EXHIBIT 10.2
NEITHER THIS SECURITY NOR ANY SECURITY ISSUABLE UPON CONVERSION HEREOF HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM
NAVISITE, INC.
PROMISSORY NOTE
(PRIMARY NOTE)
Principal Amount: [$____________] May __, 2004
FOR VALUE RECEIVED, the undersigned, NAVISITE, INC., a Delaware
corporation ("NAVISITE"), and each Principal Subsidiary (as defined below) which
is a signatory hereto (NaviSite and such Principal Subsidiaries, collectively,
and jointly and severally, the "COMPANY"), hereby unconditionally promise,
jointly and severally, to pay to the order of SUREBRIDGE, INC. (together with
its successors and/or permitted assigns, the "HOLDER"), in lawful money of the
United States of America and in immediately available funds, the principal
amount of [___________________ UNITED STATES DOLLARS ($_______________)],
together with all accrued and unpaid interest thereon (and any unpaid penalties,
fees, costs or expenses due the Holder hereunder) on this Note.
The undersigned further agree, jointly and severally, to pay interest as
provided below at the Holder's address referred to below on the unpaid balance
of this Note at the rates per annum and on the dates specified below until paid
in full. Subject to the provisions of the Purchase Agreement (as defined below),
all payments hereunder shall be made for the account of Holder at such Holder's
address, or if the Holder is Surebridge, Inc., to Surebridge, Inc., c/o Spectrum
Equity Investors, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or in any case to
such other address as the Holder may designate in accordance with the terms of
Section 14 hereof. If any principal of, or interest on, this Note is not paid
when due or there exists an Event of Default, certain additional interest may be
payable on this Note in accordance with the provisions hereof.
This Note and the Escrow Note (as herein defined) are being issued to the
Holder in connection with that certain Asset Purchase Agreement, dated as of May
6, 2004 (as amended, supplemented or otherwise modified from time to time, the
"Purchase Agreement"), among Surebridge, Inc., Lexington Acquisition Corp. and
NaviSite. The Purchase Agreement, the Registration Rights Agreement (as defined
in the Purchase Agreement) providing for the
registration of the Parent Shares (as defined in the Purchase Agreement), the
Escrow Note and this Note are collectively referred to herein as the
"TRANSACTION DOCUMENTS").
ALL OBLIGATIONS OF THE COMPANY HEREUNDER ARE AND SHALL BE FOR ALL PURPOSES
HEREUNDER AND OTHERWISE THE JOINT AND SEVERAL OBLIGATIONS OF NAVISITE AND ITS
PRINCIPAL SUBSIDIARIES SIGNATORIES HERETO.
1. Principal Repayment; Mandatory Prepayment.
The original principal amount of this Note is [$__________]. The original
principal amount is subject to adjustment as set forth in the Purchase
Agreement. This Note shall be surrendered to the Company at such time as any
such adjustments are finally determined and the Company shall cancel this Note
and shall prepare and issue a new replacement note with all terms and provisions
identical to the terms hereof, other than with respect to the principal amount
of the note and with respect to this sentence and the immediately preceding
sentences, both of which sentences shall be omitted from the replacement note.
The Company shall repay the outstanding principal of this Note, together with
all interest accrued thereon and other amounts due in respect thereof on [May
__], 2006 (the "MATURITY DATE").
After the date hereof, the Company shall prepay all or part of the
outstanding principal balance of this Note and the Escrow Note, together with
all interest accrued and unpaid thereon, and any other amounts due with respect
thereto in an amount equal to seventy-five percent (75%) of all Net Cash
Proceeds (as defined below) within three business days of receipt of Net Cash
Proceeds by the Company (a "MANDATORY Prepayment"). Such Mandatory Prepayment
shall be pro rated between this Note and the Escrow Note based on the total
principal outstanding under both Notes. Payments in respect of this Note shall
be applied, first, to interest accrued and unpaid on the outstanding principal
of this Note and, second, to prepay the principal amount of this Note.
Notwithstanding the foregoing, during the period when the Working Capital
Adjustment is not resolved under Section 1.6 of the Purchase Agreement, and
NaviSite would otherwise be obligated to pay this Note in full as a Mandatory
Prepayment, NaviSite may retain up to $500,000 of the amount otherwise payable
until such time as the Net Working Capital Adjustment is resolved under the
Purchase Agreement.
2. Optional Prepayment.
The Company may prepay all or any part of the unpaid principal of this
Note and the Escrow Note, together with all accrued and unpaid interest thereon
and other amounts due in respect thereof, at any time and from time to time
without premium or penalty, provided that in connection with any such
prepayment, the Company, at the Holder's request, shall provide the Holder,
within a reasonable time after receipt of Holder's request, with evidence
reasonably satisfactory to the Holder that such prepayment is not prohibited
under the Company's other outstanding Indebtedness. Other than a prepayment
required by Section 5.22 of the Purchase Agreement, such prepayment shall be pro
rated between this Note and the Escrow Note based on the total principal then
outstanding under both Notes. Payments in respect of this Note shall be applied,
first, to interest accrued and unpaid on the outstanding principal of this Note
and, second, to repay the principal amount of this Note.
