminated by Buyer or the Company following the Closing.

          8.03 Non-Competition Agreement.

          (a) For a period of 3 years after the Closing Date, no Stockholder nor any controlled
Affiliate thereof shall, except as an officer or employee of the Company develop, market or sell
any hosting services as provided by the Company on the date hereof in the United States or any
other country in which the Company or any of the Subsidiaries conducted its business during the two
years prior to the date hereof; it being understood, however, that the foregoing shall not restrict
any Stockholder nor any controlled Affiliate thereof from developing, marketing or selling CDN
Services. “CDN Services” means content delivery network services involving the delivery of large
volumes of streaming or download content to end users.

          (b) The parties hereto agree that the duration and geographic scope of the non-competition
provision set forth in this Section 8.03 are reasonable. In the event that any court of competent
jurisdiction determines that the duration or the geographic scope, or both, are

32

 

unreasonable and
that such provision is to that extent unenforceable, the parties hereto agree that the provision
shall remain in full force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this non-competition provision shall be
deemed to be a series of separate covenants, one for each and every county of each and every state
of the United States of America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be effective. The
Stockholders agree that damages are an inadequate remedy for any breach of this provision and that
the Buyer shall, whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions without bond or other
security upon any actual or threatened breach of this non-competition provision.

ARTICLE IX. GENERAL PROVISIONS

          Section 9.01 Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given if delivered
personally, or the next business day if sent by overnight courier (providing proof of
delivery), or on the same business day if sent via facsimile on a business day during normal
business hours to the parties at the following addresses (or at such other address for a
party as specified by like notice):

If to the Company, to:

Jupiter Hosting

1100 Space Park Drive

Santa Clara, CA 95054

Attn: Ray D. Taft

Facsimile:

with copy to:

Goodwin Procter LLP

530 Lytton Avenue, Second Floor

Palo Alto, CA 94301

Attn: William Davisson

Facsimile: (650) 617-3281

If to the Stockholders, to:

c/o Stockholders’ Representative

1964 Camino Verdera

Lincoln, CA 95648

Attn: Joseph Lackey

Facsimile: (916) 543-3217

33

 

with a copy to:

Goodwin Procter LLP

530 Lytton Avenue, Second Floor

Palo Alto, CA 94301

Attn: William Davisson

Facsimile: (650) 617-3281

If to Buyer, to:

NaviSite, Inc.

400 Minuteman Road

Andover, MA 01810

Attn: Monique Cormier, Esq.

Facsimile: (978) 946-7803

with a copy to:

BRL Law Group LLC

31 St. James Avenue, Suite 850

Boston, MA 02116

Attn: Thomas B. Rosedale, Esq.

Facsimile: (617) 399-6930

     9.02 Fees and Expenses. Except as otherwise expressly provided herein, the Buyer, on
the one hand, and the Stockholders, jointly and severally, on the other hand, will pay all fees and
expenses (including, without limitation, legal and accounting fees and expenses) incurred by them
in connection with the transactions contemplated hereby. The Stockholders, jointly and severally,
will pay all fees and expenses (including, without limitation, legal and accounting fees and
expenses) of the Company or any Subsidiary incurred on or prior to the date hereof with respect to
the transactions contemplated by this Agreement. In no event will any of the fees or expenses
incurred in connection with this transaction by the Stockholders or the Stockholders’
Representative, including, without limitation, the fees and expenses of counsel to the
Stockholders or those parties required to be set forth on Schedule 3.18 hereto, be paid by
the Company or any Subsidiary.

     9.03 Certain Definitions. For purposes of this Agreement:

          (a) An “Affiliate” shall mean any affiliate, as defined in Rule 12b-2 under the Exchange Act;

          (b) “Effect” means any change, event, violation, inaccuracy, circumstance or effect;

          (c) “Material Adverse Effect” means any Effect that (i) is materially adverse to the business,
assets (including intangible assets), financial condition or results of

34

 

operations of a party,
together with its subsidiaries taken as a whole or (ii) materially impedes such party’s authority
to consummate the transactions contemplated hereby in accordance with the terms hereof and
applicable Laws, provided that in no event shall any of the following, alone or in combination, be
deemed to constitute, nor shall any of the following be taken into account in determining whether
there has been or shall be, a Material Adverse Effect: (A) any Effect directly related to the
announcement or pendency of the transactions contemplated hereby, including, but not limited to, a
decline in Buyer’s stock price; (B) any Effect that results from changes affecting any of the
industries in which such party operates generally or the United States economy generally which does
not have a disproportionate effect on such party; (C) any Effect that results from changes
affecting general worldwide economic or capital market conditions which does not have a
disproportionate effect on such party; or (D) changes in Laws or regulations or the interpretation
thereof;

          (d) “Permitted Liens” means (i) statutory liens of landlords, liens of carriers,
warehousepersons, mechanics and materialpersons incurred in the ordinary course of business, which
are not yet due and payable or are being contest in good faith through appropriate proceedings,
(ii) easements, rights-of-way, restrictions and other Encumbrances, in each case that do not
materially detract from the value of, or materially impair the existing use of, the property upon
which such Encumbrance exists and (iii) liens securing Taxes, assessments and governmental charges
not yet delinquent; and

          (e) “Person” means an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other entity.

