Document:

exv4w1

 

	 	 	 	 	 

 

 

BEI Technologies, Inc.

     A statement of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights as established, from time to time,
by the Certificate of Incorporation of the Corporation and by any certificate of determination,
the number of shares constituting each class and series, and the designations thereof, may be
obtained by the holder hereof upon request and without charge at the principal office of the
Corporation.

     This certificate also evidences and entitles the holder hereof to certain rights as set forth
in a Rights Agreement between BEI Technologies, Inc. (the “Company”) and American Stock Transfer &
Trust Company as Rights Agent (the “Rights Agent”), dated as of September 11, 1997, as amended from
time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor. As described in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and certain related persons, whether currently held by or on behalf of such Person or
by any subsequent holder, shall become null and void.

     The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full according to applicable
laws or regulations:

	 	 	 	 	 	 	 	 	 	 	 
	TEN COM

	 	—
	 	as tenants in common
	 	UNIF GIFT MIN ACT
	 	—
	 	..........................Custodian..........................
	TEN ENT

	 	—
	 	as tenants by the entireties
	 	 	 	 	 	          (Cust)                              (Minor)
	JT TEN

	 	—
	 	as joint tenants with right of
	 	 	 	 	 	under Uniform Gifts to Minors
	

	 	 	 	survivorship and not as tenants
in common
	 	 	 	 	 	Act................................................................
                              (State)
	

	 	 	 	 	 	UNIF TRF MIN ACT
	 	—
	 	................Custodian (until age ................)
	

	 	 	 	 	 	 	 	 	 	          (Cust)
	

	 	 	 	 	 	 	 	 	 	...........................under Uniform Transfers
	

	 	 	 	 	 	 	 	 	 	          (Minor)
	

	 	 	 	 	 	 	 	 	 	to Minors Act............................................
	

	 	 	 	 	 	 	 	 	 	                              (State)

Additional abbreviations may also be used though not in the above list.

	 
	FOR VALUE RECEIVED,                                                              hereby sell, assign and transfer unto

	 	 	 
	PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE
	 	 

	 	 	 	 	 
	 

	 	 	 	 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

	

Share of the common stock represented by the within Certificate, and do hereby irrevocably constitute and
appoint

	

Attorney to transfer the said stock on the books of the within named Corporation with full power of
substitution in the premises.

Dated                                                                                 

	 	 	 	 	 
	

	 	X	 	 
	

	 	 	 	

	

	 	X	 	 
	

	 	 	 	

	

	 	NOTICE:
	 	THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S] AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed

	 	 	 
	By                                                                                                                                             
	 	 
	THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.exv4w2

 

Exhibit 4.2

AGREEMENT OF SUBSTITUTION AND AMENDMENT OF

COMMON SHARES RIGHTS AGREEMENT

     This Agreement of Substitution and Amendment is entered into as of December 22, 2004,
by and between BEI Technologies, Inc., a Delaware corporation (the “Company”) and American Stock
Transfer & Trust Company, a New York banking corporation (“AST”).

RECITALS

	A.  	On or about September 11, 1997, the Company entered into a Rights Agreement
(the “Rights Agreement”) with Chasemellon Shareholder Services, L.L.C., (the
“Predecessor Agent”) as rights agent.
	 
	B.  	The Company wishes to remove the Predecessor Agent and substitute AST as
rights agent pursuant to Section 21 of the Rights Agreement.
	 
	C.  	The Company has given the Predecessor Agent notice of removal of the
Predecessor Agent as rights agent.

AGREEMENT

     NOW THEREFORE, in consideration of the foregoing and of other consideration, the
sufficiency of which is hereby acknowledged, the parties agree as follows:

	 	1.  	Section 21 of the Rights Agreement is hereby amended to provide that any
successor rights agent shall, at the time of its appointment as rights agent,
have a combined capital and surplus of at least $ 10 million, rather than $50
million.
	 
	 	2.  	The Company hereby appoints AST as rights agent pursuant to Section 21 of
the Rights Agreement, to serve in that capacity for the consideration and
subject to all of the terms and conditions of the Rights Agreement.
	 
	 	3.  	AST hereby accepts the appointment as rights agent pursuant to Section 21 of
the Rights Agreement and agrees to serve in that capacity for the
consideration and subject to all of the terms and conditions of the Rights
Agreement.

 

 

	 	4.  	From and after the effective date hereof, each and every reference in the
Rights Agreement to a “Rights Agent” shall be deemed to be a reference to
AST.
	 
	 	5.  	Section 26 of the Rights Agreement is amended to provide that notices or
demands shall be addressed as follows (until another address is filed):

If to the Company:

BEI Technologies, Inc. One Post

Street, Suite 2500 San

Francisco, CA 94104

If to AST:

American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Attention: Corporate Trust Department

	 	6.  	Except as expressly modified herein, the Rights Agreement shall remain in
full force and effect.
	 
	 	7.  	This Agreement of Substitution and Amendment may be executed in one or
more counterparts, each of which shall together constitute one and the same
document.
	 