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3. Interest.
Interest shall accrue on the unpaid balance of this Note at the annual
rate of ten percent (10%), and shall be paid in full on the Maturity Date (or
such earlier date as provided herein); provided, however, that if an Event of
Default (as defined below) shall occur and be continuing, all principal and
interest outstanding under this Note shall, as of and after the occurrence of
such Event of Default, bear interest at a rate per annum of fifteen percent
(15%). Interest on this Note shall be computed based on a 360-day year of twelve
30-day months. Notwithstanding the foregoing or anything to the contrary, no
interest shall be due or payable and no interest shall accrue on account of any
principal amount paid to the Holder on or prior to the six month anniversary of
the issuance date of this Note.
4. Event of Default.
If any of the following shall occur (each an "EVENT OF DEFAULT"):
(a) all or any portion of the principal of, or interest on, or other
amounts payable with respect to this Note is not paid when due, and such failure
continues for three business days after receipt of written notice thereof from
the Holder or a holder hereof; or
(b) there shall have been a material breach by NaviSite of Section 4.10 of
the Purchase Agreement; or
(c) a proceeding under 11 U.S.C. Sections 101 et seq., as amended,
and any similar or successor Federal statute, and the rules and regulations
thereunder (collectively, the "BANKRUPTCY CODE"), seeking an order for relief or
under any other bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is filed against NaviSite or
any Principal Subsidiary and such proceeding is not dismissed within 60 days of
the date of its filing, or a proceeding under the Bankruptcy Code seeking an
order for relief or under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed by
NaviSite or any Principal Subsidiary, or NaviSite or any Principal Subsidiary
makes an assignment for the benefit of creditors, or NaviSite or any Principal
Subsidiary authorizes any of the foregoing; or
(d) NaviSite or any Principal Subsidiary voluntarily or involuntarily
dissolves or is dissolved, or its existence terminates or is terminated (other
than following a merger by any Principal Subsidiary with and into another
Principal Subsidiary or with or into NaviSite) unless NaviSite or such Principal
Subsidiary revives its certificate of incorporation within three business days
thereafter; or
(e) NaviSite or any Principal Subsidiary fails generally to pay its debts
as they become due; or
(f) NaviSite or any Principal Subsidiary fails to pay any principal of or
interest on any Debt for Borrowed Money (for purposes of clarity only, such Debt
for Borrowed Money shall not include Capitalized Leases (as defined herein))
having an outstanding principal amount of $500,000 or more ("MATERIAL
INDEBTEDNESS") for a period, with respect to the SVB Line, longer than the grace
or cure period, if any, provided for such payment, or with respect to any
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other Material Indebtedness for a period longer than 120 days after the
applicable grace or cure period, if any, provided for such payment; an event of
default is declared under any instrument or agreement evidencing, creating,
securing or otherwise relating to such Material Indebtedness (including without
limitation any guaranty or assumption agreement relating to such Material
Indebtedness) or other event occurs and continues beyond any applicable grace
period, and the effect of such default or other event is to cause, or to permit
the holder or holders of such Material Indebtedness (or their representative) to
cause, such Material Indebtedness (or the obligations under any such guaranty or
assumption agreement) to become due and payable prior to the stated maturity
thereof; or
(g) NaviSite shall fail to maintain the listing or quotation of its common
stock on the Nasdaq SmallCap Market (unless it obtains a listing or quotation of
its common stock on the Nasdaq National Market or the American Stock Exchange);
or
(h) NaviSite shall breach any of its covenants contained in Section 5 or
Section 9 hereof; or
(i) NaviSite shall fail to perform its obligations under Sections 1, 2 or
6 of the Registration Rights Agreement, unless such failure to perform is the
result of actions or omissions by Surebridge; or
(j) NaviSite shall be acquired or agree to be acquired (which for purposes
hereof, shall mean the acquisition by any party of (i) more than 50% of the
stock or (ii) all or substantially all of the assets of NaviSite) (whether by
merger, consolidation, sale of all or substantially all of its assets or
otherwise) and in connection with such transaction the acquiring party does not
expressly agree in writing to pay the remaining outstanding principal and
accrued interest hereunder or otherwise assume and honor the terms and
provisions of this Note;
then, in any such case, upon the delivery of written notice to NaviSite (subject
to any grace or cure periods identified above) in the manner provided in Section
14 below, the Holder may declare due and payable the principal of, interest on
and other amounts due in respect of, this Note, whereupon the same shall be
immediately due and payable; provided, however, if an Event of Default of the
type described in the preceding clauses (c) or (d) shall occur, then the
principal of, interest on and other amounts due in respect of, this Note shall
be, without any action on the part of the holder hereof, automatically due and
payable immediately upon the occurrence of such an Event of Default. In the
event that this Note becomes or is declared due and payable prior to its stated
maturity, the same shall become due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