     9.04 Interpretation. When a reference is made in this Agreement to an Article,
Section, Schedule or Exhibit, such reference will be to an Article or Section of, or a Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they will be deemed to be followed by the words “without
limitation.”
The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement will refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings ascribed to them
herein. The definitions contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein or in any agreement
or instrument that is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. References to a Person
are also to its permitted successors and assigns.

     9.05 Counterparts and Facsimile Signatures. This Agreement may be executed in one or
more counterparts, all of which will be considered one and the same agreement and will

35

 

become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other parties. This Agreement may be executed by facsimile signature.

     9.06 Amendments and Waivers. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by a writing duly and
validly executed by the parties hereto, or in the case of a waiver, the party waiving compliance.
No waiver by any party with respect to any default, misrepresentation or breach of warranty or
covenant hereunder shall be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of
any prior or subsequent occurrence.

     9.07 Entire Agreement; Severability. This Agreement (including the exhibits,
schedules, documents and instruments referred to herein) and the Mutual Confidentiality Agreement,
dated as of February 28, 2007, by and between Buyer and the Company constitute the entire
agreement, and supersede all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement. If any term, condition or other
provision of this Agreement is found to be invalid, illegal or incapable of being enforced by
virtue of any rule of law, public policy or court determination, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force and effect. If the final
judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so modified.

     9.08 Third Party Beneficiaries. Except as expressly provided in this Agreement, each
party hereto intends that this Agreement shall not benefit or create any right or cause of action
in or on behalf of any Person other than the parties hereto and their respective successors and
permitted assigns.

     9.09 Governing Law. This Agreement will be governed by, and construed in accordance
with, the internal laws of the State of Delaware regardless of the laws that might otherwise govern
under applicable principles of conflict of laws.

     9.10
Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned, in whole or in part, by operation of law or
otherwise by the parties hereto without the prior written consent of the other party, except that
Buyer may collaterally assign this Agreement or a portion to lenders in connection with the
financing of the transactions contemplated hereby (or any amendments, supplements, restatements or
refinancings thereof). Any assignment in violation of the preceding sentence will be void.
Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and assigns.

36

 

     9.11
Consent to Jurisdiction. Each of the parties hereby consents to personal jurisdiction,
service of process and exclusive venue in the federal or state courts of the State of Illinois for
any claim, suit or proceeding arising under this Agreement, or in the case of a third party claim
subject to indemnification hereunder, in the court where such claim is brought.

     9.12
Mutual Drafting. The parties hereto are sophisticated and have been represented
by attorneys throughout the transactions contemplated hereby who have carefully negotiated the
provisions hereof. As a consequence, the parties do not intend that the presumptions of Laws
relating to the interpretation of contracts against the drafter of any particular clause should be
applied to this Agreement or any agreement or instrument executed in connection herewith, and
therefore waive their effects.

     9.13 Remedies. It is specifically understood and agreed that any breach of the
provisions of this Agreement or any other agreement executed and delivered pursuant to this
Agreement by any party hereto will result in irreparable injury to the other parties hereto, that
the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any
other remedies which they may have, such other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by Law).

     9.14 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THIS WAVIER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON
THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS IT HAS REVIEWED THIS
WAIVER WITH
ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENT OR AGREEMENTS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS WRITTEN CONSENT TO A TRIAL BY THE COURT.

37

 

     IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of
and on the date first above written.

	 	 	 	 	 	 	 
	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 	 	NAVISITE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James W. Pluntze	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	JUPITER HOSTING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ray D. Taft	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Ray D. Taft	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	STOCKHOLDERS:	 	 

	 	 	 	 	 	 	 
	 	 	 /s/ Joseph Lackey	 	 
	 	 	 	 	 
	 	 	Joseph Lackey	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	 1964 Camino Verdera	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 Lincoln, CA 95648	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 /s/ Ray Taft	 	 
	 	 	 	 	 
	 	 	Ray D. Taft	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	 2319 Vera Ave.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 Redwood City, CA 94061	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 /s/ Raymond J. Taft	 	 
	 	 	 	 	 
	 	 	Ray J. Taft	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	 2911 Naples Ave.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 Half Moon Bay, CA 94019

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