Exhibit 10.61
NOTE PURCHASE AGREEMENT
dated as of October 29, 2001
among
NAVISITE, INC.,
COMPAQ FINANCIAL SERVICES CORPORATION
AND
CMGI, INC.
TABLE OF CONTENTS
ARTICLE 1
Definitions
PAGE
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Section 1.01. Certain Defined Terms....................................... 1
Section 1.02. Index Of Defined Terms...................................... 7
Section 1.03. Accounting Terms And Determinations......................... 8
Section 1.04. Other Definitional Provisions............................... 8
ARTICLE 2
Purchase And Sale Of Notes
Section 2.01. Purchase And Sale Of Notes.................................. 9
ARTICLE 3
Closing
Section 3.01. The Closing................................................. 9
ARTICLE 4
Representations And Warranties Of The Company
Section 4.01. Corporate Existence and Power............................... 9
Section 4.02. Due Authorization........................................... 9
Section 4.03. Binding Effect; Liens of Security Documents................. 10
Section 4.04. Governmental Consents....................................... 10
Section 4.05. Non-contravention........................................... 10
Section 4.06. SEC Reports; Financial Statements........................... 11
Section 4.07. Capitalization.............................................. 11
Section 4.08. Valid Issuance of Stock..................................... 13
Section 4.09. Litigation.................................................. 14
Section 4.10. Ownership of Property....................................... 14
Section 4.11. No Default.................................................. 14
Section 4.12. Absence of Certain Changes.................................. 14
Section 4.13. No Burdensome Restrictions.................................. 14
Section 4.14. Subsidiaries; Other Equity Investments...................... 14
Section 4.15. Investment Company Act...................................... 15
Section 4.16. Taxes....................................................... 15
Section 4.17. Employment Matters.......................................... 15
Section 4.18. Compliance with ERISA....................................... 15
Section 4.19. Brokers..................................................... 16
Section 4.20. Related Transactions........................................ 16
Section 4.21. Employment, Shareholders and Subscription Agreements........ 16
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PAGE
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Section 4.22. Representations and Warranties Incorporated from the
Security Documents.......................................... 16
Section 4.23. Environmental and Safety Laws............................... 16
Section 4.24. Invention Assignment and Confidentiality Agreement.......... 16
Section 4.25. Intellectual Property....................................... 17
Section 4.26. Registration Rights......................................... 17
Section 4.27. Real Property Interests..................................... 17
ARTICLE 5
Affirmative Covenants
Section 5.01. Financial Statements And Other Reports...................... 18
Section 5.02. Payment Of Obligations...................................... 20
Section 5.03. Conduct Of Business And Maintenance Of Existence............ 20
Section 5.04. Maintenance Of Property Insurance........................... 20
Section 5.05. Compliance With Laws; Filings Of Reports.................... 21
Section 5.06. Inspection Of Property, Books And Records................... 22
Section 5.07. Reservation Of Shares....................................... 22
Section 5.08. Purchasers' Meetings........................................ 22
Section 5.09. Board Of Directors Meetings................................. 23
Section 5.10. Meeting Of Stockholders; Stockholder Approval............... 23
ARTICLE 6
Negative Covenants
Section 6.01. Debt........................................................ 23
Section 6.02. Negative Pledge............................................. 24
Section 6.03. Consolidations, Mergers And Sales Of Assets................. 24
Section 6.04. Restricted Payments......................................... 25
Section 6.05. Purchase Of Assets; Investments............................. 25
Section 6.06. Transactions With Affiliates................................ 25
Section 6.07. Notice Of Issuance Of Securities............................ 25
Section 6.08. Amendments And Waivers...................................... 26
ARTICLE 7
Events Of Default
Section 7.01. Events Of Default........................................... 26
ARTICLE 8
Conditions
Section 8.01. Conditions To Closing....................................... 28
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PAGE
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ARTICLE 9
Expenses, Indemnity, Taxes And Right To Perform
Section 9.01. Expenses.................................................... 29
Section 9.02. Indemnity................................................... 30
ARTICLE 10
Miscellaneous
Section 10.01. Survival................................................... 30
Section 10.02. No Waivers................................................. 30
Section 10.03. Security Agreement......................................... 31
Section 10.04. Notices.................................................... 31
Section 10.05. Payments................................................... 32
Section 10.06. Severability............................................... 32
Section 10.07. Amendments And Waivers..................................... 33
Section 10.08. Successors And Assigns; Registration....................... 33
Section 10.09. Lost Or Destroyed Notes.................................... 34
Section 10.10. Headings................................................... 35
Section 10.11. Confidentiality............................................ 35
Section 10.12. Governing Law; Submission To Jurisdiction.................. 35
Section 10.13. Waiver Of Jury Trial....................................... 36
Section 10.14. Counterparts; Integration.................................. 36
EXHIBIT A - Form of Initial Note........................................... A-1
EXHIBIT B - Form of Guarantee and Security Agreement....................... B-1
EXHIBIT C - Form of Amendment to and Restatement of the Investor
Rights Agreement............................................... C-1
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NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "AGREEMENT") is made and entered into as
of October 29, 2001 among NaviSite, Inc., a Delaware corporation (the
"COMPANY"), Compaq Financial Services Corporation, a Delaware corporation
("CFS"), and CMGI, Inc., a Delaware corporation ("CMGI," together with CFS, the
"PURCHASERS").
WHEREAS, as more fully described in the Transaction Agreement, the Company
will issue to CFS a senior, secured, convertible note in an aggregate principal
amount equal to the sum of $55,000,000 plus an amount equal to the interest that
would have accrued on $35,000,000 of such note from November 1, 2001 up to and
including the Closing Date had such note been issued on November 1, 2001 (the
"CFS NOTE"), and the Company will issue to CMGI a senior, secured, convertible
note in the principal amount of $10,000,000 (the "CMGI NOTE," together with the
CFS Note, the "NOTES"), in each case, substantially in the form attached hereto
as Exhibit A;
WHEREAS, on or prior to the Closing Date, (i) the Company and the
Collateral Representative will enter into a Guarantee and Security Agreement
substantially in the form attached hereto as Exhibit B (the "SECURITY
AGREEMENT") and (ii) the Company and the Purchasers will enter into the
Amendment to and Restatement of the Investor Rights Agreement substantially in
the form attached hereto as Exhibit C (the "INVESTOR RIGHTS AGREEMENT
AMENDMENT");
NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties, covenants and agreements set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Certain Defined Terms. The following terms have the
following meanings:
"AFFILIATE" means (i) any Person that directly or indirectly controls the
Company, (ii) any Person (other than the Company or any of its Subsidiaries)
which is controlled by or is under common control with such controlling Person
and (iii) in the case of an individual, the parents, descendants, siblings and
spouse of such individual. As used herein, the term "control" of a Person means
the possession, directly or indirectly, of the power to vote 10% or more of any
class of voting securities of such Person or to direct or cause the direction of
the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"AFFILIATE OBLIGATIONS" means obligations of the Company to CMGI arising
from (i) services and benefits provided by CMGI to the Company including but not
limited to, employee benefits, insurance, consulting, professional and legal
services, security services, recruiting fees, telecommunication charges,
software licenses, office supplies, human resources, facilities, finance,
information technology, public relations and (ii) invoices for goods or services
billed to and paid for by CMGI on behalf of the Company including but not
limited to, legal fees, office equipment leasing, office space rent, bank fees,
consulting agency fees, payroll services, telephony, relocation services,
shipping and handling services, tax consulting fees and real estate fees, in
each case solely to the extent consistent with the past business practices of
CMGI and the Company with respect to such services, benefits and invoices.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"CAPITAL LEASE" of any Person means any lease of any property by such
Person as lessee which would, in accordance with GAAP, be required to be
accounted for as a capital lease on the balance sheet of such Person.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents however designated of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person and any rights (other than debt securities convertible
or exchangeable into an equity interest), warrants or options to acquire an
equity interest in such Person.
"CHANGE OF CONTROL" means, with respect to the Company, the occurrence of
either of the following:
(a) if
(x) any "person" or "group" (as such terms are used in Section 13(d)
and Section 14(d) of the Exchange Act or any successor provisions to
either of the foregoing), including any group acting for the purpose
of acquiring, holding, voting or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act,
except that a person will be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time,
and such person or group shall be deemed to beneficially own any
Voting Stock of a
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corporation held by another corporation so long as such person or
group beneficially owns, directly or indirectly, in the aggregate a
majority of the total voting power of the Voting Stock of such other
corporation), directly or indirectly, of a percentage of the total
voting power of the Voting Stock of the Company that is greater than
the percentage of the total voting power of the Voting Stock of the
Company held by CMGI and its Subsidiaries, or
(y) any Permitted Holder files a Schedule 13D or TO (or any successor
schedule, form or report under the Exchange Act) in connection with a
transaction or event as a result of which (a) such person becomes the
"beneficial owner" of additional shares of Common Stock and (b) the
Common Stock ceases, or immediately upon consummation of or
immediately following such transaction or event, will cease, to be
listed on a U.S. national securities exchange or approved for
quotation on the Nasdaq National Market or any similar U.S. system for
automated dissemination of quotations of securities prices; or
(b) if during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors (together
with new directors whose election or appointment by the board of
directors or whose nomination for election by the Company's
stockholders was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
of the Company's board of directors then in office.
"COLLATERAL" means all property, now existing or hereafter acquired,
mortgaged or pledged to or purported to be subjected to a Lien in favor of, the
Collateral Representative for the benefit of the Purchasers pursuant to the
Security Documents.
"COLLATERAL REPRESENTATIVE" means CFS in its capacity as collateral
representative for the Purchasers under the Security Documents, and its
successors in such capacity.
"DEBT" of a Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable or Affiliate Obligations in each case
arising and paid in the ordinary course of business, (iv) all Capital Leases of
such Person, (v) all obligations of such Person to purchase securities (or other
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property) which arise out of or in connection with the issuance or sale of the
same or substantially similar securities (or property), (vi) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vii) all equity
securities of such Person subject to repurchase or redemption otherwise than at
the sole option of such Person, (viii) all Debt secured by a Lien on any asset
of such Person, whether or not such Debt is otherwise an obligation of such
Person, and (ix) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FINANCING DOCUMENTS" means this Agreement, the Notes, the Security
Documents, the Investor Rights Agreement Amendment and any documents or
agreements contemplated therein.
"FISCAL YEAR" means a fiscal year of the Company.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"INVESTMENT" means any investment in any Person, whether by means of
acquiring or holding securities, capital contribution, loan, time deposit,
advance, Guarantee or otherwise.
"INVESTOR RIGHTS AGREEMENT" means the agreement dated October 27, 1999, as
amended on June 8, 2000 and December 12, 2000, between the Company and CMGI.
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"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and the
other Financing Documents, the Company or its Subsidiaries shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the financial
condition, operations, business, properties or prospects of the Company and its
Subsidiaries, taken as a whole, (ii) the rights and remedies of the Collateral
Representative or the Purchasers under the Financing Documents, or the ability
of any of the Company or its Subsidiaries to perform its obligations under the
Financing Documents to which it is a party, (iii) the legality, validity or
enforceability of any Financing Document, or (iv) the existence, perfection or
priority of any security interest granted in the Financing Documents with
respect to, or the value of, any material Collateral.
"MATERIAL DEBT" means Debt of the Company or any of its Subsidiaries,
arising in one or more related or unrelated transactions, in an aggregate
principal or face amount exceeding $1,000,000.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a Person
by its chairman of the board (if an officer), chief executive officer, president
or chief financial officer.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, articles of organization or partnership agreement)
or which relate to the internal governance of such Person (such as by-laws).
"PERMITTED CONTEST" means a contest maintained in good faith by appropriate
proceedings promptly instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; provided that compliance with the
obligation that is the subject of such contest is effectively stayed during such
challenge.
"PERMITTED HOLDER" means:
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o CMGI and any of its Subsidiaries,
o CFS and any of its Subsidiaries or Affiliates,
o any corporation, the outstanding voting power of the Capital Stock of
which is beneficially owned, directly or indirectly, by the Company's
stockholders in substantially the same proportions as their ownership of
the voting power of the Company's Capital Stock, or
o the Company or any Subsidiary of the Company.
"PERMITTED LIENS" means Liens permitted pursuant to Section 6.02.
"PERSON" means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any government or agency or political subdivision thereof.
"PROPERTY INSURANCE POLICY" means any insurance policy maintained by the
Company or any Subsidiary covering losses with respect to tangible real or
personal property or improvements or losses from business interruption.
"REQUIRED HOLDERS" means the holders of more than 50% of the aggregate
outstanding principal amount of the Notes.
"RESTRICTED PAYMENT" means as to any Person (i) any dividend or other
distribution on any equity interest in such Person (except those payable solely
in equity interests of the same class) or (ii) any payment on account of (a) the
purchase, redemption, retirement, defeasance, surrender or acquisition of any
equity interests in such Person or any claim respecting the purchase or sale of
any equity interest in such Person or (b) any option, warrant or other right to
acquire any equity interests in such Person.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY DOCUMENTS" means the Security Agreement and any other agreement
pursuant to which the Company or any of its Affiliates provides a Lien on its
assets in favor of the Collateral Representative for the benefit of the
Purchasers, and all supplementary assignments, security agreements, pledge
agreements, acknowledgments or other documents delivered or to be delivered
pursuant to the terms hereof or of any other Security Document.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
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power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
Unless otherwise specified, the term Subsidiary shall refer to a Subsidiary of
the Company.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A-1 by
Standard & Poor's Ratings Service and P-1 by ▇▇▇▇▇'▇ Investors Services, Inc.,
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any State thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000 and
which issues (or the parent of which issues) certificates of deposit or
commercial paper with a rating described in clause (ii) above, (iv) repurchase
agreements with respect to securities described in clause (i) above entered into
with an office of a bank or trust company meeting the criteria specified in
clause (iii) above, provided in each case that such Investment matures within
one year from the date of acquisition thereof by the Company or any Subsidiary,
or (v) any money market or mutual fund which invests only in the foregoing and
the liquidity of which is satisfactory to the Required Holders.
"TRANSACTION AGREEMENT" means the agreement dated October 29, 2001 among
CMGI, the Company, CFS, AltaVista Company, a Delaware corporation, Compaq
Computer Corporation, a Delaware corporation, Compaq Financial Services Company,
an unlimited company having a share capital formed under the laws of Ireland,
and Compaq Financial Services Canada Corporation, a corporation incorporated
under the Nova Scotia Business Corporation Act.
"UCC" has the meaning set forth in the Security Agreement.
"VOTING STOCK" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors, or persons performing
similar functions, of such persons, whether at all times or only for so long as
no senior class of securities has such voting power by reason of any
contingency.
Section 1.02. Index Of Defined Terms. The following terms shall have the
respective meanings given to them in the sections indicated below:
DEFINED TERM SECTION
"Agreement".............................................. Preamble
"CFS".................................................... Preamble
"CFS Note"............................................... Recitals
"Closing"................................................ 3.01
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DEFINED TERM SECTION
"Closing Date"........................................... 3.01
"CMGI"................................................... Preamble
"CMGI Note".............................................. Recitals
"Common Stock"........................................... Recitals
"Company"................................................ Preamble
"Company Reports"........................................ 4.06
"Conversion Shares"...................................... 4.08
"Event of Default"....................................... 7.01
"GAAP"................................................... 1.03
"Indemnitees"............................................ 9.02
"Intellectual Property".................................. 4.25
"Investor Rights Agreement Amendment".................... Recitals
"Non-Assigning Purchaser"................................ 10.08(b)
"Note Register".......................................... 10.08(d)
"Notes".................................................. Recitals
"Proxy Statement"........................................ 5.10(a)
"Purchaser".............................................. Preamble
"Security Agreement"..................................... Recitals
"SEC".................................................... 4.06
"Stockholders' Meeting".................................. 5.10(b)
Section 1.03. Accounting Terms And Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time
("GAAP"), applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its consolidated
Subsidiaries delivered to the Purchasers.