5. Covenants.
(a) Priority of Obligations; Incurrence of Indebtedness. For so long as
any principal shall be outstanding hereunder, or any interest or other amounts
due with respect hereto, shall be outstanding, the Company shall not incur, and
shall not commit itself to, or permit or suffer any of its Subsidiaries to incur
or to commit to incur consolidated (as defined below) Indebtedness (including,
without limitation assume, guarantee, endorse or otherwise be or become
directly, indirectly or contingently liable for Indebtedness of any other
Person) that, together with all
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other consolidated Indebtedness of the Company exceeds (or would exceed if so
incurred) $20,500,000 in the aggregate (the "WORKING CAPITAL INDEBTEDNESS"),
unless (i) such Indebtedness is unsecured and expressly subordinated by its
terms, to the reasonable satisfaction of the Holder, to the prior indefeasible
payment in full in cash of this Note, including the principal hereof, interest
accrued thereon and other amounts payable with respect hereto; (ii) such
Indebtedness is Excluded Indebtedness (as defined below); or (iii) the proceeds
of such Indebtedness are used to make a Mandatory Prepayment hereunder.
Notwithstanding the foregoing, if the Company pays any portion of the
outstanding principal balance under the Primary Note and the Escrow Note prior
to the Maturity Date as a Mandatory Prepayment or otherwise, the Working Capital
Indebtedness which is equal to or senior with the indebtedness hereunder that
the Company shall be authorized to incur shall be increased by an amount equal
to all Mandatory Prepayment installments and other payments made by the Company
pursuant hereto. For purposes of this Section 5(a), "EXCLUDED INDEBTEDNESS"
shall mean (i) any indebtedness outstanding under this Note or the Escrow Note;
(ii) any Capitalized Lease obligations of the Company; (iii) the outstanding
unsecured Indebtedness that is identified on SCHEDULE A attached hereto; and
(iv) any promissory note entered into with any of the Company's or its
subsidiaries' landlords, in each case not affiliated with the Company, solely as
part of restructuring of a real estate lease obligation.
(b) Financial Reporting. Upon written request of a Holder, NaviSite shall
provide to the Holder a copy of all financial and other information provided to
all stockholders of NaviSite concurrently with providing such information to its
stockholders. The financial statements of NaviSite and the related notes
contained in the Public Filings (as defined in the Purchase Agreement) will
present fairly, in accordance with generally accepted accounting principles
(except for the absence of notes, and in the case of unaudited quarterly
financial statements, as permitted by Regulation S-X) the consolidating
financial position of NaviSite as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified (subject in the case
of unaudited financial statements to normal year-end audit adjustments). Such
financial statements (including the related notes) will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except as disclosed in the
Public Filings.
(c) Continued Listing. NaviSite will comply with the continued listing
requirements of the Nasdaq Marketplace Rules and will take no action designed
to, or which to its knowledge is likely to have the effect of, terminating the
registration of its common stock under the Exchange Act of 1934 or delisting the
common stock from the Nasdaq SmallCap Market (unless it obtains a listing or
quotation of its common stock on the Nasdaq National Market or the American
Stock Exchange).
(d) RULE 145. THE HOLDER COVENANTS, FOR PURPOSES OF AND WITHIN THE MEANING
OF RULE 145 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THAT FOR ONE (1) YEAR
AFTER THE DATE HEREOF, THE HOLDER AND THE HOLDER'S BOARD OF DIRECTORS WILL NOT:
(A) DISTRIBUTE THIS NOTE OR ANY INTERESTS HEREUNDER PRO RATA OR OTHERWISE TO ITS
SECURITYHOLDERS; (B) ADOPT A PLAN OR AGREEMENT THAT PROVIDES FOR DISSOLUTION OR
LIQUIDATION OF THE HOLDER; OR (C) ADOPT A PLAN OR
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AGREEMENT THAT PROVIDES FOR A PRO RATA OR SIMILAR DISTRIBUTION OF THIS NOTE TO
THE SECURITYHOLDERS OF THE HOLDER OR OTHERWISE.
6. Acknowledgment. The Holder acknowledges, understands and agrees that in no
event shall this Note and the Escrow Note collectively be convertible into
an aggregate number of shares of NaviSite's Common Stock that is equal to
or greater than the Share Cap (as defined in the Purchase Agreement)
unless and until NaviSite has obtained the effective approval of its
stockholders of those matters described in Section 5.18 of the Purchase
Agreement.
7. Legends.
The Holder hereby acknowledges that this Note (unless no longer required in the
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Company, it being agreed that ▇▇▇▇▇▇▇ Procter LLP shall be satisfactory)
shall bear legends substantially in the following forms:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
IN NO EVENT SHALL THIS PROMISSORY NOTE NOR ANY INTEREST HEREIN OR
HEREUNDER BE ASSIGNED, CONVEYED, ENCUMBERED, PLEDGED, SOLD,
DISTRIBUTED OR OTHERWISE TRANSFERRED UNTIL AFTER THE FIRST
ANNIVERSARY OF THE DATE OF THIS PROMISSORY NOTE.