	 	   	IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of
the date indicated above.

	 	 	 	 	 
	 	BEI Technologies, Inc.

/s/ Robert R. Corr

Robert R. Corr

Vice President, Secretary, Treasurer and Controller

AMERICAN STOCK TRANSFER & TRUST COMPANY

/s/ HERBERT J. LEMMER 

Name: HERBERT J. LEMMER

	 	 	VICE PRESIDENT<PAGE>

                                                                    EXHIBIT 10.1

                 SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

This SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE ("Settlement Agreement") is
made to be effective as of January 13th, 2005 ("Effective Date") by and between
NAVISITE, INC., a Delaware corporation ("NaviSite"), ATLANTIC INVESTORS, LLC,
ARTHUR P. BECKER, ANDREW RUHAN and GABRIEL RUHAN (collectively, the "Atlantic
Parties"), and CONVERGENCE ASSOCIATES, Inc., a Delaware corporation
("Convergence") as agent and assignee of the parties listed on the signature
page hereof (collectively the "Settling Shareholders").

                                    RECITALS

A. The Settling Shareholders own shares of common stock, par value $0.01 per
share, of NaviSite and the Settling Shareholders and their attorneys are to
receive a total of 521,880 additional shares of NaviSite as set forth herein
(the "Stock").

B. On behalf of the Settling Shareholders, on December 11, 2003, Convergence (on
behalf of itself and the Settling Shareholders)filed an arbitration proceeding
against NaviSite, styled Convergence Associates, Inc. v. NaviSite, JAMS
Reference No. 1 1 000403 6 (the "Proceeding").

C. In the Proceeding, Convergence prayed for an award of additional shares of
Stock based on allegations that NaviSite breached the earn-out provisions set
forth in the Agreement and Plan for Merger and Reorganization among NaviSite,
Avasta Acquisition Corporation and Avasta, Inc. dated January 29, 2003 (the
"Merger Agreement") and other claims. Subsequently, NaviSite filed cross-claims
against the Settling Shareholders.

D. Pursuant to the Merger Agreement, additional shares of Stock potentially were
to be issued to the Settling Shareholders.

E. Pursuant to a Decision of the Arbitrator dated September 30, 2004 (the
"Decision"), Convergence and the Settling Shareholders were awarded additional
shares of Stock. In the Decision, the Arbitrator determined that Convergence and
the Settling Shareholders were the prevailing parties and were entitled,
pursuant to the Merger Agreement, to an award of attorneys' fees, costs and
disbursements as additional compensation in enforcing rights to the additional
shares of Stock awarded by the Arbitrator.

F. Prior to the hearing at which the Arbitrator was to determine the nature and
extent of the attorneys' fees, costs and disbursements award, NaviSite,
Convergence and the Settling Shareholders reached an agreement as to the
attorneys' fees, costs and disbursements.

G. Pursuant to this Settlement Agreement, NaviSite, Convergence and the Settling
Shareholders (collectively the "Parties") intend to fully and completely settle
the entire Proceeding, including the attorneys' fees, costs and disbursements
issue on the terms and conditions set forth in this Settlement Agreement.

H. Pursuant to this Settlement Agreement, the Parties have agreed to certain
restrictions (with exceptions as set forth herein) to apply only to the Stock
and only during the period from the

1

<PAGE>

Effective Date through December 31, 2005 (the "Expiration Date") and in no event
extending beyond the Expiration Date or to any shares other than the Stock
delivered under this Settlement Agreement and in no event extending to any
private transaction or transactions among or between any of the Settling
Shareholders or between any Settling Shareholder and any third-party who is an
accredited investor and where the transaction otherwise is allowed as a private
transaction exempt from any further compliance with applicable federal or state
securities laws.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned each agree as
follows:

        1. Issuance of Shares of Stock; Reimbursement of Costs, Expenses and
Disbursements. On the Effective Date, NaviSite agrees to and shall issue an
aggregate of 521,880 shares of Stock (the "Stock") comprised of: 321,880 shares
of Stock (the "Awarded Stock") and 200,000 shares of Stock (the "Attorney Fee
Stock") to the Settling Shareholders and to their attorneys, in such amounts per
Settling Shareholder and attorneys as set forth on Exhibit C hereto, such shares
of Stock to be "restricted securities" as defined by Rule 144 ("Rule
144") promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). As to all of the Stock, NaviSite agrees that it shall take such steps and
actions as are set forth, and otherwise comply with, Exhibit A hereto, and the
parties hereto hereby agree that they shall be subject to the provisions of
Exhibit A hereto. In addition to the foregoing, within two business days of the
Effective Date, NaviSite shall pay $175,000 to the Trust Account of Russo & Hale
LLP by wire transfer or by check for the benefit of Convergence in reimbursement
of costs, expenses and disbursements paid or incurred in the Proceeding.