Section 1.04. Other Definitional Provisions. References in this Agreement
to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles,
Sections, Schedules or Exhibits of or to this Agreement unless otherwise
specifically provided. Any term defined herein may be used in the singular or
plural. "Include", "includes" and "including" shall be deemed to be followed by
"without limitation". "Writing", "written" and comparable terms refer to
printing, typing and other means of reproducing words in a visible form.
References to any agreement or contract are to such agreement or contract as
amended, modified or supplemented from time to time. References to any Person
include the successors and assigns of such Person. References to "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively. References to any statute or act shall
include all related current regulations and all amendments and any successor
statutes, acts and regulations.
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ARTICLE 2
Purchase And Sale Of Notes
Section 2.01. Purchase And Sale Of Notes. On the Closing Date (as defined
in Section 3.01 hereof), (i) CFS shall (x) consummate the other transactions
described in the Transaction Agreement and (y) deliver $20,000,000 to the
Company by wire transfer of immediately available funds, against delivery of the
CFS Note to CFS by the Company and (ii) CMGI shall deliver $10,000,000 to the
Company by wire transfer of immediately available funds against delivery of the
CMGI Note to CMGI. The Notes shall be convertible, in accordance with their
terms, into shares of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK").
ARTICLE 3
Closing
Section 3.01. The Closing. The closing of the purchase and sale of the
Notes (the "CLOSING") shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ as soon as possible (and not less than
six Business Days after the date hereof), but in no event later than 10 Business
Days, after satisfaction of the conditions set forth in Section 8.01, or at such
other time or place as the Company, CMGI and CFS may agree (the "CLOSING DATE").
ARTICLE 4
Representations And Warranties Of The Company
The Company represents and warrants to the Purchasers, as of the date
hereof and the date of the Closing, that:
Section 4.01. Corporate Existence and Power. The Company is an entity duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and as
will be conducted after the transactions contemplated by the Transaction
Agreement, except where the failure to have such licenses, authorizations,
consents and approvals would not have a Material Adverse Effect. Each of the
Company and its Subsidiaries is qualified to do business as a foreign entity in
each jurisdiction in which it is required to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect.
Section 4.02. Due Authorization. All corporate action on the part of each
of the Company and its Subsidiaries pursuant to its Organizational Documents,
which is necessary for the authorization, execution and delivery of, and the
9
performance of all obligations of the Company and its Subsidiaries under the
Financing Documents has been taken, other than the approval of stockholders of
the Company of the conversion of the Notes to Common Stock.
Section 4.03. Binding Effect; Liens of Security Documents. Each of the
Financing Documents to which the Company is a party (other than the Notes) and
to which any of the Company's Subsidiaries is a party constitutes a valid and
binding agreement, and each of the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company, in each case enforceable against such Person in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws relating to the enforcement of
creditors' rights generally and by general equitable principles, other than the
approval of stockholders of the Company of the conversion of the Notes to Common
Stock.
Section 4.04. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company or any of its Subsidiaries is required in connection with the
consummation of the transactions contemplated by the Financing Documents, except
(i) as may be required under the Securities Act and the rules and regulations
thereunder and all applicable state securities laws in connection with the
transactions contemplated by the Financing Documents and obtaining approval of
stockholders of the Company of the conversion of the Notes to Common Stock and
(ii) for such consents, approvals, orders, authorizations, qualifications,
designations, declarations or filings the failure of which to obtain or make,
individually or in the aggregate, would not have a Material Adverse Effect. All
such consents, approvals, orders, authorizations and qualifications will be
effective and all such designations, declarations and filings will be made
within the time prescribed by law.
Section 4.05. Non-contravention. The execution, delivery and performance by
the Company and its Subsidiaries of the Financing Documents, and the
consummation by the Company and its Subsidiaries of the transactions
contemplated hereby and thereby, other than the approval of stockholders of the
Company of the conversion of the Notes to Common Stock, do not: (i) contravene
or conflict with the Company's or any of its Subsidiaries' Organizational
Documents; (ii) constitute a violation of any provision of any federal, state,
local or foreign law or rule, regulation or requirement binding upon or
applicable to the Company or any of its Subsidiaries; (iii) constitute a
violation of any rule, regulation or requirement of the National Association of
Securities Dealers, Inc.; or (iv) constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Company or any of its Subsidiaries is
entitled under, or result in the creation or imposition of any Lien under, any
contract to which the Company or any of its
10
Subsidiaries is a party (other than as contemplated by the Financing Documents)
or any permit, license or similar right relating to the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries may be bound or
affected, except any such default, consent, right of termination, cancellation
or acceleration, loss or lien, claim or encumbrance which, individually or in
the aggregate, would not have a Material Adverse Effect.
Section 4.06. SEC Reports; Financial Statements. The Company has previously
furnished or made available to the Purchasers its (i) Annual Report on Form 10-K
for the fiscal year ended July 31, 2000, (ii) Definitive Proxy Statement filed
with the Securities and Exchange Commission (the "SEC") on November 16, 2000 and
(iii) all other periodic and current reports filed by the Company with the SEC
under the Exchange Act since July 31, 2000 in each case, as amended prior to the
date hereof (collectively, the "COMPANY REPORTS"). As of their respective dates
the Company Reports (or, if any of the Company Reports shall have been amended,
as of the date of such amendment), complied in all material respects with
applicable requirements of the Exchange Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading. The Company
has timely filed with the SEC, and the Company Reports constitute, all reports
required to be filed under Sections 13, 14 or 15(d) of the Exchange Act since
July 31, 2000. The audited financial statements and unaudited interim financial
statements of the Company included in the Company Reports (i) comply as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (ii) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Company as of the
respective dates thereof and for the periods referred to therein and (iv) are
consistent with the books and records of the Company.
Section 4.07. Capitalization. (a) As of the date hereof the authorized
Capital Stock of the Company consists of: (i) 150,000,000 shares of Common
Stock, of which 62,336,563 shares are issued and outstanding and (ii) 5,000,000
shares of preferred stock, par value $0.01 per share, of which none are issued
and outstanding. All of such shares of Capital Stock have been duly authorized
for issuance, and all of such shares which are issued and outstanding have been
validly issued and are fully paid, nonassessable and free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. The Company has reserved: (i) 15,000,000 shares of Common
Stock for issuance to officers, directors, employees, consultants or Affiliates
under the Company's 1998 Equity Incentive Plan, of which 5,769,680 are subject
to outstanding options granted thereunder; (ii) 250,000 shares of
11
Common Stock for issuance to non-employee directors of the Company under the
Company's 1998 Director Stock Option Plan, of which 150,000 are subject to
outstanding options granted thereunder; (iii) 500,000 shares of Common Stock for
issuance to non-employee directors of the Company under the Company's 1999 Stock
Option Plan for Non-Employee Directors, of which 71,770 are subject to
outstanding options granted thereunder; (iv) 1,000,000 shares of Common Stock
for issuance under the Company's 2000 Stock Option Plan, of which 461,995 are
subject to outstanding options granted thereunder; and (v) 250,000 shares of
Common Stock for issuance under the Company's Employee Stock Purchase Plan, of
which 249,860 are issued and outstanding. All shares of Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, are duly authorized and
will be validly issued, fully paid and nonassessable. Other than (i) the
NaviSite Warrant No. 1 dated December 15, 2001 to purchase 2,601,626 shares of
the Company's Common Stock at an exercise price per share equal to $5.765625
("NAVISITE WARRANT 1"), (ii) the NaviSite Warrant No. 2 dated December 15, 2001
to purchase 2,601,626 shares of the Company's Common Stock at an exercise price
per share equal to $6.91875 ("NAVISITE WARRANT 2", together with the NaviSite
Warrant 1, the "NAVISITE WARRANTS"), (iii) the 7.5% Convertible Subordinated
Notes of NaviSite held by CMGI due December 12, 2003 in the principal amounts of
$50,000,000 and $30,000,000 and (iv) as set forth above in this paragraph (a),
there are no other equity securities, options, warrants, calls, rights,
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the Capital Stock of the Company or obligating the Company to grant,
extend or enter into any such equity security, option, warrant, call, right,
commitment or agreement. Except as disclosed in the Company Reports, to the
Company's knowledge there are no stockholder agreements, voting agreements or
voting trusts relating to any shares of Capital Stock of the Company.
(b) On the Closing Date after giving effect to the transactions
contemplated by the Transaction Agreement, the authorized Capital Stock of the
Company will consist of: (i) 150,000,000 shares of Common Stock, of which
86,678,394 shares will be issued and outstanding (as such number may be
increased pursuant to the exercise of stock options described in the second
sentence of Section 4.08(a) above in accordance with their terms on or prior to
the Closing Date) and (ii) 5,000,000 shares of preferred stock, par value $0.01
per share, of which none will be issued and outstanding. All of such shares of
Capital Stock will have been duly authorized for issuance, and all of such
shares which shall at such time be issued and outstanding will have been validly
issued and will be fully paid, nonassessable and free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. On the Closing Date after giving effect to the transactions
contemplated by the
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Transaction Agreement the Company will have reserved: (i) 15,000,000 shares of
Common Stock for issuance to officers, directors, employees, consultants or
Affiliates under the Company's 1998 Equity Incentive Plan, of which 5,769,680
will be subject to outstanding options granted thereunder; (ii) 250,000 shares
of Common Stock for issuance to non-employee directors of the Company under the
Company's 1998 Director Stock Option Plan, of which 150,000 will be subject to
outstanding options granted thereunder; (iii) 500,000 shares of Common Stock for
issuance to non-employee directors of the Company under the Company's 1999 Stock
Option Plan for Non-Employee Directors, of which 71,770 will subject to
outstanding options granted thereunder; (iv) 1,000,000 shares of Common Stock
for issuance under the Company's 2000 Stock Option Plan, of which 461,995 will
be subject to outstanding options granted thereunder; and (v) 250,000 shares of
Common Stock for issuance under the Company's Employee Stock Purchase Plan, of
which 249,860 will be issued and outstanding (as the number of shares specified
in clauses (i) through (v) above that are subject to options or issued and
outstanding may be increased by the exercise on or prior to the Closing Date of
stock options outstanding on the date hereof in accordance with their terms).
All shares of Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will at the Closing Date be duly authorized and will be validly
issued, fully paid and nonassessable. At the Closing Date, after giving effect
to the transactions contemplated by the Transaction Agreement, other than (i)
the NaviSite Warrants, (ii) the Notes and (iii) as set forth above in this
paragraph (b), there will be no other equity securities, options, warrants,
calls, rights, commitments or agreements of any character to which the Company
is a party or by which it is bound obligating the Company to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the Capital Stock of the Company or obligating the
Company to grant, extend or enter into any such equity security, option,
warrant, call, right, commitment or agreement. Except as disclosed in the
Company Reports, at the Closing Date there will, to the Company's knowledge be
no stockholder agreements, voting agreements or voting trusts relating to any
shares of Capital Stock of the Company.
Section 4.08. Valid Issuance of Stock. (a) Subject to the vote of the
stockholders at the Stockholders Meeting to approve or ratify the authorization
and issuance of the shares of Common Stock to be issued upon conversion, if any,
by the Purchasers, (the "CONVERSION SHARES"), the Conversion Shares have been
duly and validly reserved for issuance and, upon issuance, sale and delivery in
accordance with the terms of the Notes will be duly and validly issued, fully
paid, nonassessable and free of preemptive rights binding on the Company.
(b) Assuming the correctness of the representations made by the Purchasers
in Section 10.08 hereof, no change in applicable law and no unlawful
distribution of the Notes or the Conversion Shares by the Purchasers or other
Persons, the Notes and the Conversion Shares will be issued to the Purchasers in
13
compliance with applicable exemptions from (i) the registration and prospectus
delivery requirements of the Securities Act and (ii) the registration and
qualification requirements of all applicable securities laws of the states of
the United States.
Section 4.09. Litigation. Except as set forth in the Company Reports, there
is no action, suit or proceeding pending against, or to the knowledge of the
Company threatened against or affecting, any of the Company or its Subsidiaries
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable likelihood of an adverse decision which could have a
Material Adverse Effect or which draws into question the validity of any of the
Financing Documents or the Transaction Agreement.
Section 4.10. Ownership of Property. Except as disclosed on Schedule 4.10,
on and as of the Closing Date, after giving effect to the transactions
contemplated by the Transaction Agreement, the Company is the lawful owner of,
has good and marketable title to and is in lawful possession of, or has valid
leasehold interests in, all properties and other assets (real or personal,
tangible, intangible or mixed) purported to be owned or leased (as the case may
be) by the Company on the balance sheet referred to in Section 5.01, except as
disposed of in the ordinary course of business.
Section 4.11. No Default. Except as disclosed on Schedule 4.11, no Default
or Event of Default has occurred and is continuing and neither the Company nor
any of its Subsidiaries is in default under or with respect to any material
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected.
Section 4.12. Absence of Certain Changes. Except as set forth in the
Company Reports, since March 31, 2001, the businesses and operations of the
Company and each of its Subsidiaries have been conducted in the ordinary course
consistent with past practice and there has not been or occurred any event or
condition which, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect.
Section 4.13. No Burdensome Restrictions. Except as set forth in the
Company Reports, no contract, lease, agreement or other instrument to which the
Company or any of its Subsidiaries is a party or by which any of its property is
bound or affected, no charge, corporate restriction, judgment, decree or order
and no provision of applicable law or governmental regulation is reasonably
likely to have a Material Adverse Effect.
Section 4.14. Subsidiaries; Other Equity Investments. Each Subsidiary is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business
14
as now conducted, except where the failure to have such licenses,
authorizations, consents and approvals would not have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is engaged in any joint venture
or partnership with any other Person.
Section 4.15. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "Investment Company" as defined in the Investment Company Act
of 1940. The consummation of the transactions contemplated by the Financing
Documents or the Transaction Agreement do not and will not violate any provision
of such act or any rule, regulation or order issued by the SEC thereunder.
Section 4.16. Taxes. All material Federal, state and local tax returns,
reports and statements required to be filed by or on behalf of each of the
Company and its Subsidiaries have been filed with the appropriate governmental
agencies in all jurisdictions in which such returns, reports and statements are
required to be filed, and all taxes (including real property taxes) and other
charges shown to be due and payable have been timely paid prior to the date on
which any fine, penalty, interest, late charge or loss may be added thereto for
nonpayment thereof. All state and local sales and use taxes required to be paid
by each of the Company and its Subsidiaries have been paid. All material
Federal and state returns have been filed by each of the Company and its
Subsidiaries for all periods for which returns were due with respect to employee
income tax withholding, social security and unemployment taxes, and the amounts
shown thereon to be due and payable have been paid in full or adequate
provisions therefor have been made.