8. No Impairment; Obligations Absolute.
The obligations hereunder of NaviSite and each of the Principal
Subsidiaries shall remain in full force and effect without regard to, and shall
not be impaired by, (A) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of NaviSite or any Principal
Subsidiary; (B) any exercise or non-exercise, or any waiver of, any right,
remedy, power or privilege under or in respect of this Note; or (C) any
amendment to this Note, whether or not NaviSite or any Principal Subsidiary
shall have notice or knowledge of any of the foregoing. The obligations of
NaviSite and each Principal Subsidiary are independent of any other obligations
of NaviSite under or in respect of the Purchase Agreement, and a separate action
or actions may be brought and prosecuted against NaviSite or any Principal
Subsidiary to enforce this Note, irrespective of whether any action is brought
against NaviSite under or in respect of the Purchase Agreement. All rights of
the Holder shall be irrevocable, absolute and unconditional irrespective of, and
NaviSite and each Principal Subsidiary hereby irrevocably waives (to the maximum
extent permitted by applicable law) any defenses it may now have or may
hereafter acquire in any way relating to, any or all of the following: (a) any
lack of validity
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or enforceability of the Purchase Agreement or any other agreement or instrument
relating thereto; (b) any change in the time, manner or place of payment of, or
in any other term of, all or any obligations of NaviSite under or in respect of
the Purchase Agreement or any other amendment or waiver of or any consent to any
departure therefrom; (c) any change, restructuring or termination of the
corporate structure or existence of NaviSite or any Principal Subsidiary; or (d)
any other circumstance or any existence of or reliance on any representation by
the Holder or any other holder that might otherwise constitute a defense
available to, or a discharge of, NaviSite or any Principal Subsidiary.
9. Conversion.
The outstanding principal of this Note, all accrued and unpaid interest
thereon and other amounts in respect thereto shall be converted, if the Holder
so elects, into NaviSite common stock, par value $0.01 per share (the "COMMON
STOCK") in accordance with this Section 9.
Subject to any express grace or cure periods set forth herein, upon the
written election of the Holder and without payment of any additional
consideration, this Note shall be converted into such whole number of fully paid
and nonassessable shares of Common Stock as is determined by dividing (A) all or
a portion, as elected by the Holder, of the then outstanding principal of this
Note, accrued and unpaid interest thereon, and any other amounts due in respect
thereto by (B) $____________, [AVERAGE CLOSING PRICE FOR THE TEN TRADING DAYS
ENDING ONE DAY PRIOR TO CLOSING] (such formula, the "CONVERSION FORMULA"), with
such Conversion Formula to be appropriately adjusted to account for stock
dividends, stock splits, reverse stock splits, stock combinations or other
events. No fractional shares shall be issued, and the number of shares resulting
from the Conversion Formula shall be rounded down to the nearest whole share.
Any election by the Holder pursuant to this Section 9 shall be made by written
notice to NaviSite, and such notice may be given:
(a) at any time following the first anniversary of the date hereof until
the eighteen (18) month anniversary hereof if the combined principal amount of
the Primary Note and the Escrow Note then outstanding as of the first
anniversary is greater than or equal to $20,000,000;
(b) at any time following the eighteen (18) month anniversary hereof if
the combined principal amount of the Primary Note and the Escrow Note
outstanding as of said date is greater than or equal to $10,000,000;
(c) at any time and from time to time after the second anniversary hereof;
or
(d) after the occurrence of an Event of Default, provided that if such
Event of Default occurs prior to the effectiveness of the stockholder's approval
contemplated by Section 5.18 of the Purchase Agreement, then this Note and the
Escrow Note collectively shall not be convertible into a number of shares of
NaviSite's Common Stock that is equal to or greater than the Share Cap unless
and until NaviSite has obtained the effective approval of its stockholders of
those matters described in Section 5.18 of the Purchase Agreement.
Notwithstanding the foregoing, in the event the Holder desires to convert
pursuant to Section 9(a) or 9(b), NaviSite may, within 5 days of receipt of the
Holder's Conversion Notice, notify the Holder of its good faith intent to pay,
within 30 days of NaviSite's receipt of the
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Conversion Notice, to the Holder an amount that would cause the $20,000,000
threshold in Section 9(a) or the $10,000,000 threshold in Section 9(b), as
applicable, to be satisfied if such payment had been made on the applicable
anniversary date. In such event, a Holder may only convert pursuant to Section
9(a) or 9(b), as applicable, in the 5 business day period following receipt of
NaviSite's notice of its intent to pay. If the Holder does not convert, the
restriction on conversion set forth in the previous sentence shall expire on the
earlier to occur of (i) receipt from NaviSite of notice that it will not be able
to pay such amounts and (ii) 30 days after NaviSite's receipt of the Conversion
Notice. NaviSite shall act in good faith to promptly deliver the notice in
clause (i) above in the event it becomes reasonably apparent to NaviSite that
NaviSite will not be able to pay such amount in the 30 day period.
