Security Agreement - NaviSite Inc. and CMGI Inc.
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), dated as of May 1, 1999, is by
and between NAVISITE, INC., a Delaware corporation having its principal place of
business at One Hundred Brickstone Square, Andover, Massachusetts 01810 (the
"Debtor") and CMGI, INC., a Delaware corporation having an address at One
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Hundred Brickstone Square, Andover, Massachusetts 01810 (the "Lender").
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W I T N E S S E T H:
WHEREAS, the Lender has agreed, in its sole discretion, to advance funds to
the Debtor from time to time (the "Loans"), which Loans shall be evidenced by a
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Secured Convertible Demand Note dated as of May 1, 1999 (the "Convertible Note")
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and a Secured Demand Note dated May 1, 1999 (the "Demand Note," and, together
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with the Convertible Note, the "Notes"); and
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WHEREAS, the willingness of the Lender to make the Loans is subject to the
condition, among others, that the Debtor shall execute and deliver this
Agreement and grant the security interest hereinafter described;
NOW THEREFORE, in consideration of the willingness of the Lender to make
the Loans to the Debtor, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed,
with the intent to be legally bound, as follows:
1. Defined Terms. Except as otherwise expressly defined herein, all
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capitalized terms shall have the meanings ascribed to them in the Notes.
2. Security Interest. As security for the Secured Obligations described
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in paragraph 3 hereof, the Debtor hereby grants to the Lender a security
interest in and lien on all of the tangible and intangible personal property and
fixtures of the Debtor, including without limitation the property described
below, whether now owned or existing or hereafter acquired or arising, together
with any and all additions thereto and replacements therefor and proceeds and
products thereof (hereinafter referred to collectively as the "Collateral"):
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(a) all of the Debtor's tangible personal property, including without
limitation all present and future goods, inventory (including without limitation
all printed materials, merchandise, raw materials, work in process, finished
goods and supplies), equipment, merchandise, furniture, fixtures, office
supplies, motor vehicles, machinery, paper, tools, computers, and associated
equipment now owned or hereafter acquired, including, without limitation, the
tangible personal property used in the operation of the businesses of the
Debtor;
(b) to the extent that such rights are assignable as collateral, the
Debtor's rights under all present and future authorizations, permits, licenses
and franchises issued, granted or licensed to the Debtor for the operation of
its business, including without limitation each of the authorizations, permits,
licenses and franchises (if any) listed on the Intellectual Property Security
Agreement executed this date from the Debtor to the Lender;
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(c) to the extent that such rights are assignable, all of the Debtor's
rights under all present and future vendor or customer contracts and all
franchise, distribution, construction, engineering, management, direct marketing
and advertising and related agreements; and
(d) all of the Debtor's other personal property, including, without
limitation, all present and future accounts, accounts receivable, investment
property, rights to proceeds of letters of credit, contract rights, general
intangibles (including without limitation, all goodwill, all trademarks,
intellectual property to the extent assignable as collateral, all customer
lists, vendor lists, and other printed materials, including all catalogs,
indexes, lists, data and other documents and papers relating thereto, blue
prints, designs and research and development), any information stored on any
medium, including electronic medium, related to any of the personal property of
the Debtor, all instruments, documents and chattel paper, and all debts,
obligations and liabilities in whatever form owing to the Debtor from any
person, firm or corporation or any other legal entity, whether now existing or
hereafter arising, now or hereafter received by or belonging or owing to the
Debtor, and all guaranties and security therefor.
Any of the foregoing terms which are defined in the Uniform Commercial Code
shall have the meaning provided in the Uniform Commercial Code as supplemented
and expanded by the foregoing.
3. Secured Obligations. The security interest hereby granted shall
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secure the due and punctual payment and performance of the following liabilities
and obligations of the Debtor (herein called the "Secured Obligations"):
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(a) Principal of and premium, if any, and interest on the Loans;
(b) Any and all obligations of the Debtor to the Lender under the
Notes; and
(c) Any and all other obligations of the Debtor to the Lender.
4. Perfection Certificate. The Debtor has delivered to the Lender a
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Perfection Certificate in the form appended hereto as Schedule I. The Debtor
represents to the Lender that the completed Perfection Certificate delivered to
the Lender is true and correct in every respect and the facts contained in such
certificate are accurate. The Debtor shall supplement the Perfection
Certificate promptly after obtaining information which would require a
correction or addition to the Perfection Certificate.