Section 4.17. Employment Matters. The Company (i) has withheld all amounts
required by law or agreement to be withheld from wages, salaries and other
payments to its employees and former employees or has remedied any failure to do
so, (ii) is not liable for any arrearages of wages and (iii) is not liable for
taxes or penalties for failure to withhold or pay wages when due. There are no
complaints pending or, to the Company's knowledge, threatened before any
governmental authority alleging unfair labor practices or unlawful
discrimination nor, to the Company's knowledge, is there any basis for any such
claim. There are no existing or, to the Company's knowledge, threatened labor
strikes, disputes, grievances, controversies or other labor troubles affecting
the Company which would individually or in the aggregate, have a Material
Adverse Effect. The Company is not a party to any collective bargaining
agreement with any labor union.
Section 4.18. Compliance with ERISA. Except as disclosed on Schedule 4.18,
neither the Company nor any of its Subsidiaries sponsors or participates in any
employee benefit plan subject to ERISA. Neither the Company nor any of its
Subsidiaries is required to contribute to any "multiemployer plan" as defined in
15
ERISA Section 3(37), nor has the Company or any of its Subsidiaries ever
contributed to or withdrawn from such a multiemployer plan.
Section 4.19. Brokers. Except as disclosed on Schedule 4.19, no broker,
finder or other intermediary has brought about the obtaining, making or closing
of the transactions contemplated by the Financing Documents or the Transaction
Agreement, and neither the Company nor any of its Subsidiaries has or will have
any obligation to any Person in respect of any finder's or brokerage fees in
connection herewith or therewith.
Section 4.20. Related Transactions. No Person has waived any condition
precedent to its obligations to close as set forth in the Financing Documents or
the Transaction Agreement.
Section 4.21. Employment, Shareholders and Subscription Agreements. Except
for the Financing Documents or the Transaction Agreement and the other
agreements described in Schedule 4.21, and except as set forth in the Company
Reports there are no (i) employment agreements covering the management of the
Company or any of its Subsidiaries, (ii) collective bargaining agreements or
other labor agreements covering any employees of the Company or any its
Subsidiaries, (iii) material agreements for managerial, consulting or similar
services to which the Company or any of its Subsidiaries is a party or by which
it is bound, or (iv) material agreements regarding the Company or any of its
Subsidiaries, its assets or operations or any investment therein to which any of
its equityholders is a party or by which it is bound.
Section 4.22. Representations and Warranties Incorporated from the Security
Documents. As of the Closing Date, each of the representations and warranties
made in the Security Documents by the Company and its Subsidiaries is true and
correct in all material respects, and such representations and warranties are
hereby incorporated herein by reference with the same effect as though set forth
in their entirety herein, as qualified therein, except to the extent that such
representation or warranty relates to a specific date, in which case such
representation and warranty shall be true as of such earlier date.
Section 4.23. Environmental and Safety Laws. To the Company's knowledge,
the Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety which would
reasonably be expected to have a Material Adverse Effect, except as set forth in
the Company Reports.
Section 4.24. Invention Assignment and Confidentiality Agreement. Each
employee and consultant or independent contractor of the Company or any of its
Subsidiaries whose material duties include the development of products or
Intellectual Property (as defined in Section 4.25), and each former employee and
consultant or independent contractor whose material duties included the
16
development of products or Intellectual Property, has entered into and executed
an invention assignment and confidentiality agreement or an employment or
consulting agreement containing terms with respect to invention assignments and
confidentiality, in each case, except where failure to do the same would not
have a Material Adverse Effect.
Section 4.25. Intellectual Property. (a) The Company or one of its
Subsidiaries has sole title to and owns, or is licensed or otherwise possesses
legally enforceable rights to use, or reasonably expects that it will be able to
obtain licenses or legally enforceable rights to use, all patents or patent
applications, software, know-how, registered or unregistered trademarks and
service marks and any applications therefor, registered or unregistered
copyrights and trade names and any applications therefor, trade secrets or other
confidential or proprietary information ( the "INTELLECTUAL PROPERTY") necessary
to enable the Company and its Subsidiaries to carry on their respective
businesses as currently conducted or as proposed to be conducted except where
the failure to own or have rights to use such Intellectual Property would not
have a Material Adverse Effect or except as disclosed in the Company Reports.
(b) Neither the Company nor any of its Subsidiaries is currently subject
(whether as licensor or licensee) to any exclusive licenses (whether such
exclusivity is temporary or permanent) to any material portion of the
Intellectual Property utilized by the Company or any of its Subsidiaries. There
are not outstanding any licenses or agreements of any kind relating to any
Intellectual Property owned by the Company or any of its Subsidiaries, except
for agreements with customers of the Company or any such Subsidiary entered into
in the ordinary course of business. Neither the Company nor any of its
Subsidiaries is obligated to pay any royalties or other payments to third
parties with respect to any Intellectual Property (other than off-the-shelf
commercial applications), except as it may be so obligated in the ordinary
course of its business.
(c) To the Company's knowledge, neither the Company nor any of its
Subsidiaries is violating or infringing, and neither the Company nor any of its
Subsidiaries has received any communication alleging that either the Company,
any of its Subsidiaries or any of their respective employees or consultants has
violated or infringed any Intellectual Property of any other Person which would
reasonably be expected to have a Material Adverse Effect.
Section 4.26. Registration Rights. Except as provided in the Investor
Rights Agreement, as amended, the Company has not granted or agreed to grant to
any Person any rights (including piggyback registration rights) to have any
securities of the Company registered with the SEC or registered or qualified
with any other governmental authority.
Section 4.27. Real Property Interests. Except for the ownership, leasehold
or other interests set forth in Schedule 4.27, and except as set forth in
17
the Company Reports, the Company and its Subsidiaries have, as of the Closing
Date, no ownership, leasehold or other interest in real property.
ARTICLE 5
Affirmative Covenants
The Company agrees that from the date hereof until the Closing Date and
thereafter so long as any of the Notes remain outstanding:
Section 5.01. Financial Statements And Other Reports. The Company will
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with GAAP and to provide the information required to be delivered to
the Purchasers hereunder, and will deliver to the Purchasers:
(a) as soon as practicable and in any event within 30 days after the end of
each month, a consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such month and the related consolidated statements
of operations and cash flows for such month, and for the portion of the Fiscal
Year ended at the end of such month setting forth in each case in comparative
form the figures for the corresponding periods of the previous Fiscal Year and
the figures for such month and for such portion of the Fiscal Year ended at the
end of such month set forth in the annual operating and capital expenditure
budgets and cash flow forecast delivered pursuant to Section 5.01(h), all in
reasonable detail and certified by the chief financial officer of the Company as
fairly presenting the financial condition and results of operations of the
Company and its consolidated Subsidiaries and as having been prepared in
accordance with GAAP applied on a basis consistent with the audited financial
statements of the Company, subject to changes resulting from audit and normal
year-end adjustments;
(b) as soon as available and in any event within 90 days after the end of
each Fiscal Year, a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, stockholders' equity and cash flows for
such Fiscal Year, setting forth in each case in comparative form the figures for
the previous Fiscal Year and the figures for such Fiscal Year set forth in the
annual operating and capital expenditure budgets and cash flow forecast
delivered pursuant to Section 5.01(h), certified (solely with respect to such
consolidated statements) without qualification by KPMG LLP or other independent
public accountants acceptable to the Required Holders of nationally recognized
standing;
(c) together with each delivery of financial statements pursuant to Section
5.01(a) and 5.01(b) above, an Officer's Certificate of the Company (i) stating
that the officer executing such certificate has reviewed the terms of this
Agreement and has made, or caused to be made under supervision, a review in
18
reasonable detail of the transactions and condition of the Company during the
accounting period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting period, and
that such officer does not have knowledge of the existence as at the date of
such Officer's Certificate of any Default, or, if any such Default existed or
exists, specifying the nature and period of existence thereof and what action
the Company has taken or is taking or proposes to take with respect thereto,
(ii) providing details of all transactions between the Company and any Person
referred to in Section 6.06 and (iii) if not specified in the financial
statements delivered pursuant to Section 5.01(a) and 5.01(b) above, as the case
may be, specifying the aggregate amount of interest paid or accrued and the
aggregate amount of depreciation and amortization charged, during such
accounting period;
(d) promptly upon receipt thereof, copies of all reports submitted to the
Company by independent public accountants in connection with each annual,
interim or special audit of the financial statements of the Company made by such
accountants, including the comment letter submitted by such accountants to
management in connection with their annual audit;
(e) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its security holders, (ii) all regular and periodic
reports and all registration statements and prospectuses filed by the Company
with any securities exchange or with the SEC or any successor and (iii) all
press releases and other statements made available generally by the Company
concerning material developments in the business of the Company;
(f) promptly upon any executive officer of the Company obtaining knowledge
(i) of the existence of any Default, or becoming aware that the holder of any
Debt of the Company has given any notice or taken any other action with respect
to a claimed default thereunder, (ii) of any change in the Company's independent
public accountant or any resignation, or decision not to stand for re-election,
by any member of the Company's board of directors (or comparable body), (iii)
that any Person has given any notice (other than a notice received by the
Company within 30 days of the Closing Date with respect to a default under a
material lease that has been cured or waived on or prior to 60 days after the
Closing Date) to the Company with respect to a claimed default under any
material agreement or instrument (other than the Financing Documents) to which
the Company is a party or by which any of its assets is bound, or (iv) of the
institution of any litigation or arbitration involving an alleged liability of
the Company equal to or greater than $1,000,000 or any adverse determination in
any litigation or arbitration involving a potential liability of the Company
equal to or greater than $1,000,000, an Officer's Certificate of the Company
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such
19
claimed default (including any Default), event or condition, and what action the
Company has taken, is taking or proposes to take with respect thereto;
(g) simultaneously with the financial statements referred to in Section
5.01(a) above, operating plans and financial forecasts, including cash flow
projections covering proposed fundings, repayments, additional advances,
investments and other cash receipts and disbursements, in each case to the
extent prepared from time to time by the management of the Company for internal
use;
(h) at the conclusion of each Fiscal Year, the Company's annual operating
and capital expenditure budgets and cash flow forecast for the following Fiscal
Year presented on a monthly basis, which shall be in a format reasonably
consistent with projections, budgets and forecasts theretofore provided to the
Purchasers;
(i) with reasonable promptness, such other information and data with
respect to the Company as from time to time may be reasonably requested by
either of the Purchasers.
Section 5.02. Payment Of Obligations. The Company (i) shall pay and
discharge, and cause its Subsidiaries to pay and discharge, at or before
maturity, all of their respective material obligations and liabilities,
including tax liabilities, except where the same may be the subject of a
Permitted Contest, in each case to the extent that the failure to do the same
would not have a Material Adverse Effect, (ii) shall maintain, and cause its
Subsidiaries to maintain, in accordance with GAAP, appropriate reserves for the
accrual of any of the same and (iii) shall not breach or permit its Subsidiaries
to breach, in any material respect, or permit to exist any material default
under, the terms of any lease, commitment, contract, instrument or obligation to
which it is a party, or by which its properties or assets are bound, in each
case to the extent that such breach or default would not have a Material Adverse
Effect.
Section 5.03. Conduct Of Business And Maintenance Of Existence. The Company
will continue, and will cause its Subsidiaries to continue, to engage in
business of the same general type as they now conduct and will preserve, renew
and keep in full force and effect, and will cause its Subsidiaries to preserve,
renew and keep in full force and effect their respective existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
Section 5.04. Maintenance Of Property Insurance. (a) The Company will keep,
and will cause its Subsidiaries to keep, all property useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted.
20
(b) The Company will maintain, and will cause its Subsidiaries to maintain,
(i) physical damage insurance on all real and personal property on an all risks
basis (including the perils of flood and quake), covering the repair and
replacement cost of all such property and consequential loss coverage for
business interruption and extra expense, (ii) public liability insurance
(including products/completed operations liability coverage) and (iii) such
other insurance coverage in such amounts and with respect to such risks as the
Purchasers may reasonably request. All such insurance shall be provided by
insurers having an A.M. Best policyholders rating of not less than B+ or such
other insurers as the Required Holders may approve in writing.
(c) On or prior to the Closing Date, the Company shall cause the Collateral
Representative to be named as an additional insured and loss payee on each
insurance policy required to be maintained pursuant to this Section 5.04. The
Company will deliver to the Purchasers (i) on the Closing Date, a certificate
from the Company's insurance broker dated such date showing the amount of
coverage as of such date, and certifying that such policies will include
effective waivers (whether under the terms of any such policy or otherwise) by
the insurer of all claims for insurance premiums against all loss payees and
additional insureds and all rights of subrogation against all loss payees and
additional insureds, and that if all or any part of such policy is canceled, is
terminated or expires, the insurer will forthwith give notice thereof to each
additional insured and loss payee and that no cancellation, reduction in amount
or material change in coverage thereof shall be effective until at least 30 days
after receipt by each additional insured and loss payee of written notice
thereof, (ii) upon the request of either of the Purchasers from time to time
full information as to the insurance carried, (iii) within five days of receipt
of notice from any insurer, a copy of any notice of cancellation, nonrenewal or
material change in coverage from that existing on the date of this Agreement,
and (iv) forthwith, notice of any cancellation or nonrenewal of coverage by the
Company.
(d) Any proceeds to the Company or its Subsidiaries in excess of $2,000,000
from any Property Insurance Policy in respect of any claim, or from any
condemnation award or other compensation in respect of a condemnation (or any
transfer or disposition of property in lieu of condemnation), shall be paid to
the Collateral Representative to be held, applied, deposited or released for
application in accordance with Section 7 of the Security Agreement and with this
Agreement. The Company hereby appoints the Collateral Representative as its
attorney-in-fact to make proof of loss, claim for insurance and adjustments with
insurers, and to execute or endorse all documents, checks or drafts in
connection with payments under Property Insurance Policies.
Section 5.05. Compliance With Laws; Filings Of Reports. The Company will
comply, and cause its Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including ERISA and the rules and regulations
thereunder). The
21
Company will, for so long as it has securities registered under the Exchange Act
or has an effective registration statement under the Securities Act, make timely
filing of such reports as are required to be filed by it with the SEC.
Section 5.06. Inspection Of Property, Books And Records. The Company will
keep, and will cause its Subsidiaries to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause its Subsidiaries to permit, representatives of either of the
Purchasers, at such Purchaser's expense, to visit and inspect any of their
respective properties, to examine and make abstracts or copies from any of their
respective books and records, to conduct a collateral audit and analysis of
their respective inventories and accounts receivable and to discuss their
respective affairs, finances and accounts with their respective officers and
employees, all at such reasonable times during normal business hours and as
often as may reasonably be desired; provided that prior to the occurrence of a
Default or Event of Default, such visits shall be limited to one visit during
each fiscal quarter of the Company.
Section 5.07. Reservation Of Shares. The Company will at all times after
the Stockholders of the Company approve or ratify the authorization and issuance
of the Conversion Shares, reserve and keep available, solely for issuance and
delivery upon the conversion of the Notes, all such shares of Common Stock, or
such other stock, securities and property as from time to time are issuable upon
the conversion of the Notes. The Company will not avoid or seek to avoid the
observance or performance of any of the terms of the Notes, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Purchasers thereunder. In addition, the Company will promptly
take all commercially reasonable action as may from time to time be required in
order to permit the Purchasers to convert the Notes and to duly and effectively
issue shares of Common Stock pursuant thereto, including, without limitation,
complying with any applicable premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and all regulations
promulgated thereunder, with costs associated with compliance with such
requirements to be borne by the Company.
Section 5.08. Purchasers' Meetings. Within 30 days after the end of each
fiscal quarter, at the request of the Purchasers the Company will conduct a
meeting with the Purchasers to discuss such fiscal quarter's results and the
financial condition of the Company at which shall be present the chief executive
officer and the chief financial officer of the Company and such other officers
of the Company as the Company's chief executive officer shall designate. Such
meetings shall be held at a time and place convenient to the Purchasers and to
the Company.