Upon election to convert, the Holder shall surrender this Note, duly
assigned or endorsed for transfer to NaviSite or shall deliver an affidavit of
loss to NaviSite (together with an agreement to indemnify NaviSite in full with
respect to any loss actually incurred with respect to the lost Note), at its
principal executive office or such other place as NaviSite may from time to time
designate by notice to the Holders. Upon surrender of this Note or delivery of
an affidavit of loss (together with an agreement to indemnify NaviSite in full
with respect to any loss actually incurred with respect to the lost Note),
NaviSite shall commence the issuance of, and shall send by hand delivery, by
courier or by first class mail (postage prepaid) to the Holder, or to the
Holder's designee, at the address designated by the Holder, certificates for the
number of shares of Common Stock to which the Holder shall be entitled upon
conversion. The issuance of certificates for Common Stock upon conversion of
this Note shall be deemed effective as of the date of surrender of this Note or
delivery of such affidavit of loss (together with an agreement to indemnify
NaviSite in full with respect to any loss actually incurred with respect to the
lost Note) and will be made without charge to the holder of this Note for any
issuance tax in respect thereof or other costs incurred by NaviSite in
connection with such conversion and the related issuance of such stock. In the
event that the Holder elects to convert pursuant to this Section 9 less than all
of the then outstanding principal of this Note, accrued and unpaid interest
thereon, and any other amounts due in respect thereto, the Company shall issue a
replacement note with the same terms as this Note and a principal equal to the
amount of principal, interest and other amounts not converted into Common Stock
by the Holder.
NaviSite shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note as provided hereunder, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of this Note as provided hereunder; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of this Note as provided hereunder, NaviSite will take such
corporate action as may be necessary to increase the number of its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose, and to reserve the appropriate number of shares of
Common Stock for issuance upon such conversion.
NaviSite and the Holder shall act in good faith in the performance of
their respective covenants hereunder.
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10. No Waivers; Amendments.
No failure or delay on the part of the Holder or NaviSite in exercising
any right, power or remedy hereunder or under the Purchase Agreement or any
other document executed in connection therewith shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein and in the
Purchase Agreement and the Registration Rights Agreement are cumulative and are
not exclusive of any remedies that may be available to the Holder at law or in
equity or otherwise.
Subject to the provisions of Section 11 below on the effect of an
assignment of this Note, this Note may not be amended except by a writing duly
executed and delivered by the Holder (or, if more than one Holder, by those
Holders holding greater than fifty percent (50%) of the total then outstanding
principal amount hereunder) and NaviSite.
11. Assignment; Lost Note, etc.
Subject to ▇▇▇▇▇▇'s compliance with federal and state securities laws to
the reasonable satisfaction of counsel for the Company, after the first
anniversary of the date hereof, the Holder may, prior to maturity or prepayment
thereof, assign all or a portion of this Note, in connection with the
liquidation of the Holder or otherwise, to each stockholder or Affiliate of the
Holder. Prior to such assignment, the Holder shall deliver an opinion of counsel
(which opinion and counsel shall be reasonably satisfactory to the Company, it
being agreed that ▇▇▇▇▇▇▇ Procter LLP shall be satisfactory) to the effect that
such assignment is exempt from the registration requirements of the Securities
Act of 1933.
Automatically, upon any assignment of the Note in whole or in part:
(a) Each reference to "the Holder" shall mean and be a reference to each
assignee holder and all assignee holders, and their successors and assigns;
(b) Each reference to "the Note" or "this Note" shall mean and be a
reference to each replacement Note and all the Notes issued and outstanding;
(c) Any reference to the consent, request or satisfaction of the Holder or
like term, and any action to be taken by the Holder, including any amendment to
this Note, any waiver of any provision of this Note, other than an election to
convert this Note under Section 9(a), (b) or (c), shall mean and be a reference
to, and shall require the written consent or approval, of holders of the Notes
holding more than fifty percent (50%) of the principal amount of the Notes then
outstanding, and any such consent, waiver, amendment, election or other action
shall be binding on all of the holders of the Notes; provided that no such
consent, waiver or amendment shall be effective (i) to reduce or eliminate the
obligation to repay the outstanding principal on the Notes and accrued interest
at the rates provided in Section 3; or (ii) to alter or amend the consent
mechanism provided for under Section 10 or this Section 11, without, in the case
of clause (i), the approval of the holders of each Note affected thereby and, in
the case of clause (ii), all holders of the Notes then outstanding; provided
further that each holder of Notes may exercise its rights and remedies as a
creditor of NaviSite and each Principal Subsidiary if an Event of Default shall
have occurred and be continuing.