5. Special Warranties and Covenants of the Debtor. The Debtor hereby
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warrants and covenants to the Lender that:
(a) The address shown at the beginning of this Agreement is the
current principal place of business of the Debtor, and all of the Debtor's
current additional places of business, if any, and the locations of all of the
Collateral currently are listed in the Perfection Certificate delivered pursuant
to Section 4 above. The Debtor will not change its principal or any other place
of business, or the location of any Collateral from the locations set forth in
the Perfection Certificate, or make
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any change in the Debtor's name or conduct the Debtor's business operations
under any fictitious business name or trade name, without, in any such case, at
least thirty (30) days' prior written notice to the Lender.
(b) Except for the security interest created hereunder, the Debtor is
the owner or, as applicable, licensee of the Collateral free from any lien,
security interest or encumbrance and the Debtor will defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein.
(c) Except as otherwise consented to in writing by the Lender, the
Debtor will not, other than in the ordinary course of business, sell or
otherwise dispose of any of the Collateral or any interest therein nor will the
Debtor create, incur or permit to exist any mortgage, lien, charge, encumbrance
or security interest whatsoever with respect to the Collateral.
(d) Except for Collateral that is obsolete or no longer used in the
Debtor's business, the Debtor will keep the Collateral in good order and repair
(normal wear excepted) and adequately insured at all times. The Debtor will pay
promptly when due all taxes and assessments on the Collateral or for its use or
operation, except for taxes and assessments contested in good faith and for
which adequate reserves are created. The Lender may at its option discharge any
taxes, liens, security interests or other encumbrances to which any Collateral
is at any time subject, and may, upon the failure of the Debtor to do so in
accordance with the terms hereof, purchase insurance on any Collateral and pay
for the repair, maintenance or preservation thereof, and the Debtor agrees to
reimburse the Lender on demand for any payments or expenses incurred by the
Lender pursuant to the foregoing authorization and any unreimbursed amounts
shall constitute Secured Obligations for all purposes hereof.
(e) The Collateral, other than intellectual property licensed from
third parties, may be transferred to a third party upon a default without the
consent of any other third party, in accordance with and to the extent permitted
by applicable law.
(f) The Debtor will promptly execute and deliver to the Lender such
financing statements, certificates and other documents or instruments as may be
necessary to enable the Lender to perfect or from time to time renew the
security interest granted hereby, including, without limitation, such financing
statements, certificates and other documents as may be necessary to perfect a
security interest in any additional Collateral hereafter acquired by the Debtor
or in any replacements or proceeds thereof. The Debtor authorizes and appoints
the Lender, in case of need, to execute such financing statements, certificates
and other documents pertaining to the Lender's security interest in the
Collateral in its stead, with full power of substitution, as the Debtor's
attorney in fact. The Lender may from time to time request and the Debtor shall
deliver copies of all customer lists and vendor lists. The Debtor further
agrees that a carbon, photographic or other reproduction of a security agreement
or financing statement is sufficient as a financing statement under this
Agreement.
(g) The Debtor will give the Lender notice of each office at which
records of the Debtor pertaining to all intangible items of Collateral are kept.
Except as may be provided in such
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notice, the records concerning all intangible Collateral are and will be kept at
the address shown at the beginning of this Agreement as the principal place of
business of the Debtor.
(h) To the extent that the Debtor is a beneficiary under any written
letter of credit now or hereafter issued in favor of the Debtor, the Debtor
shall deliver such letter of credit to the Lender. The Lender shall from time
to time, at the request and expense of the Debtor, make such arrangements with
the Debtor as are in the Lender's reasonable judgment necessary and appropriate
so that the Debtor may make any drawing to which the Debtor is entitled under
such letter of credit, without impairment of the Lender's perfected security
interest in the Debtor's rights to the proceeds of such letter of credit or in
the actual proceeds of such drawing. At the Lender's request, the Debtor shall,
for any letter of credit, whether or not written, now or hereinafter issued in
favor of the Debtor as beneficiary, execute and deliver to the issuer or any
confirmer of such letter of credit an assignment of proceeds form, in favor of
the Lender and satisfactory to the Lender and such issuer or (as the case may
be) such confirmer, requiring the proceeds of any drawing under such letter of
credit to be paid directly to the Lender for application under the Notes.