22
Section 5.09. Board Of Directors Meetings. The Company will notify the
Purchasers of all meetings and actions by written consent of the board of
directors and each committee thereof at the same time and in the same manner as
notice of any meetings is required to be given to such Persons who do not waive
such notice (or, if such action requires no notice, then two Business Days'
written notice thereof describing the matters upon which action is to be taken).
Each Purchaser shall have the right to send a representative selected by it to
each such meeting, who shall be permitted to attend such meeting and any
adjournments thereof; provided that representatives of the Purchasers shall not
have the right to attend the portion of any such meeting during which the
Company intends to discuss information, the disclosure of which is reasonably
likely to result in the waiver of the Company's attorney client privilege
applicable to such information, but solely to the extent that the Company
provides to the Purchasers all non privileged information discussed during such
portion of such meeting.
Section 5.10. Meeting Of Stockholders; Stockholder Approval. The Company
shall:
(a) promptly prepare and file with the SEC a proxy statement covering the
solicitation of proxies for use at the Stockholders' Meeting (defined in Section
5.10(b) hereof) (the "PROXY STATEMENT") and respond to any comments of the SEC
with respect to the Proxy Statement and cause the Proxy Statement to be mailed
to its stockholders;
(b) call and give notice of, as soon as practicable following the clearance
of the Proxy Statement by the SEC, the annual meeting of its stockholders (the
"STOCKHOLDERS' MEETING") to be duly called and held as soon as reasonably
practicable (and shall use its best efforts to cause such meeting to be held no
later than December 31, 2001), for the purpose of voting to approve or ratify
the authorization and issuance of the Conversion Shares and shall use its best
efforts to obtain such stockholder approval or ratification; and
(c) recommend approval or ratification, of the issuance of the Conversion
Shares, and include such recommendation in the Proxy Statement, and take all
lawful action to solicit such stockholder approval or ratification.
ARTICLE 6
Negative Covenants
The Company agrees that from the date hereof until the Closing Date and
thereafter so long as any of the Notes remain outstanding:
Section 6.01. Debt. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt,
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or any contingent obligations which would be Debt hereunder if they were
non-contingent, except for
(a) Debt or such contingent obligations outstanding on the date of this
Agreement as set forth in Schedule 6.01 plus any renewals, extensions,
replacements or other refinancing thereof, provided that after giving effect to
such renewal, extension, replacement or other refinancing, Debt permitted
pursuant to this Section 6.01(a) does not exceed the amount listed on Schedule
6.01 as of the Closing Date;
(b) Debt under the Financing Documents;
(c) Debt incurred or assumed for the purpose of financing all or any part
of the cost of acquiring any asset (including through Capital Leases), in an
aggregate principal amount at any time outstanding not greater than $5,000,000;
and
(d) Debt to a wholly-owned Subsidiary.
Section 6.02. Negative Pledge. The Company will not, and will not permit
any of its Subsidiaries to, create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except:
(a) any Lien on any asset securing Debt permitted under Section 6.01(c)
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such asset, provided that such Lien attaches solely to such asset and
concurrently with or within 90 days after the acquisition thereof;
(b) Liens existing on the date of this Agreement securing Debt permitted by
Section 6.01(a) in an aggregate principal amount not exceeding $1,000,000;
(c) inchoate Liens for taxes, assessments or governmental charges or levies
not yet due or payable;
(d) other Liens arising in the ordinary course of its business which (i) do
not secure Debt, (ii) do not secure any obligation in an amount exceeding
$500,000 and (iii) do not in the aggregate materially detract from the value of
its assets or materially impair the use thereof in the operation of its
business; and
(e) Liens created by the Security Documents.
Section 6.03. Consolidations, Mergers And Sales Of Assets. The Company will
not, and will not permit any of its Subsidiaries to, (i) consolidate or merge
with or into any other Person or (ii) sell, lease or otherwise transfer,
directly or indirectly, any of its or their assets, other than (x) dispositions
of Temporary Cash Investments, (y) dispositions for cash and fair value of
assets
24
that the board of directors (or comparable body) of the Company determines in
good faith are no longer used or useful to or necessary for the business of the
Company and its Subsidiaries and (z) the disposition of the Company's "streaming
media" business.
Section 6.04. Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment.
Section 6.05. Purchase Of Assets; Investments. The Company will not, and
will not permit any of its Subsidiaries to, acquire any assets other than in the
ordinary course of business. The Company will not, and will not permit any of
its Subsidiaries to, make, acquire or own any Investment in any Person other
than (a) Temporary Cash Investments and (b) Investments in Subsidiaries;
provided that the aggregate amount of Investments in Subsidiaries (whether now
existing or hereafter created or acquired) made after the date hereof shall not
exceed $500,000. Without limiting the generality of the foregoing, the Company
will not, and will not permit any of its Subsidiaries to, (i) acquire or create
any Subsidiary unless such Subsidiary becomes a Lien Grantor (as defined in the
Security Agreement) pursuant to Section 15 of the Security Agreement or (ii)
engage in any joint venture or partnership with any other Person, in each case
without the prior written consent of the Required Holders; provided that the
foregoing clause (ii) shall not prohibit the Company or any Subsidiary from
entering into a strategic alliance which does not involve the transfer of cash
or other assets, or equity of the Company or any such Subsidiary.
Section 6.06. Transactions With Affiliates. Except as disclosed in the
Company Reports or on Schedule 6.06 and except for transactions on fair and
reasonable terms and conditions no less favorable to the Company as the terms
and conditions which would apply in a comparable transaction with a Person other
than an Affiliate, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company without the
prior written consent of the Required Holders.
Section 6.07. Notice Of Issuance Of Securities. The Company shall not issue
any securities from the date of this Agreement until the conversion of the
Notes, in their entirety, without the prior written consent of the Required
Holders, such consent not to be unreasonably withheld; provided that, the
Company shall not be required to obtain such consent in connection with (i) any
issuance of securities pursuant to the exercise or conversion of any securities
outstanding as of the date of this Agreement, (ii) the issuance of any shares of
Common Stock, or options or other rights to purchase or acquire shares of Common
Stock, or the issuance of any other securities, to directors, employees,
consultants or advisors to the Company, pursuant to a formal plan duly adopted
by the board of directors,
25
(iii) the issuance by the Company of Common Stock to any Person that is not an
Affiliate of the Company or (iv) the issuance by the Company of Common Stock to
any Purchaser as payment of interest on any Note or in satisfaction of Affiliate
Obligations.
Section 6.08. Amendments And Waivers. Without the prior written consent of
the Required Holders, the Company will not, nor will the Company permit any of
its Subsidiaries to, agree to (i) any amendment to or waiver of or in respect of
the Organizational Documents of the Company or such Subsidiary or any Financing
Document or (ii) any other material amendment to or waiver of any material
contract constituting a part of the Collateral, if in each case, such amendments
or waiver would adversely affect the rights or remedies of any Purchaser under
the Financing Documents.
ARTICLE 7
Events Of Default
Section 7.01 . Events Of Default. If any one or more of the following
events (each an "EVENT OF DEFAULT") shall occur and be continuing for any reason
whatsoever (whether voluntary or involuntary, by operation of law or otherwise):
(a) the Company shall fail to pay any principal, when due, or shall fail to
pay within 5 days of the due date any interest or premium on any Note, any fees
or any other amount payable hereunder;
(b) the Company shall fail to observe or perform any covenant contained in
Article 6 hereof, or Section 5(b), 5(e) or 7 of the Security Agreement;
(c) the Company or any of its Subsidiaries shall fail to observe or perform
any covenant or agreement contained in the Financing Documents (other than those
covered by Section 7.01(a) or 7.01(b) above) for 10 days after written notice
thereof has been given to the Company by either Purchaser;
(d) any representation, warranty, certification or statement made by the
Company or any of its Subsidiaries in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document shall prove to have been incorrect in any respect (or in any
material respect if such representation, warranty, certification or statement is
not by its terms already qualified as to materiality) when made (or deemed
made);
(e) the Company or any of its Subsidiaries shall fail to make any payment
in respect of any Material Debt (other than the Notes);
26
(f) any event or condition shall occur which (i) results in the
acceleration of the maturity of any Material Debt (other than the Notes) of the
Company or any of its Subsidiaries, or (ii) enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of such Material Debt
or any Person acting on such holder's behalf to accelerate the maturity thereof,
or (iii) results in a violation of, or a default under, any provision of the
certificate of incorporation of the Company or any of its Subsidiaries;
(g) the Company or any of its Subsidiaries shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Company or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any of its Subsidiaries under the
federal bankruptcy laws as now or hereafter in effect;
(i) one or more judgments or orders for the payment of money aggregating in
excess of $1,000,000 shall be rendered against the Company or any of its
Subsidiaries and such judgments or orders shall continue unsatisfied and
unstayed for a period of 10 days;
(j) there shall occur a Change of Control;
(k) through no fault of the Purchasers, the Lien created by any of the
Security Documents shall at any time fail to constitute a valid and perfected
Lien on any material portion of the Collateral purported to be secured thereby,
subject to no prior or equal Lien except Permitted Liens, or the Company or any
of its Subsidiaries shall so assert in writing;
(l) the Company or any of its Subsidiaries shall be prohibited or otherwise
materially restrained from conducting the business theretofore conducted by it
by virtue of any determination, ruling, decision, decree or order of any court
or regulatory authority of competent jurisdiction and such
27
determination, ruling, decision, decree or order remains unstayed and in effect
for any period of 10 days; or
(m) any of the Financing Documents shall for any reason fail to constitute
the valid and binding agreement of any party thereto, or any such party shall so
assert in writing;
then, and in every such event and at any time thereafter during the
continuance of such event, the Required Holders may by notice to the Company
declare the Notes (together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company and the Company will pay the same; provided that in the case of any of
the Events of Default specified in Section 7.01(g) or 7.01(h) above, without any
notice to the Company or any other act by the Purchasers, the Notes (together
with accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company and the Company will pay the same.
ARTICLE 8
Conditions
Section 8.01. Conditions To Closing. The obligation of each Purchaser to
purchase the Notes on the Closing Date shall be subject to the satisfaction of
the following conditions precedent:
(a) receipt by CFS of a duly executed CFS Note;
(b) receipt by CMGI of a duly executed CMGI Note;
(c) receipt by each Purchaser of evidence satisfactory to it in its
reasonable and good faith discretion of the satisfaction (without waiver) of all
conditions to the closing of the transactions contemplated by the Transaction
Agreement on the Closing Date;
(d) receipt by each Purchaser of evidence satisfactory to it of the
effectiveness of and a copy of all Financing Documents required to be effective
on the Closing Date, all in form and substance reasonably satisfactory to such
Purchaser, in each case in its reasonable and good faith discretion;
(e) receipt by each Purchaser of an opinion of counsel for the Company
(which shall be a nationally recognized law firm reasonably acceptable to the
Purchasers), satisfactory in form and substance to such Purchaser and covering
such matters relating to the transactions contemplated hereby as either
Purchaser may reasonably request (by its execution and delivery of this
Agreement, the
28
Company authorizes and directs such counsel to deliver such opinions to the
Purchasers);
(f) receipt by each Purchaser of all amounts due and payable to it on or
prior to the Closing Date under each Financing Document;
(g) receipt by each Purchaser of a certificate signed by the chief
financial officer or treasurer of the Company to the effect that, both before
and immediately after the purchase and sale of the Notes and the other
transactions contemplated to take place on the Closing Date, including those
contemplated by the Transaction Agreement (i) no Default shall have occurred and
be continuing and (ii) the representations and warranties of the Company and its
Subsidiaries made in or pursuant to the Financing Documents are true;
(h) receipt by each Purchaser of the certificate referred to in Section
5.04(c); and
(i) receipt by each Purchaser of all documents either Purchaser may
reasonably request relating to the existence of the Company and its
Subsidiaries, the authority for and the validity of the Financing Documents, and
any other matters relevant hereto, all in form and substance satisfactory to
each Purchaser, in its sole good faith discretion.
The certificates and opinions referred to in this Section shall be dated
the Closing Date.
ARTICLE 9
Expenses, Indemnity, Taxes And Right To Perform
Section 9.01. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, each party hereto shall bear its own (i) costs and
expenses of preparation of this Agreement and the other Financing Documents and
(ii) the fees, expenses and disbursements of each of its counsel to, and each of
its independent appraisers and consultants retained in connection with the
negotiation, preparation, execution and administration of this Agreement and the
other Financing Documents. The Company agrees to pay (i) the reasonable fees,
expenses and disbursements of counsel to, and independent appraisers and
consultants retained by, the Purchasers in connection with the negotiation,
preparation, and execution of any amendments to or any waivers of this Agreement
or any other Financing Document, (ii) all reasonable costs and expenses of
creating, perfecting and maintaining Liens pursuant to the Financing Documents,
including title investigations and fees and expenses of such local counsel as
either Purchaser shall request; provided that any such costs in excess of $5,000
per Lien Grantor shall be payable by the Purchasers, pro-rata to the outstanding
principal amount of each Purchaser's Note, (iii) the reasonable fees,
29
expenses and disbursements of independent accountants or other experts retained
by the Purchasers in connection with not more than two accounting and collateral
audits or reviews of the Company and its affairs during any calendar year and
(iv) if an Event of Default occurs, all out-of-pocket expenses incurred by each
Purchaser, including fees and disbursements of counsel and all expenses of
protecting, storing, insuring, handling, maintaining or selling any Collateral,
in connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom.
Section 9.02. Indemnity. Whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to indemnify, pay and hold
harmless the Purchasers and any subsequent holder of any of the Notes and the
officers, directors, and employees of the Purchasers and such holders
(collectively called the "INDEMNITEES") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnitee) in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitee shall be designated a party thereto and including
any such proceeding initiated by or on behalf of the Company, and the reasonable
expenses of investigation by engineers, environmental consultants and similar
technical personnel and any commission, fee or compensation claimed by any
broker (other than any broker retained by the Purchasers) asserting any right to
payment for the transactions contemplated hereby, which may be imposed on,
incurred by or asserted against such Indemnitee as a result of or in connection
with the transactions contemplated hereby or by the other Financing Documents
and the use or intended use of the proceeds of the Notes, except that the
Company shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, the Company shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all such indemnified liabilities incurred by the
Indemnitees or any of them.
ARTICLE 10
Miscellaneous
Section 10.01. Survival. The indemnities and agreements set forth in
Article 9 shall survive the payment of the Notes and any termination of this
Agreement.
Section 10.02. No Waivers. No failure or delay by any Purchaser in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
30
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 10.03. Security Agreement. The Purchasers hereby approve the
provisions of the Security Agreement and agree to be bound by the provisions
thereof, including, without limitation, Section 13 thereof.
Section 10.04. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to such party at
its address or facsimile number set forth below (other than notices, requests or
other communications provided to CFS under Section 5.01, which shall be given to
CFS at the address or facsimile number set forth below) or at such other address
or facsimile number as such party may hereafter specify for the purpose by
notice to the Company.
If to the Company to: NaviSite, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to CFS generally, to: Compaq Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention : General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to CFS pursuant to Section 5.01: Compaq Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Vice President and
Managing Director Global
Structured Finance
31
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to CMGI to: CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each such notice, request or other communication shall be effective (i) when
delivered to such party at its address specified above, (ii) when sent to such
party by facsimile, addressed to it at its facsimile number specified above, and
such party sends back an electronic confirmation of receipt, or (iii) ten days
after being sent to such party by certified or registered United States mail,
addressed to it at its address specified below, with first class or airmail
postage.