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(d) Upon any assignment of this Note by the Holder to any Affiliate of the
Holder or to each stockholder of the Holder as set forth above, in order to
efficiently administer (i) the delivering of any notices to holders of the Notes
by the Company, and (ii) the obtaining of any consent, waiver, amendment or
election from, or the taking of any other action by, the holders of the Notes,
the holders of the Notes shall designate a note holder representative (the
"Representative") and shall promptly deliver notice to the Company of such
designation, including the name and contact information for such Representative.
Initially, the Representative shall be Spectrum Equity Investors III, L.P.,
attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
Upon such assignment of this Note and the designation of the
Representative by the holders of the Notes, the Representative shall be
authorized (i) to take all action necessary in connection with obtaining any
consent, waiver, amendment or election from the holders of the Notes in
accordance with the requirements hereof, (ii) to give and receive all notices
required to be given under the Notes, and (iii) to take any and all additional
action as is contemplated to be taken by or on behalf of the holders of the
Notes by the terms of this Note.
Upon designation of the Representative by the holders of the Notes, (i)
the Company shall be able to rely conclusively on the instructions and
representations of the Representative as to the taking of any action by, or the
obtaining of any waiver, amendment or consent from the holders of the Notes in
accordance with the requirements of hereof, (ii) any notice delivered by the
Company to the Representative shall be deemed delivered to all holders of the
Notes, and (iii) no holders of the Notes shall have any cause of action against
the Company for any action taken by the Company in reliance upon the
instructions or representations of the Representative.
In the event that the Representative dies, becomes unable to perform his
responsibilities hereunder or resigns from such position, holders of the Notes
holding more than 50% of the principal amount of the Notes then outstanding
shall promptly select another representative to fill such vacancy and such
substituted representative shall be deemed to be the Representative for all
purposes hereunder.
The Representative shall not be liable to any holder of the Notes for any
action taken by him pursuant to this Section 11 unless he has acted in bad faith
or engaged in willful or intentional misconduct, and each holder of a Note, by
receipt of such Note, agrees to jointly and severally indemnify the
Representative from any losses arising out of or relating to his service as such
hereunder, it being expressly understood that the Representative shall be
entitled to reimbursement from the holders of the Notes for his costs and
expenses (including, without limitation, reasonable attorneys' fees) incurred by
Representative in his capacity as such, which third-party costs and expenses
may, at the request of the Representative, be paid by the Company to the
Representative at the time of any payment of principal or interest hereunder,
and which shall constitute a reduction in the unpaid balance of this Note.
(e) At any time at which there are two or more holders of this Note,
NaviSite shall keep a register in which it shall provide for the registration of
the Notes and the registration of transfers of the Notes, and a copy of such
register (and updates thereto) shall be provided to the Representative. The
holder of any Note may, prior to maturity or prepayment thereof, surrender such
Note at the principal office of NaviSite for transfer or exchange. Any holder
desiring to transfer or exchange any Note shall first notify the Company in
writing at least five (5) days in
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advance of such transfer or exchange and, if reasonably requested by the
Company, shall deliver an opinion of counsel (which opinion and counsel shall be
reasonably satisfactory to the Company, it being agreed that ▇▇▇▇▇▇▇ Procter LLP
shall be satisfactory) to the effect that such assignment is exempt from the
registration requirements of the Securities Act of 1933. Within a reasonable
time after such notice to NaviSite from a holder of its intention to make such
exchange and without expense (other than transfer taxes, if any) to such holder,
NaviSite shall issue in exchange therefor another Note in the same aggregate
principal amount or if requested by the holder in denominations of at least
$500,000 and multiples thereof, except in the case of a Note for the balance of
the aggregate amount of the Note so transferred, as of the date of such
issuance, as the unpaid principal amount of the Note so surrendered and having
the same maturity and rate of interest, containing the same provisions and
subject to the same terms and conditions as the Note so surrendered (provided
that no minimum shall apply to a liquidating distribution of Notes to
stockholders of the Holder or any subsequent holder and any Notes so distributed
may be subsequently transferred by such stockholder and its successors in the
original denomination thereof without further restriction). Each new Note shall
be made payable to such Person or Persons, or assigns, as the holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom. NaviSite shall have no obligation hereunder or under any Note to any
Person other than the registered holder of each such Note at any time that
NaviSite maintains a register of Notes as provided in this paragraph.
(f) If this Note is mutilated, destroyed, lost or stolen, upon receipt of
evidence satisfactory to NaviSite of such loss, theft, destruction or mutilation
of this Note and, if requested in the case of any such loss, theft or
destruction, upon delivery of an indemnity agreement holding NaviSite harmless,
which agreement is reasonably satisfactory to NaviSite, or, in the case of any
such mutilation, upon surrender and cancellation of this Note, NaviSite and its
Principal Subsidiaries shall issue a new Note of like tenor and amount and dated
the date to which interest has been paid, in lieu of this Note; provided,
however, if any Holder that is an initial holder hereof and this Note is lost,
stolen or destroyed, the affidavit of an authorized partner or officer of such
holder setting forth the circumstances with respect to such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required as a condition to the
execution and delivery by NaviSite of a new Note in replacement of this Note
other than the holder's written agreement to indemnify NaviSite and hold
NaviSite and its Affiliates harmless from any claims resulting from such loss,
theft, destruction or mutilation.