         2. Terms and Conditions Applicable to All Stock. Except as otherwise
provided herein, the following terms and conditions shall apply to the Awarded
Stock and to the Attorney Fee Stock:

         (a) Each holder of the Attorney Fee Stock and the Awarded Stock shall
each not offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, assign, or otherwise transfer, encumber or dispose
of, directly or indirectly any of the Stock (collectively, a "Transfer") until
the earlier of (x) June 30, 2005 and (y) the 30th day after the closing of an
underwritten public offering of securities by NaviSite (the "Hurdle Date").
After the Hurdle Date, no Group (which is made up of holders of the Attorney Fee
Stock and the Awarded Stock, and as set forth on Exhibit C hereto) may Transfer:
(i) more than one thousand (1,000) shares of the Stock each in one day or more
than 5,000 shares of the Stock in any 30 day period (during calendar year 2005
except under the conditions set forth in Section 2(b) below) for the 90 days
following the Hurdle Date; (ii) more than one thousand (1,000) shares of Stock
each in one day or more than 10,000 shares of the Stock in any 30 day period
(during calendar year 2005 except under the conditions set forth in Section 2(b)
below) for the 90 days following the period described in (i) above. Subsequent
to the periods described in (i) and (ii) above, the holders of the Attorney Fee
Stock and the Awarded Stock may Transfer an unlimited amount of the Stock in one
day without restriction by this Section 2(a). This paragraph (a) is subject in
its entirety to a NaviSite Blackout (as defined herein), in which case no shares
of the Stock shall be sold pursuant to this paragraph until the NaviSite
Blackout has been lifted or removed by NaviSite or the Expiration Date has
occurred, whichever first occurs. Subject to

2

<PAGE>
applicable law, the holders of the Attorney Fee Stock and the Awarded Stock may
Transfer any of their Stock in private transactions at any time and in any other
transactions after the Expiration Date, without restriction by this Settlement
Agreement. The limitations set forth in this sub-paragraph (a) shall not
increase as a result of any private transaction by any Settling Shareholder with
any third-party in any private transaction and each such third-party shall be
subject to the same limitations as is set forth in this Agreement.

Further, for the avoidance of doubt, all of the foregoing limitations only apply
to the Stock and only during the period from the Effective Date through December
31, 2005 (the "Expiration Date") and in no event extending beyond the Expiration
Date or to any shares other than the Stock delivered under this Settlement
Agreement and in no event do any of the foregoing limitations extend to any
private transaction or transactions among or between any of the Settling
Shareholders or between any Settling Shareholder and any third-party who is an
accredited investor and where the transaction otherwise is allowed as a private
transaction exempt from any further compliance with applicable federal or state
securities laws; provided, however, such transferee shall be subject to the
foregoing limitations and shall agree to be bound by such limitations as if such
transferee were a party to this Settlement Agreement.

         (b) Notwithstanding the foregoing, the holders of the Attorney Fee
Stock and the Awarded Stock may Transfer all or part of their Stock during
calendar year 2005 under any of the following conditions:

                  (i) Co-Sale Rights. Each holder of the Attorney Fee Stock
and/or the Awarded Stock shall each have the right to Transfer any Stock in
calendar year 2005 pursuant to any exercise of Co-Sale Rights as set forth in
the Statement of Co-Sale Rights attached hereto as Exhibit B and incorporated
herein by reference.

                  (ii) Change of Control. Each holder of the Attorney Fee Stock
and/or the Awarded Stock shall each have the right to Transfer any Stock in
calendar year 2005 following a Change of Control of NaviSite. For purposes of
this Settlement Agreement, the term "Change of Control" means, collectively, the
consummation of a merger, consolidation, reorganization, recapitalization or
share exchange involving NaviSite or a sale or other disposition of all or
substantially all of the assets of NaviSite (a "Business Combination"), unless,
immediately upon such Business Combination, all or substantially all of the
individuals and entities who were the beneficial owners of NaviSite's
outstanding capital stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of (i) the
then-outstanding shares of common stock or (ii) the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns NaviSite or substantially all of
NaviSite's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation").

                  (iii) Analysts and Volume. Each holder of the Attorney Fee
Stock and/or the Awarded Stock shall each have the right to Transfer, a maximum
of 5,000 shares each of the Stock during any single day during calendar year
2005 and a maximum of 75,000 shares each of the Stock in the aggregate during
any 30 day period during calendar year 2005, but only if each of the following
have occurred: (I) two (2) or more analysts from major brokerage firms are
covering

3

<PAGE>

NaviSite's Stock, and (II) the average daily volume of NaviSite Stock traded
over any consecutive twenty (20) trading day period in calendar year 2005 equals
or exceeds 200,000 shares of NaviSite common stock, subject, however, to
NaviSite imposing a blackout period (on its board members, executives and other
signatories of this Agreement) in the event it commences or proceeds with a
Business Combination, financing of at least $3 million or other major
transaction in which NaviSite's board of directors believes is in the best
interests of NaviSite (a "NaviSite Blackout"), in which case no shares shall be
sold pursuant to this paragraph until the NaviSite Blackout has been lifted or
removed by NaviSite or the Expiration Date has occurred, whichever first occurs.
For the avoidance of doubt, any shares of the Stock sold pursuant to this
paragraph shall include, and shall not be in addition to, any shares of the
Stock sold pursuant to Section 2(a) hereof.