Section 10.05. Payments. Each payment of principal on the Notes and each
payment of interest on the Notes shall be allocated pro rata among the
Purchasers in accordance with the respective principal amounts of their
outstanding Notes. Any amounts paid by the Company under the Notes shall be
applied in the following order: first, to the payment of any interest accrued up
to the date of such payment on any overdue amount under the Notes; second, to
the payment of any interest on the principal of the Notes, provided that such
interest is due and payable at such date; and third, to the payment of any
outstanding principal amount of the Notes, provided that such principal amount
is due and payable at such date.
Section 10.06. Severability. In case any provision of or obligation under
this Agreement or the Notes or any other Financing Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
32
Section 10.07. Amendments And Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Company and the Required Holders; provided that
no such amendment or waiver shall, unless signed by all of the Purchasers (i)
reduce the principal of or rate of interest on any Note or (ii) postpone the
date fixed for any payment of principal on any Note or of interest on any Note.
Section 10.08. Successors And Assigns; Registration. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns (including any transferee of
any Note), except that the Company may not assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of the
Required Holders.
(b) Either of the Purchasers may at any time assign or transfer all, or a
proportionate part of all of its rights and obligations under this Agreement and
the Notes only with the prior written consent of the Company and each other
Purchaser (each, a "NON-ASSIGNING PURCHASER"), which consent shall not be
unreasonably withheld or delayed; provided that the consent of the Company and
the Non-Assigning Purchasers shall not be required for such assignments or
transfers (i) to an Affiliate of a Purchaser or (ii) to another Purchaser.
Subject to the restriction contained in the foregoing sentence, the terms and
provisions of this Agreement shall inure to the benefit of any transferee or
assignee of any Note and, in the event of such transfer or assignment, the
rights and privileges herein conferred upon the assigning Purchaser shall
automatically extend to and be vested in such transferee or assignee, all such
to the terms and conditions hereof.
(c) Upon any assignment of any Note, the assigning Purchaser shall
surrender its Note to the Company for exchange or registration of transfer, and
the Company will promptly execute and deliver in exchange therefor a new Note or
Note of the same tenor, and registered in the name of the assignor Purchaser (if
less than all of such Purchaser's Notes are assigned) and the name of the
assignee Purchaser.
(d) The Company shall maintain a register (the "NOTE REGISTER") of the
Purchasers and all assignee Purchasers that are the holders of all the Notes
issued pursuant to this Agreement. The Company will allow any Purchaser to
inspect and copy such list at the Company's principal place of business during
normal business hours. Prior to the due presentment for registration of transfer
of any Note, the Company may deem and treat the Person in whose name a Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and premium and interest on such Note and for all other
purposes whatsoever, and the Company shall not be affected by notice to the
contrary.
33
(e) Each Purchaser (including any assignee Purchaser at the time of such
assignment) represents that it (i) is acquiring its Note solely for investment
purposes and not with a view toward, or for sale in connection with, any
distribution thereof, (ii) has received and reviewed such information as it
deems necessary to evaluate the merits and risks of its investment in the Notes,
(iii) is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act, and (iv) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the Notes, including a complete loss of its investment.
(f) Each Purchaser understands that the Notes are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future such Purchaser decides to resell,
pledge or otherwise transfer any of the Notes, such Notes may be resold, pledged
or transferred only (i) to the Company, (ii) to a person who such Purchaser
reasonably believes is a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that such resale, pledge or transfer is being made in reliance on Rule
144A under the Securities Act, or (iii) pursuant to an exemption from
registration under the Securities Act.
(g) Each Purchaser understands that the Notes will, unless otherwise agreed
by the Company and the holder thereof, bear a legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
Section 10.09. Lost Or Destroyed Notes. If any Note becomes mutilated and
is surrendered by the Purchaser with respect thereto to the Company, or if any
Purchaser claims that its Note has been lost, destroyed or wrongfully taken, the
Company shall execute and deliver to such Purchaser a replacement Note, upon
the affidavit of such Purchaser attesting to such loss, destruction or wrongful
taking with respect to such Note and such lost, destroyed, mutilated,
surrendered or wrongfully taken Note shall be deemed to be canceled for all
purposes hereof.
Such affidavit shall be accepted as satisfactory evidence of the loss, wrongful
taking or destruction thereof and no indemnity shall be required as a condition
of the execution and delivery of a replacement Note. Any costs and expenses of
the Company in replacing any such Note shall be for the account of such
Purchaser.
34
Section 10.10. Headings. Headings and captions used in the Financing
Documents (including the Exhibits and Schedules hereto and thereto) are included
for convenience of reference only and shall not be given any substantive effect.
Section 10.11. Confidentiality. In handling any confidential information of
the Company or any of its Subsidiaries, the Purchasers shall exercise the same
degree of care that it exercises with respect to its own proprietary information
of the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the agents, employees, Subsidiaries or
Affiliates of such Person in connection with its present or prospective business
relations with the Company and its Subsidiaries arising out of the Financing
Documents, but only to the extent that each such agent, employee, Subsidiary or
Affiliate has been directed to maintain the confidentiality of such information
in accordance with the provisions of this Section 10.11, (ii) to prospective
transferees or purchasers of any interest in the Notes, provided that they have
agreed to be bound by the provision of this Section 10.11, (iii) as required by
law, regulations, rule, request or order, subpoena, judicial order or similar
order and in connection with any litigation, and (iv) as may be required in
connection with the examination, audit or similar investigation of such Person.
The Purchasers will not use or allow the use of confidential information for any
purpose except in connection with the transactions and agreements contemplated
by the Financing Documents. Confidential information shall include only such
information identified as such in writing at the time provided to the Purchasers
or upon written notice to the Purchasers at any time thereafter and shall not
include information that either: (i) is in the public domain, or becomes part of
the public domain after disclosure to such Person through no fault of such
Person or (ii) is disclosed to such Person by a third party, provided the
Purchasers do not have actual knowledge that such third party is prohibited from
disclosing such information.
Section 10.12 . Governing Law; Submission To Jurisdiction. THIS AGREEMENT
AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER
FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARTIES
35
HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN SECTION 11.03. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY
PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 10.13. Waiver Of Jury Trial. EACH OF THE COMPANY AND THE PURCHASERS
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW
WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL
DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Section 10.14. Counterparts; Integration. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement, the other Financing Documents and the Transaction Agreement
constitute the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof.
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
NAVISITE, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
COMPAQ FINANCIAL SERVICES
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Vice President and
Managing Director
CMGI, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
37
EXHIBIT A
to the Note Purchase Agreement
FORM OF NOTE
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1) TO THE COMPANY, OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
THE HOLDER OF THIS NOTE IS ENTITLED TO THE BENEFITS OF THE GUARANTEE AND
SECURITY AGREEMENT DATED OCTOBER __, 2001 AMONG THE COMPANY, CERTAIN SUBSIDIARY
GUARANTORS THERETO AND COMPAQ FINANCIAL SERVICES CORPORATION, AS AMENDED,
MODIFIED AND SUPPLEMENTED FROM TIME TO TIME. ADDITIONALLY, THE HOLDER OF THIS
NOTE IS ENTITLED TO THE BENEFITS OF THE AMENDMENT TO AND RESTATEMENT OF TO THE
INVESTOR RIGHTS AGREEMENT DATED OCTOBER __, 2001 AMONG THE COMPANY, COMPAQ
FINANCIAL SERVICES CORPORATION AND CMGI, INC., AS AMENDED, MODIFIED AND
SUPPLEMENTED FROM TIME TO TIME.
NAVISITE, INC.
12% Convertible, Senior, Secured Note
Due December 31, 2007
U.S. $_______ October __, 2001
FOR VALUE RECEIVED, the undersigned, NaviSite, Inc., a Delaware corporation
(the "COMPANY"), hereby promises to pay to __, a Delaware corporation (the
"PURCHASER"), the principal sum of US$____ in twelve equal quarterly
installments (each a "PRINCIPAL PAYMENT"), together with accrued but unpaid
interest thereon, commencing on the first Interest Payment Date (as defined
below) in 2005 and continuing on each Interest Payment Date thereafter (each
date on which a Principal Payment is made, a "PRINCIPAL PAYMENT DATE")
until December 31, 2007 (the "MATURITY DATE"). The Company may not prepay this
Note. Interest on the outstanding principal shall be at a rate of 12% per annum
("INTEREST"), calculated on the basis of a 360 day year consisting of twelve 30
day months, and will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each an "INTEREST PAYMENT DATE")
beginning December 31, 2001 until the Maturity Date. Interest for first Interest
Payment Date shall be calculated from the date of issuance hereof to the first
Interest Payment Date. If all or a portion of a Principal Payment or Interest
shall not be paid when due (whether at its stated maturity, by acceleration or
otherwise), the Company hereby promises to pay, on demand, interest on such
overdue amount from and including the due date to, but excluding, the date such
amount is paid in full at 14% per annum (and until the date such overdue amount
is paid in full, "Interest" on such overdue amount shall mean interest at such
rate).
This Note is being delivered pursuant to a Note Purchase Agreement, dated
as of October 29, 2001, among the Company, the Purchaser and [CFS/CMGI] (the
"NOTE PURCHASE AGREEMENT"). This Note is one of the Notes referred to in the
Note Purchase Agreement, which among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain events and for
the amendment or waiver of certain provisions of the Note Purchase Agreement,
all upon the terms and conditions therein specified.
1. Certain Definitions. As used herein, the following terms have the
following meanings:
"CLOSING PRICE" shall mean, on any day, (i) the closing price of the Common
Stock (or any other security for which a closing price must be determined) on a
national securities exchange or as quoted on the Nasdaq National Market on such
day, as reported by the Wall Street Journal or (ii) if the Common Stock (or any
such other security) is quoted on the Nasdaq National Market but no sale occurs
on such day, the average of the closing bid and asked prices of the Common Stock
(or any such other security) on the Nasdaq National Market on such day, as
reported by the Wall Street Journal or (iii) if the Common Stock (or any such
other security) is not so listed or quoted, the average of the closing bid and
asked prices of the Common Stock (or any such other security) in the U.S. over-
the-counter market or (iv) if no such trading market is readily available, the
fair market value of the Common Stock (or any such other security) as determined
in accordance with Section 5(b) hereof.
"CURRENT MARKET PRICE" of the Common Stock means the average of the daily
Closing Prices of the Common Stock for the five consecutive trading days
selected by the board of directors commencing not more than 20 trading days
before, and ending not later than the date immediately preceding the record date
fixed in connection with such event or, if there is no record date, the date of
such event; provided, that the Current Market Price of the Common Stock in
connection with a Spin-Off shall mean the average of the daily Closing Prices of
2
the Common Stock for the same five consecutive trading days used to determine
the Fair Market Value of the securities being distributed in such Spin-Off.
"FAIR MARKET VALUE" of the securities to be distributed to the holders of
the Common Stock in connection with a Spin-Off shall mean the average of the
daily Closing Prices of such securities for a five consecutive trading day
period selected by the board of directors during the period beginning on the
first day of trading of such securities after the effectiveness of such Spin-Off
and ending not later than 20 days after the effectiveness of the Spin-Off.
All capitalized terms used but not otherwise defined herein shall have the
meaning ascribed to such terms in the Note Purchase Agreement.
2. Security.
The Purchaser's right to payment pursuant to the terms of this Note shall
be secured to the extent and on the terms and conditions set forth in the
Security Agreement, and the terms and provisions of the Security Agreement are
incorporated herein by reference.
3. Payment.
Principal Payments on each Principal Payment Date and Interest on each
Interest Payment Date shall be made by bank cashier's check payable to the
Purchaser at the Purchaser's principal address set forth in Section 10.04 of the
Note Purchase Agreement (or at such other place as the Purchaser hereof shall
notify the Company in writing) or, if the Purchaser so specifies, by written
notice to the Company given not less than two Business Days prior to the
Principal Payment Date or the Interest Payment Date, as the case may be, by bank
wire transfer, in immediately available funds, to the account so specified, in
lawful money of the United States of America; provided that, at the election of
the Company, so long as the Company is listed on the Nasdaq National Market, up
to [one-sixth - CFS Note]/[100% - CMGI Note] of the amount of Interest due on
any Interest Payment Date through and including the Interest Payment Date in
December [2003 -CFS Note]/[2007-CMGI Note] may be paid in shares of Common
Stock. The number of shares of Common Stock to be issued in payment of the
Interest due on such Interest Payment Date shall equal the amount of such
Interest to be paid in Common Stock divided by the average of the Closing Prices
per share of the Common Stock on the five consecutive trading days ending on the
trading day immediately preceding such Interest Payment Date. If any Principal
Payment Date or any Interest Payment Date occurs on a date that is not a
Business Day, then the Principal Sum or Interest then due shall be paid on the
next succeeding Business Day.
4. Conversion.
3
(a) Conversion Rights. Subject to and in accordance with the provisions of
this Section 4, at any time on or prior to the Maturity Date, the Purchaser may
elect, in its sole discretion, to effect the conversion (the "CONVERSION") of
all or any portion of the outstanding principal and interest due on this Note
into shares of Common Stock. The number of shares of Common Stock into which the
outstanding principal and accrued but unpaid interest (or portion thereof) shall
be converted pursuant to this Section 4(a) shall be determined by dividing the
amount of outstanding principal and interest the Purchaser has elected to
convert by $0.26. The Conversion Price is subject to adjustment as provided in
Section 5 hereof.
(b) Manner of Effecting the Conversion. If the Purchaser elects to effect
the Conversion pursuant to Section 4(a) hereof, the Purchaser shall deliver a
duly executed written notice to the Company of such election (the "CONVERSION
NOTICE"), and in such event the Conversion shall be deemed to have been effected
at the close of business on the date such Conversion Notice is given. Upon any
Conversion of this Note in accordance with the terms hereof, the rights of the
Purchaser with respect to the outstanding principal and all interest pursuant to
this Note shall cease and the Purchaser shall be deemed to have become the
holder of record of the shares of Common Stock into which this Note shall have
been converted, provided that, if the Purchaser elects to convert only a portion
of the outstanding principal and interest pursuant to Section 4(a) hereof, then
the Company will deliver a new note to the Purchaser, on the same terms and
conditions as this Note, with respect to the portion of the outstanding
principal and interest that is not converted (the "NEW NOTE"). Concurrently with
the delivery of a Conversion Notice, the Purchaser shall surrender this Note to
the Company. Promptly upon its receipt of a Conversion Notice, the Company shall
(i) deliver to or upon the written order of the Purchaser, a certificate or
certificates for the number of shares of Common Stock issuable upon such
Conversion, (ii) make a cash payment in respect of any fraction of a share as
provided in Section 4(c) hereof and (iii) if applicable, deliver a New Note as
set forth in this Section 4(b).
(c) Fractional Shares. No fractional shares shall be issued upon any
Conversion. Instead of any fractional share which would otherwise be issuable
upon a Conversion, the Company shall pay a cash amount in respect of such
fractional share in an amount based upon the Closing Price of the Common Stock
on the trading day immediately preceding such Conversion.
(d) Notwithstanding anything contained herein, this Note may not be
converted until the Company has obtained the stockholder approvals required in
accordance with Rule 4350(i) of the National Association of Securities Dealers
Manual and Delaware corporate law.