6. Fixtures, etc. It is the intention of the parties hereto that none of
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the Collateral shall become fixtures and the Debtor will take all such
reasonable action or actions as may be necessary to prevent any of the
Collateral from becoming fixtures. Without limiting the generality of the
foregoing, the Debtor will, if requested by the Lender, use commercially
reasonable efforts to obtain waivers of lien, in form satisfactory to the
Lender, from each lessor of real property on which any of the Collateral is or
is to be located.
7. Events of Default. The Debtor shall be in default under this
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Agreement (an "Event of Default") upon the happening of any Event of Default
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under the Notes.
8. Rights and Remedies of Lender. Upon the occurrence of any Event of
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Default, such default not having previously been waived, remedied or cured, the
Lender shall have the following rights and remedies:
(a) All rights and remedies provided by law, including without
limitation those provided by the Uniform Commercial Code;
(b) all rights and remedies provided in this Agreement; and
(c) All rights and remedies provided in any other agreement, document
or instrument pertaining to the Secured Obligations.
9. Right of Lender to Dispose of Collateral, etc. Upon the occurrence of
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any Event of Default, such Event of Default not having previously been waived,
remedied or cured, but subject to the provisions of the Uniform Commercial Code
or other applicable law, the Lender shall have the right to take possession of
the Collateral and, in addition thereto, the right to enter upon any premises on
which the Collateral or any part thereof may be situated and remove the same
therefrom. The Lender may require the Debtor to make the Collateral (to the
extent the same is moveable) available to the Lender at a place to be designated
by the Lender which is reasonably convenient to
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both parties or transfer any information related to the Collateral to the Lender
by electronic medium. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Lender will give the Debtor at least ten (10) days' prior written
notice in accordance with paragraph 18 hereof of the time and place of any
public sale of any of the Collateral or of the time after which any private sale
or any other intended disposition thereof is to be made. Any such notice shall
be deemed to meet any requirement hereunder or under any applicable law
(including the Uniform Commercial Code) that reasonable notification be given of
the time and place of such sale or other disposition.
10. Notes. Notwithstanding any other provision of this Agreement, the
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rights of the parties hereunder are subject to the provisions of the Notes.
11. Right of Lender to Use and Operate Collateral, etc. Upon the
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occurrence of any Event of Default, such default not having previously been
waived, remedied or cured, but subject to the provisions of the Uniform
Commercial Code or other applicable law, the Lender shall have the right and
power to take possession of all or any part of the Collateral, and to exclude
the Debtor and all persons claiming under the Debtor wholly or partly therefrom,
and thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the Lender may, from time to time, at the
expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to and of the Collateral as the Lender may deem
proper. In any such case the Lender shall have the right to manage and control
the Collateral and to carry on the business and to exercise all rights and
powers of the Debtor in respect thereto as the Lender shall deem best, including
the right to enter into any and all such agreements with respect to the
operation of the Collateral or any part thereof as the Lender may see fit; and
the Lender shall be entitled to collect and receive all rents, issues, profits,
fees, revenues and other income of the same and every part thereof. Such rents,
issues, profits, fees, revenues and other income shall be applied to pay the
expenses of holding and operating the Collateral and of conducting the business
thereof, and of all maintenance, repairs, replacements, alterations, additions
and improvements, and to make all payments which the Lender may be required or
may elect to make, if any, for taxes, assessments, insurance and other charges
upon the Collateral or any part thereof, and all other payments which the Lender
may be required or authorized to make under any provision of this Agreement
(including legal costs and attorneys' fees). The remainder of such rents,
issues, profits, fees, revenues and other income shall be applied as provided in
paragraph 13. Without limiting the generality of the foregoing or limiting in
any way the rights of the Lender under applicable law, at any time after (i) the
entire principal balance of any Loan shall have become due and payable (whether
at maturity, by acceleration or otherwise) and (ii) the Lender shall have
provided to the Debtor not less than ten (10) days' prior written notice of its
intention to apply for a receiver, the Lender shall be entitled to apply for and
have a receiver appointed under state or federal law by a court of competent
jurisdiction in any action taken by the Lender to enforce its rights and
remedies hereunder in order to manage, protect, preserve, sell and otherwise
dispose of all or any portion of the Collateral and continue the operation of
the business of the Debtor, and to collect all revenues and profits thereof and
apply the same to the payment of all expenses and other charges of such
receivership, including the compensation of the receiver, and to the payment of
the Secured Obligations as aforesaid until a sale or other disposition of such
Collateral shall be finally made and consummated. THE DEBTOR HEREBY IRREVOCABLY
CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT
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TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AS PROVIDED ABOVE. THE
DEBTOR (I) GRANTS SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE
IMPLICATIONS THEREOF WITH COUNSEL, (II) ACKNOWLEDGES THAT (A) THE UNCONTESTED
RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED
ESSENTIAL BY THE LENDER IN CONNECTION WITH THE ENFORCEMENT OF ITS RIGHTS AND
REMEDIES HEREUNDER AND UNDER THE NOTES, AND (B) THE AVAILABILITY OF SUCH
APPOINTMENT AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR
IN INDUCING THE LENDER TO MAKE THE LOANS TO THE DEBTOR, AND (III) AGREES TO
ENTER INTO ANY AND ALL STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER
INSTRUMENTS IN CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE
LENDER IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER
OVER ALL OR ANY PORTION OF THE COLLATERAL. THE LENDER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS PARAGRAPH 11 SHALL BE DEEMED TO CONSTITUTE A WAIVER OF THE
DEBTOR'S RIGHT TO FILE FOR PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE
AT ANY TIME PRIOR TO THE APPOINTMENT OF A RECEIVER.