                  (iv) Private Transactions. Each holder of the Attorney Fee
Stock and or the Awarded Stock shall each have the right to Transfer before the
Expiration Date and without restriction any of the Stock to any third-party who
is an accredited investor where the transaction is private and is otherwise
permissible under applicable federal and state securities laws. Without limiting
the foregoing, each Settling Shareholder may, for example, Transfer by and among
each other and with any other accredited investor any of the Stock so long as
all other restrictions imposed by this Agreement continue as to such Stock in
the hands of such other party through the Expiration Date.

3. General Release. In consideration of the terms and conditions set forth
herein, Convergence and the Settling Shareholders and each of their respective
officers, directors, shareholders, members, partners (general and limited),
employees, agents, attorneys and representatives (collectively, the "Claimant
Parties") and NaviSite and each officer, director, shareholder, member, partner
(general and limited), employee, agent, attorney and representative (the
"Respondent Party") hereby mutually release, relinquish and forever discharge
each other of and from any and all claims, demands, causes of action,
obligations, liabilities directly related to (a) the Proceeding, (b) the
Decision of the Arbitrator ordering an award of attorneys' fees, costs and
disbursements in favor of Convergence and the Settling Shareholders as the
prevailing parties in the Proceeding, and (c) any other claim of or by
Convergence and or the Settling Shareholders that NaviSite is required or
obligated to pay them attorneys' fees, costs or disbursements arising out of or
paid or incurred in the Proceeding.

4. Voluntary Release and Settlement. NaviSite, Convergence and the Settling
Shareholders represent and warrant to one another that this Settlement Agreement
in all respects has been voluntarily and knowingly executed by them with the
express intention of extinguishing all claims and allegations between arising
out of or relating to the Proceeding. With respect to the released and
discharged claims set forth in Section 3 above, NaviSite, Convergence and the
Settling Shareholders expressly waive any and all rights and benefits which are
or may be conferred upon them by the provisions of California Civil Code Section
1542, which reads:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

NaviSite, Convergence and the Settling Shareholders each assume all risks
attendant to release of claims set forth in Section 3 above, whether unknown,
unforeseen or latent. NaviSite, Convergence and the Settling Shareholders
understand and acknowledge the significance and consequence of

4

<PAGE>

such a specific waiver of the protection of California Civil Code Section 1542.
NaviSite, Convergence and the Settling Shareholders understand and accept the
risk that they may have substantial claims, damages, actions, or causes of
action against one another with respect to the matters specified in Section 3
above that have not yet been manifested or that are presently unknown or that
have not been identified, and they nevertheless intend to and do deliberately
release such possible further or unknown claims, damages, lawsuits and causes of
action on these specific matters as between one another.

5. Lock-Up Agreement. Each of the parties hereto who is receiving Stock hereby
agrees, in connection with an underwritten public offering of NaviSite's
securities pursuant to a registration statement under the Securities Act filed
or amended in calendar year 2005, to execute an agreement, in substantially the
same form as the agreements executed or to be executed by each of Atlantic
Investors, LLC, Arthur P. Becker, Andrew Ruhan and Gabriel Ruhan (and other
officers and directors and affiliates of NaviSite), with respect to restrictions
or limitations on the sale, short sale, grant of options, or other such
dispositions of securities issued by NaviSite and held by such party (other than
those shares included in the offering) without the prior written consent of
NaviSite or the underwriters managing such underwritten public offering as may
be requested by NaviSite or the managing underwriters at the time of such
offering for a period of time not to exceed 90 days after said filing or through
the Expiration Date, whichever first occurs.

6. Miscellaneous.

a. Disclosure. NaviSite hereby represents and warrants to Convergence and the
Settling Shareholders that in connection with the issuance and sale of
securities pursuant to this Settlement Agreement it has not made any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made, in the light of the circumstances under which
they were made, not misleading.

b. Representations. NaviSite, Convergence and the Settling Shareholders each
represent and warrant to the other that, other than assignments between (i)
Settling Shareholders and (ii) Russo & Hale LLP and its investment fund (namely
RH INVESTMENTS LLC), he, she or it has made no assignment and will make no
assignment of any of the claims as defined above, or of any actual or claimed
right of any kind whatsoever, with regard to matters released herein, except as
set forth in this section of the Settlement Agreement, and that no other person
or entity of any kind has had or now has any interest of any kind in any of the
demands, obligations, actions, causes of action, debts, liabilities, rights,
contracts, damages, costs, expenses, losses or claims which have been asserted
in the Lawsuit. Assignments may be made by and between the Settling
Shareholders; and their counsel. Attached hereto as Exhibit C is a table of the
distribution of the Stock to be issued by NaviSite pursuant to this Agreement.