4
5. Antidilution Provisions.
(a) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) STOCK SPLITS AND COMBINATIONS. In case the Company shall at any
time or from time to time after the Closing Date (A) subdivide or split the
outstanding shares of Common Stock, (B) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares or (C)
issue by reclassification of the shares of Common Stock any shares of
Capital Stock of the Company, then, and in each such case, the Conversion
Price in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of
this Note thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other securities of the
Company which such holder would have owned or have been entitled to receive
after the occurrence of any of the events described above, had such Note
been surrendered for conversion immediately prior to the occurrence of such
event or the record date therefor, whichever is earlier. An adjustment made
pursuant to this subparagraph (i) shall become effective at the close of
business on the day upon which such corporate action becomes effective.
Such adjustment shall be made successively whenever any event listed above
shall occur.
(ii) STOCK DIVIDENDS IN COMMON STOCK. In case the Company shall at any
time or from time to time after the Closing pay a dividend or make a
distribution in shares of Common Stock on any class of Capital Stock of the
Company other than dividends or distributions of shares of Common Stock or
other securities with respect to which adjustments are provided in Section
5(a)(i) above, the Conversion Price shall be adjusted so that the holder of
this Note shall be entitled to receive upon conversion thereof, the number
of shares of Common Stock determined by multiplying (A) the applicable
Conversion Price by (B) a fraction, the numerator of which shall be the
number of shares of Common Stock theretofore outstanding and the
denominator of which shall be the sum of such number of shares and the
total number of shares issued in such dividend or distribution.
(iii) ISSUANCE OF RIGHTS OR WARRANTS. In case the Company shall issue
to all holders of Common Stock rights or warrants entitling such holders to
subscribe for or purchase Common Stock at a price per share less than the
Current Market
5
Price, the Conversion Price in effect immediately prior to the close of
business on the record date fixed for determination of stockholders
entitled to receive such rights or warrants shall be reduced by multiplying
such Conversion Price by a fraction, the numerator of which is the sum of
the number of shares of Common Stock outstanding at the close of business
on such record date and the number of shares of Common Stock that the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market
Price and the denominator of which is the sum of the number of shares of
Common Stock outstanding at the close of business on such record date and
the number of additional shares of Common Stock so offered for subscription
or purchase. For purposes of this subparagraph (iii), the issuance of
rights or warrants to subscribe for or purchase securities convertible into
Common Stock shall be deemed to be the issuance of rights or warrants to
purchase the Common Stock into which such securities are convertible at an
aggregate offering price equal to the sum of the aggregate offering price
of such securities and the minimum aggregate amount (if any) payable upon
conversion of such securities into Common Stock. Such adjustment shall be
made successively whenever any such event shall occur.
(iv) DISTRIBUTION OF INDEBTEDNESS, SECURITIES OR ASSETS. In case the
Company shall distribute to all holders of Common Stock (whether by
dividend or in a merger, amalgamation or consolidation or otherwise)
evidences of indebtedness, shares of Capital Stock of any class or series,
other securities, cash or assets (other than Common Stock, rights or
warrants referred to in subparagraph (iii) above and other than as a result
of a Fundamental Change (as defined below)), the Conversion Price in effect
immediately prior to the close of business on the record date fixed for
determination of stockholders entitled to receive such distribution shall
be reduced by multiplying such Conversion Price by a fraction, the
numerator of which is the Current Market Price on such record date less the
fair market value (as determined in good faith by the board of directors,
except in the case of a Spin-Off (as defined below)) of the portion of such
evidences of indebtedness, shares of capital stock, other securities, cash
and assets so distributed applicable to one share of Common Stock, and the
denominator of which is the Current Market Price. Such adjustment shall be
made successively whenever any such event shall occur.
In respect of a dividend or other distribution of shares of Capital
Stock of any class or series, or similar equity interests,
6
of or relating to a subsidiary or other business unit of the Company (a
"SPIN-OFF"), the adjustment to the Conversion Price under this subparagraph
(iv) shall occur 20 trading days after the effective date of the Spin-Off.
(v) ISSUANCE OF COMMON STOCK. In case the Company shall issue or sell
any shares of Common Stock at a price per share less than the Current
Market Price (other than any (i) such transaction as to which an adjustment
is otherwise provided for in this Section 5, (ii) the issuance by the
Company of Common Stock to pay interest pursuant to Section 3 hereof or in
satisfaction of Affiliate Obligations or (iii) the issuance by the Company
to directors, employees, consultants or advisors of the Company of shares
of Common Stock, or grant of options or other rights to purchase or acquire
Common Stock, at a price, or exercise price, as the case may be, no lower
than the fair market value of the Common Stock (as reasonably determined by
the independent directors of the Company in good faith as of the time of
issuance or grant, as the case may be), so long as the aggregate number of
shares of Common Stock that are so issued or with respect to which an
option or other right is so granted under this clause (iii) does not exceed
14,500,000 shares or (iv) the issuance by the Company of Common Stock
pursuant to the NaviSite warrants in accordance with their terms as of the
date hereof the Conversion Price in effect immediately prior to the close
of business on the date immediately preceding such issuance or sale shall
be reduced by multiplying such Conversion Price by a fraction, the
numerator of which is the sum of the number of shares of Common Stock
outstanding at the close of business on the date immediately preceding such
issuance or sale (giving assumed effect to the conversion of all
convertible securities outstanding on the date hereof) to and the number of
shares of Common Stock that the aggregate price paid for the total number
of shares of Common Stock so issued or sold on such date would purchase at
such Current Market Price and the denominator of which is the sum of the
number of shares of Common Stock outstanding at the close of business on
the date immediately preceding such issuance or sale (giving assumed effect
to the conversion of all convertible securities outstanding on the date
hereof) and the number of additional shares of Common Stock so issued or
sold. For purposes of this subparagraph (v), the issuance of rights,
options or warrants to purchase Common Stock or securities convertible or
exchangeable for Common Stock shall be deemed to be the issuance of the
Common Stock into which such securities are exercisable at an aggregate
price equal to the sum of the aggregate price paid for such securities and
the minimum aggregate amount (if any) payable upon exercise or conversion
of such options, rights, warrants or securities for Common Stock,
7
and the date of issuance and sale for purposes hereof shall be the date
upon which such options, rights or warrants were issued or amended. Such
adjustment shall be made successively whenever any such event shall occur;
provided that no adjustment shall be made upon exercise of any option,
right or warrant. If an adjustment is made as the result of the issuance of
an option, right, warrant or convertible security and such option, right,
warrant or security expires unexercised or unconverted, the Conversion
Price shall be readjusted to the price that would have been in effect if no
such adjustment had been made.
(vi) FUNDAMENTAL CHANGES. In case any transaction or event (including,
without limitation, any merger, consolidation, combination,
recapitalization, sale of assets, tender or exchange offer,
reclassification, compulsory share exchange or liquidation) shall occur in
which all or substantially all outstanding shares of Common Stock are
converted into or exchanged or acquired for or constitute the right to
receive stock, other securities, cash, property or assets (each, a
"FUNDAMENTAL CHANGE"), the holder of this Note outstanding immediately
prior to the occurrence of such Fundamental Change shall have the right
upon any subsequent conversion to receive (but only out of legally
available funds, to the extent required by applicable law) the kind and
amount of stock, other securities, cash, property or assets that such
holder would have received if such share had been converted immediately
prior thereto.
(b) (i) Subject to paragraph (b)(ii) below, each determination of the
Closing Price pursuant to clause (iv) of the definition of "Closing Price" shall
be made in good faith by the Company. Upon each determination of the fair market
value of the Common Stock by the Company hereunder, the Company shall promptly
give notice thereof to each Purchaser, setting forth in reasonable detail the
calculation of such fair market value and the method and basis of determination
thereof (the "Company Determination").
(ii) If the Required Holders shall disagree with the Company
Determination and shall by notice to the Company given within 10 days after
the Company's notice of the Company Determination (an "Appraisal Notice")
elect to dispute the Company Determination, such dispute shall be resolved
as set forth in paragraph (b)(iii) below; provided that such procedure
shall not apply to any determination of fair market value made pursuant to
Section 5(a)(v)(ii).
8
(iii) The Company shall within 10 days after an Appraisal Notice shall
have been given pursuant to paragraph (b)(i) above engage an investment
bank or other qualified appraisal firm reasonably acceptable to the
Required Holders (the "APPRAISER") to make an independent determination of
the fair market value of the Common Stock (the "APPRAISER DETERMINATION").
The Appraiser Determination shall be final and binding on the Company and
the Purchasers. If the Company Determination and the Appraiser
Determination differ by an amount of 15% or less of the Company
Determination, then the costs of conducting the appraisal shall be borne
equally by the Company and the Purchasers; if the Company Determination is
greater than the Appraiser Determination by more than 15% of the Company
Determination, then the costs of conducting the appraisal shall be borne
entirely by the Purchasers; and if the Appraiser Determination is greater
than the Company Determination by more than 15% of the Company
Determination, then the costs of conducting the appraisal shall be borne
entirely by the Company; provided that in each case costs separately
incurred by the Company and any Purchasers shall be separately borne by
them.
(c) Anything in paragraph (a) to the contrary notwithstanding, the Company
shall not be required to give effect to any adjustment in the Conversion Price
unless and until the net effect of one or more adjustments (each of which shall
be carried forward until counted toward adjustment), determined as above
provided, shall have resulted in a change of the Conversion Price by at least
1%, and when the cumulative net effect of more than one adjustment so determined
shall be to change the Conversion Price by at least 1%, such change in the
Conversion Price shall thereupon be given effect. In the event that, at any time
as a result of the provisions of this paragraph (b), the holder of this Note
upon subsequent conversion shall become entitled to receive any shares of
Capital Stock of the Company other than Common Stock, the number of such other
shares so receivable upon conversion of this Note shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained herein.
(d) In any case in which paragraph (a) requires that an adjustment as a
result of any event is to become effective from and after a record date, the
Company may elect to defer until after the occurrence of such event (i) issuing
to the holder of this Note converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion over and above the shares issuable on the basis of the
Conversion Price in effect immediately prior to
9
adjustment and (ii) paying to such holder any amount in cash in lieu of a
fractional share of Common Stock.
(e) If the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
and shall thereafter and before the distribution to stockholders thereof legally
abandon its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment in the number of shares of Common Stock issuable upon
exercise of the right of conversion or in the Conversion Price then in effect
shall be required by reason of the taking of such record.
(f) Upon any adjustment of the Conversion Price or the number of shares of
Common Stock issuable upon the Conversion of this Note, a certificate, signed by
(i) the Company's president and chief financial officer or (ii) any independent
firm of certified public accountants of recognized national standing the Company
selects at its own expense, setting forth in reasonable detail the events
requiring the adjustment and the method by which such adjustment was calculated,
shall be mailed to the Purchaser at the address set forth in Section 10.04 of
the Note Purchase Agreement hereof and shall specify the adjusted Conversion
Price and the number of shares of Common Stock issuable upon the Conversion of
the Note after giving effect to the adjustment.
(g) The Company shall not, by amendment of its Certificate of Incorporation
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in the carrying out of all provisions of this Section
5 and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Purchaser against impairment.
(h) Except as otherwise provided herein, all sections of this Section 5 are
intended to operate independently of one another. If an event occurs that
requires the application of more than one section, all applicable sections shall
be given independent effect.
6. Governing Laws.
This Note shall be governed by, and construed in accordance with, the laws
of the State of New York in all respects, including all matters of construction,
validity and performance, without regard to the choice of law provisions
thereof.
10
IN WITNESS WHEREOF, the Company has caused this Note to be signed on its
behalf, in its corporate name, by its duly authorized officer as an instrument
under seal, as of the day and year first above written.
NAVISITE, INC.
By:
----------------------
Name:
Title:
11
EXHIBIT B
to the Note Purchase Agreement
GUARANTEE AND SECURITY AGREEMENT
dated as of
October __, 2001
among
NAVISITE, INC.
THE GUARANTORS PARTY HERETO
and
COMPAQ FINANCIAL SERVICES CORPORATION,
as Collateral Representative
TABLE OF CONTENTS
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SECTION 1. Definitions...................................................... 1
SECTION 2. Guarantees by Guarantors......................................... 6
SECTION 3. Grant of Transaction Liens....................................... 8
SECTION 4. General Representations and Warranties........................... 9
SECTION 5. Further Assurances; General Covenants............................ 11
SECTION 6. Investment Property.............................................. 13
SECTION 7. Collateral Accounts.............................................. 14
SECTION 8. Remedies upon Event of Default................................... 15
SECTION 9. Application of Proceeds.......................................... 16
SECTION 10. Fees and Expenses; Indemnification.............................. 17
SECTION 11. Authority to Administer Collateral.............................. 18
SECTION 12. Limitation on Duty in Respect of Collateral..................... 19
SECTION 13. General Provisions Concerning the Collateral Representative..... 19
SECTION 14. Termination of Transaction Liens; Release of Collateral......... 21
SECTION 15. Additional Guarantors and Lien Grantors......................... 22
SECTION 16. Notices......................................................... 22
SECTION 17. No Implied Waivers; Remedies Not Exclusive...................... 23
SECTION 18. Successors and Assigns.......................................... 23
SECTION 19. Amendments and Waivers.......................................... 23
SECTION 20. Choice of Law................................................... 23
SECTION 21. Waiver of Jury Trial............................................ 23
SECTION 22. Severability.................................................... 24
SCHEDULES:
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SCHEDULE 1 Equity Interests in Subsidiaries and Affiliates Owned by
Original Lien Grantors
EXHIBITS:
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EXHIBIT A Security Agreement Supplement
EXHIBIT B Perfection Certificate
EXHIBIT C Issuer Control Agreement
ii
GUARANTEE AND SECURITY AGREEMENT
AGREEMENT dated as of October __, 2001 among NAVISITE, INC., the GUARANTORS
party hereto and COMPAQ FINANCIAL SERVICES CORPORATION, as Collateral
Representative.
WHEREAS, the Company is entering into the Note Purchase Agreement (as this
and other capitalized terms are defined in Section 1 hereof), pursuant to which
the Company intends to issue the Notes to the Purchasers;
WHEREAS, the Company is willing to secure its obligations under the Notes
and the Note Purchase Agreement by granting Liens on its assets to the
Collateral Representative as provided in the Security Documents;
WHEREAS, the Company is willing to cause each of its Subsidiaries to
guarantee the foregoing obligations of the Company and to secure its guarantee
thereof by granting Liens on its assets to the Collateral Representative as
provided in the Security Documents;
WHEREAS, the Purchasers are not willing to purchase the Notes unless (i)
the foregoing obligations of the Company are secured and guaranteed as described
above and (ii) each guarantee thereof is secured by Liens on assets of the
relevant Guarantor as provided in the Security Documents;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
(a) Terms Defined in Note Purchase Agreement. Terms defined in the Note
Purchase Agreement and not otherwise defined in subsection (b) or (c) of this
Section have, as used herein, the respective meanings provided for therein.
(b) Terms Defined in UCC. As used herein, each of the following terms
has the meaning specified in the UCC:
Term UCC
---- ---
Account 9-102
Authenticate 9-102
Certificated Security 8-102
Chattel Paper 9-102
Document 9-102
Equipment 9-102
Financial Asset 8-102 & 103
General Intangibles 9-102
Instrument ▇-▇▇▇
▇▇▇▇▇▇▇▇▇ 9-102
Investment Property 9-102
Payment Intangible 9-102
Record 9-102
Securities Intermediary 8-102
Security 8-102 & 103
Supporting Obligations 9-102
Uncertificated Security 8-102
(c) Additional Definitions. The following additional terms, as used
herein, have the following meanings:
"ARTICLE 9" means Article 9 of the Uniform Commercial Code as set forth in
the 1998 Official Text thereof; provided that, when used with respect to any
jurisdiction on or after the date when such Article 9 (with or without local
changes therein) first becomes effective in such jurisdiction, " Article 9"
refers to Article 9 as in effect in such jurisdiction from time to time.