12. Collection of Accounts Receivable, etc. Upon the occurrence of any
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Event of Default, such default not having previously been waived, remedied or
cured, the Lender may notify or may require the Debtor to notify account
debtors, including without limitation, customers and vendors, obligated on any
or all of the Debtor's accounts receivable, whether now existing or hereafter
arising, to make payment directly to the Lender, and may take possession of all
proceeds of any accounts in the Debtor's possession, and may take any other
steps which the Lender deems necessary or advisable to collect any or all such
accounts receivable or other Collateral or proceeds thereof.
13. Proceeds of Collateral. After deducting all costs and expenses of
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collection, storage, custody, sale or other disposition and delivery (including
legal costs and attorneys' fees) and all other charges against the Collateral,
the residue of the proceeds of any such sale or disposition shall be applied to
the payment of the Secured Obligations in such order of priority as the Lender
shall determine and any surplus shall be returned to the Debtor or to any person
or party lawfully entitled thereto (including, if applicable, any subordinated
creditors of the Debtor). By way of enlargement and not by way of limitation of
the rights of the Lender under applicable law or the Notes, the Lender shall be
entitled to allocate its application of the Collateral, and the proceeds
thereof, to the Secured Obligations (including without limitation the Loans) in
such proportions and in such order as the Lender, in its sole discretion, shall
decide (consistent with the Notes). In the event the proceeds of any sale,
lease or other disposition of the Collateral hereunder are insufficient to pay
all of the Secured Obligations in full, the Debtor will be liable for the
deficiency, together with interest thereon at the maximum rate provided in the
Notes, and the cost and expenses of collection of such deficiency, including (to
the extent permitted by law) without limitation reasonable attorneys' fees,
expenses and disbursements.
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14. Waivers, etc. The Debtor hereby waives presentment, demand, notice,
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protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the Lender's
rights hereunder or in connection with any Secured Obligations or any
Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Debtor or to any
account debtor in respect of any account receivable or to any other third party,
or substitution, release or surrender of any Collateral, the addition or release
of persons primarily or secondarily liable on any Secured Obligation or on any
account receivable or other Collateral, the acceptance of partial payments on
any Secured Obligation or on any account receivable or other Collateral and/or
the settlement or compromise thereof. No delay or omission on the part of the
Lender in exercising any right hereunder shall operate as a waiver of such right
or of any other right hereunder. Any waiver of any such right on any one
occasion shall not be construed as a bar to or waiver of any such right on any
future occasion. THE DEBTOR FURTHER WAIVES ANY RIGHT IT MAY HAVE UNDER THE
CONSTITUTION OF THE COMMONWEALTH OF MASSACHUSETTS, UNDER THE CONSTITUTION OF ANY
STATE IN WHICH ANY OF THE COLLATERAL MAY BE LOCATED, OR UNDER THE CONSTITUTION
OF THE UNITED STATES OF AMERICA, TO NOTICE (OTHER THAN ANY REQUIREMENT OF NOTICE
PROVIDED HEREIN) OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR
REMEDY PROVIDED BY THIS AGREEMENT TO THE LENDER AND WAIVES ITS RIGHTS, IF ANY,
TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE
FOREGOING PROVISIONS HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE
WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. The Debtor's waivers under
this section have been made voluntarily, intelligently and knowingly and after
the Debtor has been apprized and counseled by its attorneys as to the nature
thereof and its possible alternative rights.