c. Authority to Execute Settlement Agreement. Each party hereby represents and
warrants that (a) he/she/it has the power and authority to enter into this
Settlement Agreement on behalf of itself and other parties designated herein-;
and (b) this Settlement Agreement represents his or her legal, valid, and
binding obligation, enforceable in accordance with its terms against all the
parties to this Agreement. In addition, Convergence hereby represents and
warrants that it has the power and authority to execute this Settlement
Agreement on behalf of each of the Settling Stockholders and that this Agreement
represents legal, valid and binding obligations of the Settling Stockholders,

5

<PAGE>

enforceable in accordance with its terms.

d. Each Party to Bear Own Fees and Costs. NaviSite agrees to pay any and all
outstanding billings from JAMS relating to the re-scheduled hearing date in the
Proceeding if this Settlement Agreement is executed after January 13, 2005 and
said hearing date was not cancelled with the JAMS office by either party on or
before January 13, 2005. Except as otherwise set forth in this Settlement
Agreement, NaviSite, Convergence and the Settling Shareholders each agree to
bear their own costs and attorneys' fees with respect to this Settlement
Agreement and the Proceeding.

e. Arbitration. Any dispute arising from this Settlement Agreement shall be
settled in arbitration before JAMS, with Judge Charles A. Legge serving as
Arbitrator if available. If Judge Legge is unavailable or unable to arbitrate
the dispute, another retired judge from JAMS shall arbitrate the dispute.

f. Attorneys' Fees and Costs. If any party to this Settlement Agreement shall
commence any action or other proceeding against any other party arising out of,
or relating to, the interpretation or enforcement of this Settlement Agreement,
the prevailing party shall be entitled to recover from the losing party, in
addition to any other relief, its actual attorneys fees irrespective of whether
or not the action or other proceeding is prosecuted to judgment and irrespective
of any court schedule of reasonable attorneys' fees. If any action or proceeding
hereunder embraces more than one dispute and one party is the prevailing party
with respect to some but not all of the disputes, the court shall apportion the
costs and expenses and reasonable attorneys' fees incurred by the parties to the
separate disputes, and thereby equitably determine the amount to be borne by
each party.

g. No Admissions. Nothing in this Settlement Agreement is intended to or shall
be construed as an admission of fault or liability by NaviSite, Convergence or
any Settling Shareholder.

h. No Reliance. NaviSite, Convergence and the Settling Shareholders each
acknowledge and agree that this Settlement Agreement is executed without
reliance on any agreement, promise, statement or representation by or on behalf
of any other person or entity except as set forth herein and that no promise or
inducement has been made or offered except as set out herein.

i. Time of the Essence. Time is of the essence in the performance and observance
of each covenant and condition set forth in this Settlement Agreement.

j. Binding; On Successors and Assigns; Meaning of "Affiliates". This Settlement
Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representatives of the parties hereto. For the
purposes of this Agreement, the term "affiliates" includes, without limitation,
all parties over which any signatory to this Agreement has any management or
control over, directly or indirectly, provided that such party or parties
directly or indirectly own or hold or have voting or dispositive power over
NaviSite securities (today or after the date hereof); each of the signatories to
this Agreement represents and warrants that each has no ownership interest and
no management or control over, directly or indirectly, Waythere, Inc. (formerly
known as Surebridge, Inc.) even though Waythere, Inc. owns greater than 10% of
NaviSite's outstanding common stock and based on that representation, Waythere,
Inc. is not an "affiliate" of NaviSite (or any other signatory) within the
meaning of this Agreement..

6

<PAGE>

k. Governing Law. This Settlement Agreement shall be construed and governed by
the laws of the State of California.

1. No Presumption; Provisions Void if Unenforceable. This Settlement Agreement
shall be construed as though drawn and prepared jointly. Any uncertainty or
ambiguity shall not be interpreted for or against any one party. Should any
provision of this Settlement Agreement be declared void and unenforceable, such
portion shall be severed from the remainder, the validity of which shall remain
unaffected.

m. Entire Agreement. This Settlement Agreement constitutes the entire agreement
between the parties, and supersedes any and all prior agreements, promises or
inducements concerning the subject matter hereof, and there are no
contemporaneous terms not included herein. This Settlement Agreement may not be
amended, altered, modified or otherwise changed except in a writing signed by
all parties hereto.

n. Counterparts. This Settlement Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.

o. Parties Have Read Settlement Agreement. NaviSite (and related parties) and
Convergence (for itself and for all of the Settling Shareholders) have carefully
read and understand the contents of this Settlement Agreement and sign the same
as their own free act and after receiving the advice of their own legal counsel.

p. Confidentiality of Declaration of Blackout Period. The parties hereto
acknowledge and understand that the declaration of a NaviSite Blackout (and the
underlying facts giving rise to the NaviSite Blackout) will constitute material
non-public information of NaviSite which is confidential and proprietary to
NaviSite (the "Proprietary Information"); accordingly, Convergence, for itself
and for all of the Settling Shareholders and their permitted assigns, agrees
that such Proprietary Information shall be held in confidence and not disclosed
to any third party and such information shall not used for any purpose without
the prior written consent of NaviSite. The recipient of the Proprietary
Information shall hold in confidence, and shall not disclose, any such
Proprietary Information of NaviSite. The foregoing obligation shall end with
respect to any portion of the Proprietary Information which (a) becomes public
as a result of any action by NaviSite, (b) becomes public through no fault of
any Settling Shareholder, (c) becomes available as a result of any action by any
third-party (other than involving any improper action by Convergence or any of
the Settling Shareholders), (d) becomes available by independent development, or
(e) becomes subject to disclosure as a result of any judicial, administrative or
other order by any governmental authority.