"COLLATERAL" means all property, whether now owned or hereafter acquired, on
which a Lien is granted or purports to be granted to the Collateral
Representative pursuant to the Security Documents. When used with respect to a
specific Lien Grantor, the term "Collateral" means all its property on which
such a Lien is granted or purports to be granted.
"COLLATERAL ACCOUNT" has the meaning specified in Section 7.
"COLLATERAL REPRESENTATIVE" means Compaq Financial Services Corporation, a
Delaware corporation, in its capacity as representative of the Secured Parties
under the Security Documents, and its successors in such capacity.
"COMPANY" means NaviSite, Inc., a Delaware corporation.
"EQUITY INTEREST" means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof or
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition.
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"GUARANTORS" means each Subsidiary listed on the signature pages hereof
under the caption "Guarantors" and each Subsidiary that shall, at any time after
the date hereof, become a "Guarantor" pursuant to Section 15.
"ISSUER CONTROL AGREEMENT" means an Issuer Control Agreement substantially
in the form of Exhibit C (with any changes that the Collateral Representative
shall have approved).
"LIEN GRANTORS" means the Company and the Guarantors.
"LLC INTEREST" means a membership interest or similar interest in a limited
liability company.
"NOTE" has the meaning specified in the Note Purchase Agreement.
"NOTE DOCUMENTS" means the Note Purchase Agreement, the Notes, the
Registration Rights Agreement and the Security Documents and any documents or
agreements contemplated therein.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement of even date
herewith among the Company and the Purchasers named therein.
"OPINION OF COUNSEL" means a written opinion of legal counsel (who may be
counsel to a Lien Grantor or other counsel, in either case reasonably acceptable
to the Collateral Representative) addressed and delivered to the Collateral
Representative.
"ORIGINAL LIEN GRANTOR" means any Lien Grantor that grants a Lien on any of
its assets hereunder on the Effective Date.
"OWN" refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and "ACQUIRE"
refers to the acquisition of any such rights.
"PARTNERSHIP INTEREST" means a partnership interest, whether general or
limited.
"PERFECTION CERTIFICATE" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit B, completed and supplemented
with the schedules contemplated thereby to the satisfaction of the Collateral
Representative, and signed by an officer of such Lien Grantor.
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"PERMITTED LIENS" means (i) the Transaction Liens and (ii) any other Liens
on the Collateral permitted to be created or assumed or to exist pursuant to
Section 6.02 of the Note Purchase Agreement.
"PLEDGED", when used in conjunction with any type of asset, means at any
time an asset of such type that is included (or that creates rights that are
included) in the Collateral at such time. For example, "Pledged Equity Interest"
means an Equity Interest that is included in the Collateral at such time.
"POST-PETITION INTEREST" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company (or would accrue but for the
operation of applicable bankruptcy or insolvency laws), whether or not such
interest is allowed or allowable as a claim in any such proceeding.
"PROCEEDS" means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Collateral, including all claims of the relevant Lien Grantor against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral.
"PURCHASERS" has the meaning specified in the Note Purchase Agreement.
"RELATED PARTIES" means, with respect to any specified Person, such Person's
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and its Affiliates.
"RELEASE CONDITIONS" means the following condition for releasing all the
Secured Guarantees and terminating all the Transaction Liens: all Secured
Obligations shall have been paid in full.
"REQUIRED HOLDERS" means the holders of more than 50% of the aggregate
outstanding principal amount of the Notes.
"SECURED AGREEMENT", when used with respect to any Secured Obligation,
refers collectively to each instrument, agreement or other document that sets
forth obligations of the Company, obligations of a guarantor and/or rights of
the holder with respect to such Secured Obligation.
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"SECURED GUARANTEE" means, with respect to each Guarantor, its guarantee of
the Secured Obligations under Section 2 hereof or Section 1 of a Security
Agreement Supplement.
"SECURED OBLIGATIONS" means all principal of all Notes outstanding from time
to time under the Note Purchase Agreement, all interest (including Post-Petition
Interest) on such Notes and all other amounts now or hereafter payable by the
Company pursuant to the Note Documents.
"SECURED PARTIES" means the holders from time to time of the Secured
Obligations.
"SECURITY AGREEMENT SUPPLEMENT" means a Security Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the Collateral
Representative for the purpose of adding a Subsidiary as a party hereto pursuant
to Section 15 and/or adding additional property to the Collateral.
"SECURITY DOCUMENTS" means this Agreement, the Security Agreement
Supplements and all other supplemental or additional security agreements,
control agreements, mortgages or similar instruments delivered pursuant to the
Note Documents.
"SUPPORTING LETTER OF CREDIT" means a letter of credit that supports the
payment or performance of one or more items included in the Collateral.
"TRANSACTION LIENS" means the Liens granted by the Lien Grantors under the
Security Documents.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "UCC" means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
(a) Terms Generally. The definitions of terms herein (including those
incorporated by reference to the UCC or to another document) apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. The words "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be
followed by the phrase "WITHOUT LIMITATION". The word "WILL" shall be construed
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to have the same meaning and effect as the word "SHALL". Unless the context
requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "HEREIN", "HEREOF" and "HEREUNDER", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections, Exhibits
and Schedules shall be construed to refer to Sections of, and Exhibits and
Schedules to, this Agreement and (e) the word "PROPERTY" shall be construed to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.
SECTION 2. Guarantees by Guarantors.
(a) Secured Guarantees. Each Guarantor unconditionally guarantees the
full and punctual payment of each Secured Obligation when due (whether at stated
maturity, upon acceleration or otherwise). If the Company fails to pay any
Secured Obligation punctually when due, each Guarantor agrees that it will
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the relevant Secured Agreement.
(b) Secured Guarantees Unconditional. The obligations of each Guarantor
under its Secured Guarantee shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company, any other Guarantor or any
other Person under any Secured Agreement, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Secured Agreement;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Company, any other
Guarantor or any other Person under any Secured Agreement;
(iv) any change in the corporate existence, structure or ownership
of the Company, any other Guarantor or any other Person or any of their
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respective subsidiaries, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Company, any other Guarantor or any
other Person or any of their assets or any resulting release or discharge of
any obligation of the Company, any other Guarantor or any other Person under
any Secured Agreement;
(v) the existence of any claim, set-off or other right that such
Guarantor may have at any time against the Company, any other Guarantor, any
Secured Party or any other Person, whether in connection with the Notes or
any unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Company, any other Guarantor or any other Person for any reason of any
Secured Agreement, or any provision of applicable law or regulation
purporting to prohibit the payment of any Secured Obligation by the Company,
any other Guarantor or any other Person; or
(vii) any other act or omission to act or delay of any kind by the
Company, any other Guarantor, any other party to any Secured Agreement, any
Secured Party or any other Person, or any other circumstance whatsoever that
might, but for the provisions of this clause (vii), constitute a legal or
equitable discharge of or defense to any obligation of any Guarantor
hereunder.
(c) Release of Secured Guarantees. (i) All the Secured Guarantees will
be released when all the Release Conditions are satisfied. If at any time any
payment of a Secured Obligation is rescinded or must be otherwise restored or
returned upon the insolvency or receivership of the Company or otherwise, the
Secured Guarantees shall be reinstated with respect thereto as though such
payment had been due but not made at such time.
(ii) The Collateral Representative may release any Secured
Guarantee with the prior written consent of the Required Holders.
(d) Waiver by Guarantors. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Company, any other Guarantor or any other Person.
(e) Subrogation. A Guarantor that makes a payment with respect to a
Secured Obligation hereunder shall be subrogated to the rights of the payee
7
against the Company with respect to such payment; provided that no Guarantor
shall enforce any payment by way of subrogation against the Company, or by
reason of contribution against any other guarantor of such Secured Obligation,
until all the Release Conditions have been satisfied.
(f) Stay of Acceleration. If acceleration of the time for payment of any
Secured Obligation by the Company is stayed by reason of the insolvency or
receivership of the Company or otherwise, all Secured Obligations otherwise
subject to acceleration under the terms of any Secured Agreement shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Collateral Representative.
(g) Continuing Guarantee. Each Secured Guarantee is a continuing
guarantee, shall be binding on the relevant Guarantor and its successors and
assigns, and shall be enforceable by the Collateral Representative or the
Secured Parties. If all or part of any Secured Party's interest in any Secured
Obligation is assigned or otherwise transferred, the transferor's rights under
each Secured Guarantee, to the extent applicable to the obligation so
transferred, shall automatically be transferred with such obligation.
(h) Limitation on Obligations of Subsidiary Guarantor. The obligations
of each Subsidiary Guarantor under its Secured Guarantee shall be limited to an
aggregate amount equal to the largest amount that would not render such Secured
Guarantee subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of applicable law.
SECTION 3. Grant of Transaction Liens.
(a) The Company, in order to secure the Secured Obligations, and each
Guarantor listed on the signature pages hereof, in order to secure its Secured
Guarantee, grants to the Collateral Representative for the benefit of the
Secured Parties a continuing security interest in all the following property of
the Company or such Guarantor, as the case may be, whether now owned or existing
or hereafter acquired or arising and regardless of where located:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
8
(v) all General Intangibles (including any Equity Interests in other
Persons that do not constitute Investment Property);
(vi) all Instruments;
(vii) all Inventory;
(viii) all Investment Property;
(ix) all books and records (including customer lists, credit files,
computer programs, printouts and other computer materials and records) of
such Original Lien Grantor pertaining to any of its Collateral;
(x) such Original Lien Grantor's ownership interest in (1) its
Collateral Accounts, (2) all Financial Assets credited to its Collateral
Accounts from time to time and all Security Entitlements in respect thereof,
(3) all cash held in its Collateral Accounts from time to time and (4) all
other money in the possession of the Collateral Representative; and
(xi) all Proceeds of the Collateral described in the foregoing
clauses (i) through (x).
(b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
(c) The Transaction Liens are granted as security only and shall not subject
the Collateral Representative or any other Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of any Lien Grantor with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. General Representations and Warranties. Each Original Lien
Grantor represents and warrants that:
(a) Such Lien Grantor is a corporation1 duly organized, validly existing
and in good standing under the laws of the jurisdiction identified as its
jurisdiction of organization in its Perfection Certificate.
-------------
1 Modify as needed if any Original Lien Grantor is not a corporation.
9
(b) Schedule 1 lists all Equity Interests in Subsidiaries and Affiliates
owned by such Lien Grantor as of the Effective Date. Such Lien Grantor holds all
such Equity Interests directly (i.e., not through a Subsidiary, a Securities
Intermediary or any other Person).
(c) Except as set forth on the Perfection Certificate of such Lien Grantor,
all Pledged Equity Interests owned by such Lien Grantor are owned by it free and
clear of any Lien other than (i) the Transaction Liens and (ii) any tax liens,
judgment liens and other Permitted Liens. All shares of capital stock included
in such Pledged Equity Interests (including shares of capital stock in respect
of which such Lien Grantor owns a Security Entitlement) have been duly
authorized and validly issued and are fully paid and non-assessable. None of
such Pledged Equity Interests is subject to any option to purchase or similar
right of any Person. Such Lien Grantor is not and will not become a party to or
otherwise bound by any agreement (except the Note Documents) which restricts in
any manner the rights of any present or future holder of any Pledged Equity
Interest with respect thereto.
(d) Except as set forth on the Perfection Certificate of such Lien Grantor,
such Lien Grantor has good and marketable title to all its Collateral (subject
to exceptions that are, in the aggregate, not material), free and clear of any
Lien other than Permitted Liens.
(e) Such Lien Grantor has not performed any acts that might prevent the
Collateral Representative from enforcing any of the provisions of the Security
Documents or that would limit the Collateral Representative in any such
enforcement. No financing statement, security agreement, mortgage or similar or
equivalent document or instrument covering all or part of the Collateral owned
by such Lien Grantor is on file or of record in any jurisdiction in which such
filing or recording would be effective to perfect or record a Lien on such
Collateral, except financing statements, mortgages or other similar or
equivalent documents with respect to Permitted Liens. After the Effective Date,
no Collateral owned by such Lien Grantor will be in the possession or under the
Control of any other Person having a claim thereto or security interest therein,
other than a Permitted Lien.
(f) The Transaction Liens on all Collateral owned by such Lien Grantor
(i) have been validly created, (ii) will attach to each item of such Collateral
on the Effective Date (or, if such Lien Grantor first obtains rights thereto on
a later date, on such later date) and (iii) when so attached, will secure all
the Secured Obligations or such Lien Grantor's Secured Guarantee, as the case
may be.
(g) Such Lien Grantor has delivered a Perfection Certificate to the
Collateral Representative. The information set forth therein is correct and
10
complete as of the Effective Date. Within 60 days after the Effective Date, such
Lien Grantor will furnish to the Collateral Representative a file search report
from each UCC filing office listed in its Perfection Certificate, showing the
filing made at such filing office to perfect the Transaction Liens on its
Collateral.
(h) When UCC financing statements describing the Collateral as set forth in
Schedule 1 to such Lien Grantor's Perfection Certificate have been filed in the
offices specified in such Perfection Certificate, the Transaction Liens will
constitute perfected security interests in the Collateral owned by such Lien
Grantor to the extent that a security interest therein may be perfected by
filing pursuant to the UCC, prior to all Liens and rights of others therein
except Permitted Liens.
(i) Such Lien Grantor has taken, and will continue to take, all actions
necessary under the UCC to perfect its interest in (i) any Accounts or Chattel
Paper purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors and (ii) any Payment Intangibles or promissory notes
purchased or otherwise acquired by it, as against its assignors and creditors of
its assignors.
(j) Such Lien Grantor's Collateral is insured as required by the Note
Purchase Agreement.
(k) All of such Lien Grantor's Inventory has or will have been produced
in compliance, in all material respects, with the applicable requirements of the
Fair Labor Standards Act, as amended.
SECTION 5. Further Assurances; General Covenants. Each Lien Grantor
covenants as follows:
(a) Such Lien Grantor will, from time to time, at the Company's expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
intellectual property filing and any filing of financing or continuation
statements under the UCC) that from time to time may be necessary or desirable,
or that the Collateral Representative may request, in order to:
(i) create, preserve, perfect, confirm or validate the Transaction
Liens on such Lien Grantor's Collateral;
(ii) enable the Collateral Representative and the other Secured
Parties to obtain the full benefits of the Security Documents; or
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(iii) enable the Collateral Representative to exercise and enforce any
of its rights, powers and remedies with respect to any of such Lien
Grantor's Collateral.
To the extent permitted by applicable law, such Lien Grantor authorizes the
Collateral Representative to execute and file such financing statements or
continuation statements without such Lien Grantor's signature appearing thereon.
Such Lien Grantor agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Such Lien Grantor constitutes the Collateral Representative
its attorney-in-fact to execute and file all intellectual property filings and
other filings required or so requested for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed; and such power, being coupled
with an interest, shall be irrevocable until all the Transaction Liens granted
by such Lien Grantor terminate pursuant to Section 14. The Company will pay the
costs of, or incidental to, any intellectual property filings and any recording
or filing of any financing or continuation statements or other documents
recorded or filed pursuant hereto in accordance with clause (ii) of the second
sentence of Section 9.01 of the Note Purchase Agreement.