12. Method of Payments; Multiple Payees.
All payments to be made under this Note shall be made in United States
dollars by wire transfer or by check of immediately available funds to the
account or accounts specified by the Holder in writing and delivered to NaviSite
in the manner specified in Section 14 below. If this Note is assigned to one or
more parties pursuant to Section 11 hereof, any payments made by NaviSite
hereunder shall be made to such holders pro rata based on the total principal
outstanding under such notes.
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13. Waiver of Presentment, Etc.
NaviSite and each Principal Subsidiary hereby waives presentment, demand,
protest and notice of any kind. The Company agrees to pay, on demand, all costs
and expenses of collection of the Note and/or the enforcement of the Holder's
rights hereunder, including reasonable attorney's fees and disbursements.
14. Notice.
All notices (including notices of address change), requests, claims,
demands and other communications under this Note will be in writing and will be
deemed given if delivered personally, sent by overnight courier (providing proof
of delivery), or via facsimile to the parties at the following addresses (or at
such other address for a party as specified by like notice):
if to the Holder, to:
Surebridge, Inc.
c/o Spectrum Equity Investors
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston, MA 02109
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to:
NaviSite, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Rosedale & ▇▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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15. Certain Definitions.
In addition to the capitalized terms defined elsewhere in this Note, the
following capitalized terms shall have the following definitions. All meanings
of all defined terms in this Note shall be equally applicable to both the
singular and plural forms of the terms defined.
"AFFILIATE" shall mean, with respect to any specified person, a person
that directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
"BANKRUPTCY CODE" shall have the meaning ascribed thereto in the Purchase
Agreement.
"CAPITALIZED LEASE" shall mean every obligation of such Person under any
lease required to be capitalized under generally accepted accounting principles
in the United States.
"CONTROL" (including the terms "controlling," "controlled by" and "under
common control with) shall mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract, or otherwise.
"DEBT FOR BORROWED MONEY" shall mean Indebtedness of the types described
in clause (i) of the definition of the term "Indebtedness" and any guarantee,
endorsement or other obligation in respect of such amounts.
"EQUITY INTEREST" shall mean any equity security of NaviSite or any
Subsidiary, or any security convertible into any such equity security.
"ESCROW NOTE" shall have the meaning set forth in the Purchase Agreement.
"INDEBTEDNESS" shall mean each of the following, as to any Person, whether
recourse is secured by or is otherwise available against all or only a portion
of the assets of such Person, and whether or not contingent, but without
duplication:
(i) every obligation for such Person for money borrowed;
(ii) every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments (but not including obligations evidenced by notes
or similar instruments that are issued in direct connection with the
restructuring or renegotiation of any real estate lease or related obligation
that is not with any Affiliate of NaviSite or any of its subsidiaries) including
obligations incurred in connection with the acquisition of property, assets or
business;
(iii) every reimbursement obligation of such Person with respect to
letters of credit (other than letters of credit issued in connection with real
estate leases), bankers' acceptances or similar facilities issued for the
account of such Person;
(iv) every non-equity obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities repurchase
agreements but excluding
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trade accounts payable or accrued liabilities arising in the ordinary course of
business which are on normal trade terms or which are being contested in good
faith);
(v) every Capitalized Lease;
(vi) every obligation of such Person under any lease treated as an
operating lease under generally accepted accounting principles and as a loan or
financing for U.S. income tax purposes (a "SYNTHETIC LEASE");
(vii) all sales by such Person of (i) Accounts, (ii) chattel paper,
instruments or documents creating or evidencing a right to payment of money or
(iii) other receivables (together with the items described in the preceding
clauses (i) and (ii), collectively "RECEIVABLES"), whether pursuant to a
purchase facility or otherwise, other than in connection with the disposition of
the business operations of such Person relating thereto or a disposition of
defaulted receivables for collection and not as a financing arrangement, and
together with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith;
(viii) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise acting
as surety for, any obligation of a type described in any of clauses (i) through
(vii) (the "PRIMARY OBLIGATION") of another Person (the "PRIMARY OBLIGOR"), in
any manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person (a) to purchase or pay (or advance or supply funds
for the purchase of) any security for the payment of such primary obligation,
(b) to purchase property, securities or services for the purpose of assuring the
payment of such primary obligation, or (c) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such primary obligation.
The "AMOUNT" or "PRINCIPAL AMOUNT" of any Indebtedness at any time of
determination represented by (u) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (v) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (w) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchasers (other than the Company or any of its
subsidiaries) thereof, excluding amounts representative of yield or interest
earned on such investment, (x) any synthetic lease shall be the stipulated loss
value, termination value or other equivalent amount, (y) any derivative contract
shall be the maximum amount of any termination or loss payment required to be
paid by such Person if such derivative contract were, at the time of
determination, to be terminated by reason of any event of default or early
termination event thereunder, whether or not such event of default or early
termination event has in fact occurred and (z) any equity related purchase
obligation shall be the maximum fixed redemption or purchase price thereof
inclusive of any accrued and unpaid dividends to be comprised in such redemption
or purchase price.