         IN WITNESS WHEREOF, THIS SETTLEMENT AGREEMENT was executed in San
Francisco, California on the-date set forth below the signature of the parties,
provided, however, this Settlement Agreement shall for all purposes be deemed
effective as of the Effective Date first above written.

7

<PAGE>

NAVISITE                              CONVERGENCE:*
NaviSite, Inc., a Delaware            Convergence Associates, Inc., a
corporation,                          Delaware corporation

By:  /s/ Arthur Becker              By:         /s/ Russ Irwin
     ---------------------------                -------------------------------

Name:  Arthur Becker                Name:        Russ Irwin
     ---------------------------                -------------------------------

Title:      CEO                     Title:
     ---------------------------                -------------------------------

ATLANTIC INVESTORS, LLC                      *CONVERGENCE IS SIGNING AS AGENT
                                             AND ASSIGNEE OF EACH OF THE
By:  /s/ Simon McNally                       SETTLING SHAREHOLDERS WHO ARE
     -----------------------------           LISTED AND WHO RECEIVE SHARES OF
                                             STOCK IN ACCORDANCE WITH EXHIBIT
Name:   Simon McNally                        "C" AND THIS SETTLEMENT AGREEMENT
      ----------------------------

Title:
        --------------------------

/s/ Arthur P. Becker
----------------------------------
Arthur P. Becker

/s/ Andrew Ruhan
----------------------------------
Andrew Ruhan

/s/ Gabriel Ruhan
----------------------------------
Gabriel Ruhan

8

<PAGE>

APPROVED AS TO FORM:

  RUSSO & HALE LLP                          BROWNE ROSEDALE & LANOUETTE LLP

/s/ Jack Russo                                  /s/ Thomas B. Rosedale
-----------------------------------         ------------------------------------
By: Jack Russo, Esq.                        By: Thomas B. Rosedale, Esq.
Attorneys for Convergence                       Attorneys for NaviSite, Inc.
and the Settling Shareholders

Dated:  1/13                   ,2005        Dated:  January 28             ,2005
       -----------------------                      --------------------

9

<PAGE>

                      EXHIBIT "A" TO SETTLEMENT AGREEMENT
                        STATEMENT OF REGISTRATION RIGHTS

CERTAIN DEFINITIONS. The following terms shall have the following respective
meanings:

"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

"HOLDER" shall mean any person or entity holding the Awarded Stock or the
Attorney Fee Stock.

"REGISTRATION EXPENSES" shall mean all expenses incurred by NaviSite in
registering Stock, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for NaviSite, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of NaviSite which shall be
paid in any event by NaviSite).

"SELLING EXPENSES" shall mean all underwriting discounts, selling commissions
and stock transfer taxes applicable to the securities registered by the Holder
and, except as set forth under Registration Expenses, all reasonable fees and
disbursements of counsel for the Holder.

1. RESTRICTIVE LEGEND. Each certificate representing Awarded Stock and Attorney
Fee Stock shall be stamped or otherwise imprinted with a legend in substantially
the following form (in addition to any legend required under applicable state
law, including state securities laws):

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS NAVISITE RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.

The Holders each consent to NaviSite making a notation on its records and giving
instructions to any transfer agent of the Stock in order to implement the
restrictions on transfer established in this Agreement.

3. REGISTRATION.

3.1      NAVISITE REGISTRATION.

(a) Required Registration. (i) NaviSite shall, on or before the date which is 45

10

<PAGE>

days after the Effective Date, prepare and file with the Commission a
Registration Statement on Form S-3 or such other appropriate form (the "Initial
Registration Statement") for sale or distribution of the Awarded Stock and the
Attorney Fee Stock on a delayed or continuous basis under Rule 415 of the
Securities Act, and shall use commercially reasonable efforts to cause such
Initial Registration Statement to be declared effective no later than the 180th
day after the Effective Date. NaviSite shall at its own expense, subject to the
provisions of this Exhibit A, furnish to Holders a prospectus meeting the
requirements of Section 10(a) of the Securities Act during such period as
NaviSite is obligated to maintain the effectiveness of a Registration Statement
pursuant to paragraph (ii) below. For purposes hereof, "Initial Registrable
Securities" shall include the Attorney Fee Stock and Awarded Stock,
collectively.