15. Termination; Assignment, etc. This Agreement and the security
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interest in the Collateral created hereby shall terminate when all of the
Secured Obligations have been paid and finally discharged in full and the Lender
and the Debtor agree to terminate this Agreement. In such event, the Lender
agrees to execute appropriate releases of liens on the Collateral. No waiver by
the Lender or by any other holder of Secured Obligations of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion. In the event of a sale or assignment of
part or all of the Secured Obligations by the Lender, the Lender may assign or
transfer its respective rights and interest under this Agreement in whole or in
part to the purchaser or purchasers of such Secured Obligations, whereupon such
purchaser or purchasers shall become vested with all of the powers and rights of
the Lender hereunder.
16. Reinstatement. Notwithstanding the provisions of paragraph 15, this
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Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any amount received by the Lender in respect of the Secured
Obligations is rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Debtor or any subsidiary or upon the appointment of any intervener or
conservator of, or trustee or similar official for, the Debtor or any subsidiary
or any substantial part of any of their properties, or otherwise, all as though
such payments had not been made.
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17. Governmental Approval. Prior to or, where permitted, upon the
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exercise by the Lender of any power, right, privilege or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, the Debtor will
execute and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments and other documents and papers that the
Debtor may be required to obtain for such governmental consent, approval,
registration, qualification or authorization.
18. Notices. All notices, consents, approvals, elections and other
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communications hereunder shall be in writing (whether or not the other
provisions of this Agreement expressly so provide) and shall be deemed to have
been duly given if delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by facsimile, as follows: (i) if to the
Lender, to CMGI, Inc., 100 Brickstone Square, Andover, Massachusetts 01810,
Attention: Chief Financial Officer, facsimile number: 978-684-3672, and (ii) if
to the Debtor, to NaviSite, Inc., 100 Brickstone Square, Andover, Massachusetts
01810, Attention: Chief Financial Officer, facsimile number: 978-684-3596.
19. Miscellaneous. This Agreement shall inure to the benefit of the
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Lender and be binding upon the Lender and the Debtor and their respective
successors and assigns. In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Agreement may be executed in two counterparts, each of which shall be an
original, but both of which together shall constitute one instrument.
20. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement,
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including the validity hereof and the rights and obligations of the parties
hereunder, shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts. The Debtor, to the extent that it may lawfully
do so, hereby consents to service of process, and to be sued, in the
Commonwealth of Massachusetts and consents to the jurisdiction of the courts of
the Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts to which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any of the Secured Obligations or with respect
to the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts. The Debtor further
agrees that a summons and complaint commencing an action or proceeding in any of
such courts shall be properly served and shall confer personal jurisdiction if
served personally or by certified mail to it at its address provided in
paragraph 18 hereof or as otherwise provided under the laws of the Commonwealth
of Massachusetts.
THE DEBTOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE DEBTOR IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
21. Construction in Event of Conflict. Simultaneously with the execution
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of this Agreement, the parties are entering into an Intellectual Property
Security Agreement (the "IP
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Security Agreement"). In the event of any conflict between this Agreement and
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the IP Security Agreement, the terms of the IP Security Agreement shall control.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the date first above written.
NAVISITE, INC.
By: /s/ Joel B. Rosen
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Name: Joel B. Rosen
Title: Chief Executive Officer
CMGI, INC.
By: /s/ Andrew J. Hajducky
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Name: Andrew J. Hajducky III
Title: Chief Financial Officer
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Schedule I
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Officer's Certificate
The undersigned, Joel B. Rosen, of NaviSite, Inc., a Delaware corporation
(the "Company"), hereby certifies, and agrees on behalf of the Company (the
"Pledgor Corporation"), as follows:
Set forth below are all the locations where the Company maintains any
material amount (fair market value of $10,000 or more) of Collateral (as defined
in the Security Agreement between the Company and CMGI, Inc. dated as of May 1,
1999) of the Company (whether or not in the possesion of the Company):
Andover,Massachusettes
New York, New York
Phoenix, Arizona
San Jose, California
Scotts Valley, California
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of ____,
1999.
NAVISITE, INC.
BY: /s/ Joel B. Rosen
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Name: Joel B. Rosen
Title: Chief Executive Officer