14
"NET CASH PROCEEDS" shall mean, with respect to (i) the sale or issuance
of any Equity Interests (as defined above) or (ii) the incurrence of Debt for
Borrowed Money (as defined above) (other than a refinancing of any Debt for
Borrowed Money existing on the date hereof or with respect to borrowings under
the SVB Line) or (iii) the sale of any assets, in each case by or for the
account of NaviSite or any of its Subsidiaries, the aggregate amount of cash
received from time to time by or on behalf of NaviSite (or any Subsidiary) for
its own account in connection with any such sale, issuance or incurrence, after
deducting therefrom reasonable and customary transaction related costs not paid
to an Affiliate of NaviSite or any of its Subsidiaries, including, but not
limited to: (a) brokerage commissions, underwriting fees and discounts, fairness
opinions and fees and expenses of financial advisors, legal fees, accountants'
and auditors' fees, filing and registration fees with the Securities and
Exchange Commission, state securities commissions, Nasdaq fees, Federal Trade
Commission (and other foreign and domestic agencies responsible for antitrust
matters) and other similar fees, success fees, printing costs, costs to Edgarize
and related fees and tax advisory services; and (b) the amount of taxes payable
in connection with or as a result of such sale, issuance or incurrence; in each
case to the extent that the amounts so deducted are properly attributable to
such transaction and are actually paid or are reserved for in accordance with
U.S. generally accepted accounting principles, based on NaviSite's reasonable
estimate, at the time of receipt of such cash by NaviSite or its Subsidiaries,
as applicable. Notwithstanding anything to the contrary, neither (i) cash or
cash equivalents of any businesses or companies acquired by NaviSite after the
date hereof, nor (ii) the proceeds of a single financing or series of financings
that total less than $1,000,000 in the aggregate, shall be included as, or
deemed to be, "Net Cash Proceeds."
"NOTE" or "NOTES" shall mean this promissory note or the series of
promissory notes issued pursuant to Section 11.
"PERSON" or "PERSON" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust, organization,
business, or a government or agency or political subdivision thereof.
"PRIMARY NOTE" shall have the meaning set forth in the Purchase Agreement.
"PRINCIPAL SUBSIDIARY" shall mean each Subsidiary specifically identified
on SCHEDULE B.
"SVB LINE" shall mean the Accounts Receivable Financing Line with Silicon
Valley Bank, dated May 27, 2003, as amended.
"SUBSIDIARY" or "SUBSIDIARY" shall mean with respect to any specified
person, another Person where at least 50% of such Person's issued and
outstanding voting securities is owned, directly or indirectly, by such Person.
16. Usury Limitation.
All agreements between the Company and the Holder are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Holder for the use or the
forbearance of the obligations of NaviSite and its Subsidiaries hereunder exceed
the maximum permissible under applicable law. As used herein, the term
15
"applicable law" shall mean the law in effect as of the date hereof; provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this provision shall be governed by
such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of NaviSite and each of its Subsidiaries and the Holder in
the execution, delivery and acceptance of this Note to contract in strict
compliance with the laws of The State of Delaware from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision
hereof at the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from any circumstances whatsoever the Holder should
ever receive as interest an amount which would exceed the highest lawful rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal balance of the obligations of the Company hereunder, as
determined by the Holder, and not to the payment of interest.
17. WAIVER OF JURY TRIAL; VENUE.
EACH OF THE HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER RELATING TO ENFORCEMENT OF THIS
NOTE AND AGREES THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, EACH OF THE HOLDER AND THE COMPANY HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY OR
PUNITIVE DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
THE COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE HOLDER AND EACH OTHER PARTY TO ENTER INTO THIS NOTE.
THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT
IN THE COURTS OF THE STATE OF DELAWARE OR ANY FEDERAL COURT SITTING IN DELAWARE
AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE COMPANY, BY MAIL AT THE ADDRESS SET
FORTH HEREIN. EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.
[Signature Pages Follows]
16
This Note shall be deemed to be under seal and all rights and obligations
hereunder shall be construed and interpreted in accordance with and governed by
the internal laws of the State of Delaware (without giving effect to a conflict
of law practice contained therein).
NAVISITE, INC.
By:
---------------------------------------
Name:
Title
The following Principal Subsidiaries hereby execute this Note with the intention
of being bound, jointly and severally, with the Company as a direct obligor
hereunder.
CLEARBLUE TECHNOLOGIES MANAGEMENT, INC.
By:
---------------------------------------
Name:
Title
AVASTA, INC.
By:
---------------------------------------
Name:
Title
CONXION CORPORATION
By:
---------------------------------------
Name:
Title
INTREPID ACQUISITION CORP.
By:
---------------------------------------
Name:
Title
LEXINGTON ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
17