(ii) NaviSite shall use its reasonable best efforts to cause the Initial
Registration Statement described in paragraph (i) to remain effective (or, if
required by applicable law, to cause another Registration Statement with respect
to the Initial Registrable Securities to become and remain effective) until the
earlier to occur of: (i) such time as such securities cease to be Initial
Registrable Securities; and (ii) the date which is two (2) years after the
Effective Date. As to any particular securities, such securities will cease to
be Initial Registrable Securities when (i) they have been transferred in a
public offering registered under the Securities Act, (ii) they have been
transferred in a sale made through a broker, dealer or market-maker pursuant to
Rule 144 under the Securities Act, (iii) the Holders are or would be able to
sell all of such securities under Rule 144(k) under the Securities Act, or (iv)
they have been transferred other than as permitted by this Settlement Agreement.
In the event NaviSite inquires in writing of any of the parties hereto as to how
many shares of Stock such person then beneficially owns or holds, directly or
indirectly, such party shall respond to NaviSite in writing with all such
reasonably requested information within five business days after receipt of such
written request. If such party fails to respond in writing to NaviSite within
such time period, then NaviSite may conclusively presume that such party no
longer beneficially owns or holds, directly or indirectly, any shares of Stock.

(b) Underwriting. If the registration of which NaviSite gives notice is for a
registered public offering involving an underwriting, NaviSite shall so advise
the Holder as a part of the written notice given pursuant to this Exhibit A. In
such event, the right of the Holder to registration pursuant to Section 3.1 of
this Exhibit A shall be conditioned upon the Holder's participation in such
underwriting and the inclusion of the Awarded Stock and the Attorney Fee Stock
in the underwriting shall be limited to the extent provided herein.

A Holder proposing or demanding to distribute its securities through such
underwriting shall (together with NaviSite and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by NaviSite. Notwithstanding any other provision of this Section 3.1 of this
Exhibit A, if the managing underwriter determines that marketing factors require
a limitation of the number of shares to be underwritten or that marketing
factors require the exclusion of shares held by selling stockholders, and so
confirms such determination in a written letter to NaviSite, the managing
underwriter may limit the total number of registrable securities to be included
in such registration to zero. NaviSite shall so advise the Holder and other
holders distributing their securities through such underwriting and the number
of shares of registrable securities that may be included in the registration, if
required. To facilitate the allocation of shares in accordance with the above
provisions, NaviSite may round the number of shares allocated to the Holder to
the nearest

11

<PAGE>

100 shares.

If the Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to NaviSite and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.

(c) Right to Terminate Certain Registrations. NaviSite shall have the right to
terminate or withdraw any registration initiated by it hereunder prior to the
effectiveness of such registration whether or not the Holder has elected to
include securities in such registration.

         3.2 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with all registrations pursuant hereto shall be borne by NaviSite.
All Selling Expenses shall be borne by the Holders and not by NaviSite.

         3.3 REGISTRATION PROCEDURES. In the case of each registration effected
by NaviSite pursuant hereto, NaviSite will keep the Holder advised in writing as
to the initiation of each registration, qualification and compliance and as to
the completion thereof. NaviSite will:

(a) furnish to the participating Holder and to the underwriters of the
securities being registered, if any, such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as such Holder and underwriters may reasonably request in order to
facilitate the public offering of such securities;

(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act;

(c) register and qualify the Awarded Stock and Attorney Fee Stock under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested in writing by the Holder, provided that NaviSite shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions;

(d) in the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering (the participating Holder in such
underwriting shall also enter into and perform its obligations under such an
agreement);

(e) notify the Holder of registrable securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;

(f) cause all such registrable securities registered pursuant hereunder to be
listed on each securities exchange on which similar securities issued by
NaviSite are then listed; and

(g) provide a transfer agent and registrar for all registrable securities
registered

12

<PAGE>

pursuant hereunder and a CUSIP number for all such registrable securities, in
each case not later than the effective date of such registration.

         3.4 DELAY OF REGISTRATION. The Holder shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 3 of this Exhibit A.

         3.5 INFORMATION BY HOLDERS. The Holder of registrable securities
included in any registration shall furnish to NaviSite such information
regarding such Holder, the registrable securities held by it and the
distribution proposed by such Holder as NaviSite may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.

         3.6 SUSPENSION. Notwithstanding anything to the contrary until such
securities cease to be Initial Registrable Securities, NaviSite may suspend the
effectiveness of any Registration Statement, the use of the prospectus included
in any Registration Statement and/or the sales of the Initial Registrable
Securities, if, in its reasonable good faith judgment, (A) NaviSite is engaged
in a non-public activity or there is a pending material development the
disclosure of which would be materially detrimental to NaviSite; (B) maintaining
the effectiveness of such Registration Statement at such time would materially
adversely affect a proposed financing, reorganization or recapitalization of
NaviSite, or pending negotiations relating to a merger, consolidation,
acquisition or similar transaction involving NaviSite; or (C) financial
statements meeting the requirements of Regulation S-X are not available at such
time; provided, that, if registrable securities are otherwise saleable
thereunder and not restricted by this Settlement Agreement, NaviSite shall give
to each holder of Initial Registrable Securities prior written notice of such
suspension at such Holder's most recent address on file with NaviSite. Upon
receipt of such notice, such holder shall immediately discontinue any sales of
Initial Registrable Securities pursuant to such Registration Statement.

13

<PAGE>

                        EXHIBIT B TO SETTLEMENT AGREEMENT

                           STATEMENT OF TRADING RIGHTS

With respect to calendar year 2005, Convergence and or the Settling Shareholders
shall have the right to Transfer all or any part or all of their Stock upon
their exercise of the Trading Rights set forth below:

SALES BY ATLANTIC PARTIES

1.1. Notice of Purchase Offers. Should any of the Atlantic Parties propose to
accept from any persons or entity, other than an affiliate or related party of
the Atlantic Parties (the "Buyer") one or more bona fide offers (a "Purchase
Offer") to purchase shares of NaviSite's Stock from any of the Atlantic Parties
in a private transaction (i.e., not in an open market transaction on the Nasdaq
SmallCap Market), then the Atlantic Parties shall within five (5) calendar days
promptly give written notice to NaviSite, Convergence and the Settling
Shareholders, of the terms and conditions of such Purchase Offer including: (a)
a description of the shares of Stock to be transferred, (b) the identity of the
prospective transferee(s) and (c) the consideration and the material terms and
conditions upon which the proposed transfer is to be made. The Atlantic Parties
shall inform the Buyer of the trading rights set forth in Section 1.2 below, and
shall not accept or otherwise entertain any Purchase Offer that does not allow
for the right of Convergence and or the Settling Shareholders to make a pro rata
sale to the Buyer. Any transfer or sale of NaviSite Stock by any of the Atlantic
Parties to an affiliate or related party shall be subject to the transferee
first agreeing in writing to be subject to the terms and conditions of this
Exhibit B with respect to such shares.

1.2 Trading Rights. Convergence and the Settling Shareholders shall have the
right, exercisable within five (5) business days before any of the Atlantic
Parties sells Stock as described in Section 1.1 above to sell a pro rata amount
of stock publicly or, at their options, to the Buyer (e.g, if any of the
Atlantic Parties sells or has the opportunity to sell a portion of his or its
shares of NaviSite common stock in a private transaction to the Buyer, then
Convergence and the Settling Shareholders collectively shall have the right to
sell a pro rata portion of their Stock publicly or to the Buyer ).

1.3. Ongoing Rights. The exercise or non-exercise of the Trading Rights shall
not adversely affect a Settling Stockholder's right to participate in subsequent
Stock sales during calendar year 2005 by any of the Atlantic Parties pursuant to
Section 1.1 of this Exhibit B.

1.4. Permitted Exemptions. The Transfer Rights of Convergence and the Settling
Shareholders shall not apply to (a) any transfer of Stock to NaviSite pursuant
to a written agreement entered before the Effective Date between NaviSite and
any of the Atlantic Parties providing for the right of such repurchase or to any
of the Atlantic Parties' ancestors or descendants or spouse or to a trustee for
their benefit or (b) a sale to a person who is an employee, consultant or
director of NaviSite at the time of transfer; provided, that (i) the Atlantic
Parties shall inform Convergence and the Settling Shareholders of such pledge,
transfer or sale at the time of transfer prior to effecting it.

<PAGE>

        EXHIBIT C TO SETTLEMENT AGREEMENT - STOCK AND CASH DISTRIBUTION

<TABLE>
<CAPTION>
                                                           AWARD          FEE         CASH
RECIPIENT                                                  STOCK         STOCK       PAYMENT    GROUP
---------                                                  -----         -----       -------    -----
<S>                                                      <C>           <C>          <C>         <C>
Russo & Hale/ RH INVESTMENTS LLC                         144,846        90,000            $0        A
Convergence Entrepreneurs Fund II, L.P.                    5,344         3,320        $6,017        B
Convergence Ventures II, Civil Law Partnership             8,550         5,313        $9,628        B
Convergence Ventures II, L.P.                             98,330        61,097      $110,725        B
Sunrise Capital Fund II, LLC                              12,509         7,773       $11,589        C
Sand Hill Capital Fund I, L.P.                             7,818         4,858        $7,243        D
CommVest Partners I Company                                2,376         1,476            $0        E
CommVest Partners II Company                               1,876         1,166            $0        E
Williams Street Associates VIII, LLC                       8,068         5,013            $0        E
APAX Excelsior VI, L.P.                                   13,729         8,531       $12,720        F
APAX Excelsior VI-A C.V.L.P.                               1,123           698        $1,040        F
APAX Excelsior VI-B C.V.L.P.                                 748           465          $693        F
Patricof Private Investment Club III, L.P.                   481           299          $445        F
Weiss, Peck & Greer Venture Assoc IV Cayman, L.P.            996           619          $923        G
Weiss, Peck & Greer Venture Assoc IV, LLC                  7,885         4,899        $7,305        G
WPG Enterprise Fund III, LLC                               6,895         4,284        $6,388        G
WPG Information Sciences Entrepreneur Fund, L.P.             306           190          $284        G
                                                         -------       -------      --------
                                                         321,880       200,000      $175,000
                                                         -------       -------      --------
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]