(b) Such Lien Grantor will not (i) change its name or corporate structure,
(ii) change its location (determined as provided in UCC Section 9-307) or (iii)
become bound, as provided in UCC Section 9-203(d) or otherwise, by a security
agreement entered into by another Person, unless it shall have given the
Collateral Representative prior notice thereof.
(c) At least 30 days before it takes any action contemplated by Section
5(b), such Lien Grantor will, at the Company's expense and at the request of the
Purchasers, cause to be delivered to the Collateral Representative an Opinion of
Counsel, in form and substance satisfactory to the Collateral Representative, to
the effect that (i) all financing statements and amendments or supplements
thereto, continuation statements and other documents required to be filed or
recorded in order to perfect and protect the Transaction Liens against all
creditors of and purchasers from such Lien Grantor after it takes such action
(except any continuation statements specified in such Opinion of Counsel that
are to be filed more than six months after the date thereof) have been filed or
recorded in each office necessary for such purpose, (ii) all fees and taxes, if
any, payable in connection with such filings or recordations have been paid in
full and (iii) except as otherwise agreed by the Required Holders, such action
will not adversely affect the perfection or priority of the Transaction Lien on
any Collateral to be owned by such Lien Grantor after it takes such action or
the accuracy of such Lien Grantor's representations and warranties herein
relating to such Collateral.
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(d) If any Collateral is located on premises leased by a Lien Grantor as
lessee, such Lien Grantor shall, within 60 days of the date hereof in the case
of leases in existence on the date hereof, and substantially simultaneously with
the execution and delivery of such lease, in the case of leases hereafter
entered into, use its reasonable efforts to secure from the landlord a waiver of
contractual and statutory landlord's liens, an agreement to permit access to and
removal of Collateral and other customary matters, all pursuant to an instrument
in form and substance satisfactory to the Collateral Representative.
(e) Such Lien Grantor will not sell, lease, exchange, assign or otherwise
dispose of, or grant any option with respect to, any of its Collateral; provided
that such Lien Grantor may do any of the foregoing unless (i) doing so would
violate a covenant in the Note Purchase Agreement or (ii) an Event of Default
shall have occurred and be continuing and the Collateral Representative shall
have notified such Lien Grantor that its right to do so is terminated, suspended
or otherwise limited. Concurrently with any sale, lease or other disposition
(except a sale or disposition to another Lien Grantor or a lease) permitted by
the foregoing proviso, the Transaction Liens on the assets sold or disposed of
(but not in any Proceeds arising from such sale or disposition) will cease
immediately without any action by the Collateral Representative or any other
Secured Party. The Collateral Representative will, at the Company's expense,
execute and deliver to the relevant Lien Grantor such documents as such Lien
Grantor shall reasonably request to evidence the fact that any asset so sold or
disposed of is no longer subject to a Transaction Lien.
(f) Such Lien Grantor will, promptly upon request, provide to the
Collateral Representative all information and evidence concerning such Lien
Grantor's Collateral that the Collateral Representative may reasonably request
from time to time to enable it to enforce the provisions of the Security
Documents.
SECTION 6. Investment Property. Each Lien Grantor represents, warrants
and covenants as follows:
(a) Certificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will deliver to the Collateral Representative as Collateral hereunder
all certificates representing Pledged Certificated Securities then owned by such
Lien Grantor. Thereafter, whenever such Lien Grantor acquires any other
certificate representing a Pledged Certificated Security, such Lien Grantor will
immediately deliver such certificate to the Collateral Representative as
Collateral hereunder.
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(b) Uncertificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will enter into (and cause the relevant issuer to enter into) an Issuer
Control Agreement in respect of each Pledged Uncertificated Security then owned
by such Lien Grantor and deliver such Issuer Control Agreement to the Collateral
Representative (which shall enter into the same). Thereafter, whenever such Lien
Grantor acquires any other Pledged Uncertificated Security, such Lien Grantor
will enter into (and cause the relevant issuer to enter into) an Issuer Control
Agreement in respect of such Pledged Uncertificated Security and deliver such
Issuer Control Agreement to the Collateral Representative (which shall enter
into the same).
(c) Delivery of Pledged Certificates. All Pledged Certificates, when
delivered to the Collateral Representative, will be in suitable form for
transfer by delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, all in form and
substance satisfactory to the Collateral Representative.
SECTION 7. Collateral Accounts. (a) If and when required for purposes
hereof, the Collateral Representative will establish with respect to each Lien
Grantor an account (its "COLLATERAL ACCOUNT"), in the name and under the
exclusive control of the Collateral Representative, into which all amounts owned
by such Lien Grantor that are to be deposited therein pursuant to the Note
Documents shall be deposited from time to time. Each Cash Collateral Account
will be operated as provided in this Section.
(b) The Collateral Representative shall deposit the following amounts,
as and when received by it, in the Collateral Account of the applicable Lien
Grantor:
(i) each amount required by the Note Documents to be deposited
therein, including, without limitation, all proceeds specified in Section
5.04(d) of the Note Purchase Agreement; and
(ii) each amount realized or otherwise received by the Collateral
Representative with respect to assets of such Lien Grantor upon any exercise
of remedies pursuant to any Security Document.
(c) Unless (x) an Event of Default shall have occurred and be continuing
and the Required Holders shall have instructed the Collateral Representative
to stop withdrawing amounts from the Collateral Account pursuant to this
subsection or (y) the maturity of the Notes shall have been accelerated
pursuant to Article 7
14
of the Note Purchase Agreement, the Collateral Representative shall withdraw
amounts deposited in the Collateral Account in accordance with Section 5.04(d)
of the Note Purchase Agreement and apply them to pay, or reimburse the Company
and its Subsidiaries for paying, the cost of repairing, restoring or replacing
the affected property to the extent that the Company has certified, no less than
5 Business Days prior to the date of such withdrawal, that (i) it and its
Subsidiaries intend to apply all or any portion of such amounts to pay the cost
of repairing, restoring or replacing the affected property and (ii) if such
property is to be replaced, the property acquired to replace it will be included
in the Collateral at least to the extent that the property to be replaced was
included therein;
(d) Funds held in any Collateral Account may, until withdrawn, be
invested and reinvested in such Temporary Cash Investments as the relevant Lien
Grantor shall request from time to time; provided that, if an Event of Default
shall have occurred and be continuing, the Collateral Representative may select
such Temporary Cash Investments.
(e) If an Event of Default shall have occurred and be continuing, the
Collateral Representative may withdraw any amounts held therein and apply such
amounts as provided in Section 9.
SECTION 8. Remedies upon Event of Default. (a) If an Event of Default shall
have occurred and be continuing, the Collateral Representative may exercise (or
cause its sub-agents to exercise) any or all of the remedies available to it (or
to such sub-agents) under the Security Documents.
(b) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Collateral Representative may
exercise on behalf of the Secured Parties all the rights of a secured party
under the UCC (whether or not in effect in the jurisdiction where such rights
are exercised) with respect to any Collateral and, in addition, the Collateral
Representative may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law, withdraw all cash
held in the Collateral Accounts and apply such cash as provided in Section 9
and, if there shall be no such cash or if such cash shall be insufficient to pay
all the Secured Obligations in full, sell, lease, license or otherwise dispose
of the Collateral or any part thereof. Notice of any such sale or other
disposition shall be given to the relevant Lien Grantor(s) as required by
Section 11. The foregoing provisions of this subsection shall apply to Real
Property Collateral only to the extent permitted by applicable law and the
provisions of any applicable Mortgage or other document.
(c) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing:
15
(i) the Collateral Representative may license or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any Pledged intellectual property (including any Pledged Recordable
Intellectual Property) throughout the world for such term or terms, on such
conditions and in such manner as the Collateral Representative shall in its
sole discretion determine; provided that such licenses or sublicenses do not
conflict with any existing license made available to the Collateral
Representative;
(ii) the Collateral Representative may (without assuming any obligation
or liability thereunder), at any time and from time to time, in its sole and
reasonable discretion, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of any
Lien Grantor in, to and under any of its Pledged intellectual property and
take or refrain from taking any action under any thereof, and each Lien
Grantor releases the Collateral Representative and each other Secured Party
from liability for, and agrees to hold the Collateral Representative and
each other Secured Party free and harmless from and against any claims and
expenses arising out of, any lawful action so taken or omitted to be taken
with respect thereto, except for claims and expenses arising from the
Collateral Representative's or such Secured Party's gross negligence or
willful misconduct; and
(iii) upon request by the Collateral Representative (which shall not be
construed as implying any limitation on its rights or powers), each Lien
Grantor will execute and deliver to the Collateral Representative a power of
attorney, in form and substance satisfactory to the Collateral
Representative, for the implementation of any sale, lease, license or other
disposition of any of such Lien Grantor's Pledged intellectual property or
any action related thereto. In connection with any such disposition, but
subject to any confidentiality restrictions imposed on such Lien Grantor in
any license or similar agreement, such Lien Grantor will supply to the
Collateral Representative its know-how and expertise relating to the
relevant intellectual property or the products or services made or rendered
in connection with such intellectual property, and its customer lists and
other records relating to such intellectual property and to the distribution
of said products or services.
SECTION 9. Application of Proceeds. (a) If an Event of Default shall have
occurred and be continuing, the Collateral Representative may apply (i) any cash
held in the Collateral Accounts and (ii) the proceeds of any sale or other
disposition of all or any part of the Collateral, in the following order of
priorities:
16
first, to pay the expenses of such sale or other disposition, including
reasonable compensation to agents of and counsel for the Collateral
Representative, and all expenses, liabilities and advances incurred or made
by the Collateral Representative in connection with the Security Documents;
second, to pay the unpaid principal of the Secured Obligations ratably
until payment in full of the principal of all Secured Obligations shall have
been made;
third, to pay ratably all interest (including Post-Petition Interest) on
the Secured Obligations until payment in full of all such interest shall
have been made;
fourth, to pay all other Secured Obligations ratably until payment in
full of all such other Secured Obligations shall have been made; and
finally, to pay to the relevant Lien Grantor, or as a court of competent
jurisdiction may direct, any surplus then remaining from the proceeds of
the Collateral owned by it;
provided that Collateral owned by a Guarantor and any proceeds thereof shall be
applied pursuant to the foregoing clauses first, second, third and fourth only
to the extent permitted by the limitation in Section 2(h). The Collateral
Representative may make such distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
(b) In making the payments and allocations required by this Section, the
Collateral Representative may rely upon information supplied to it by the
Secured Parties. All distributions made by the Collateral Representative
pursuant to this Section shall be final (except in the event of manifest error)
and the Collateral Representative shall have no duty to inquire as to the
application by any Secured Party of any amount distributed to it.
SECTION 10. Fees and Expenses; Indemnification. (a) The Company will
forthwith upon demand pay to the Collateral Representative:
(i) the amount of any taxes that the Collateral Representative may have
been required to pay by reason of the Transaction Liens or to free any
Collateral from any other Lien thereon;
(ii) the amount of any and all reasonable out-of-pocket expenses,
including transfer taxes and reasonable fees and expenses of counsel and
17
other experts, that the Collateral Representative may incur in connection
with (x) the administration or enforcement of the Security Documents,
including such expenses as are incurred to preserve the value of the
Collateral or the validity, perfection, rank or value of any Transaction
Lien, (y) the collection, sale or other disposition of any Collateral or (z)
the exercise by the Collateral Representative of any of its rights or powers
under the Security Documents; and
(iii) the amount required to indemnify the Collateral Representative
for, or hold it harmless and defend it against, any loss, liability or
expense (including the reasonable fees and expenses of its counsel and any
experts or sub-agents appointed by it hereunder) incurred or suffered by the
Collateral Representative in connection with the Security Documents, except
to the extent that such loss, liability or expense arises from the
Collateral Representative's gross negligence or willful misconduct or a
breach of any duty that the Collateral Representative has under this
Agreement (after giving effect to Sections 12 and 13).
Any such amount not paid to the Collateral Representative in accordance with the
Security Documents will bear interest for each day thereafter until paid at a
rate of 14% per annum.
(b) If any transfer tax, documentary stamp tax or other tax is payable in
connection with any transfer or other transaction provided for in the Security
Documents, the Company will pay such tax and provide any required tax stamps to
the Collateral Representative or as otherwise required by law.
SECTION 11. Authority to Administer Collateral. Each Lien Grantor
irrevocably appoints the Collateral Representative its true and lawful attorney,
with full power of substitution, in the name of such Lien Grantor, any Secured
Party or otherwise, for the sole use and benefit of the Secured Parties, but at
the Company's expense, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default shall have occurred and be
continuing, all or any of the following powers with respect to all or any of
such Lien Grantor's Collateral:
(a) to demand, ▇▇▇ for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
18
(c) to sell, lease, license or otherwise dispose of the same or the
proceeds or avails thereof, as fully and effectually as if the Collateral
Representative were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to
make any allowance or other adjustment with reference thereto;
provided that, except in the case of Collateral that is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Representative will give the relevant Lien Grantor at
least ten days' prior written notice of the time and place of any public sale
thereof or the time after which any private sale or other intended disposition
thereof will be made. Any such notice shall (i) contain the information
specified in UCC Section 9-613, (ii) be Authenticated and (iii) be sent to the
parties required to be notified pursuant to UCC Section 9-611(c); provided that,
if the Collateral Representative fails to comply with this sentence in any
respect, its liability for such failure shall be limited to the liability (if
any) imposed on it as a matter of law under the UCC.
SECTION 12. Limitation on Duty in Respect of Collateral. Beyond the exercise
of reasonable care in the custody and preservation thereof, the Collateral
Representative will have no duty as to any Collateral in its possession or
control or in the possession or control of any sub-agent or bailee or any income
therefrom or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Collateral Representative will be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession or control if such Collateral is accorded treatment substantially
equal to that which it accords its own property, and will not be liable or
responsible for any loss or damage to any Collateral, or for any diminution in
the value thereof, by reason of any act or omission of any sub-agent or bailee
selected by the Collateral Representative in good faith, except to the extent
that such liability arises from the Collateral Representative's gross negligence
or willful misconduct.
SECTION 13. General Provisions Concerning the Collateral Representative. (a)
Authority. The Collateral Representative is authorized to take such actions and
to exercise such powers as are delegated to the Collateral Representative by the
terms of the Security Documents, together with such actions and powers as are
reasonably incidental thereto.
(b) Rights and Powers as a Secured Party. The Collateral Representative
shall, in its capacity as a Secured Party, have the same rights and powers as
any other Secured Party and may exercise the same as though it were not the
Collateral Representative.
19
(c) Limited Duties and Responsibilities. The Collateral Representative
shall not have any duties or obligations under the Security Documents except
those expressly set forth therein. Without limiting the generality of the
foregoing, (a) the Collateral Representative shall not be subject to any
fiduciary or other implied duties, regardless of whether an Event of Default has
occurred and is continuing and (b) the Collateral Representative shall not have
any duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Security
Documents that the Collateral Representative is required in writing to exercise
by the Required Holders. The Collateral Representative shall not be liable for
any action taken or not taken by it with the consent or at the request of the
Required Holders or in the absence of its own gross negligence or willful
misconduct. The Collateral Representative shall not be responsible for the
existence, genuineness or value of any Collateral or for the validity,
perfection, priority or enforceability of any Transaction Lien, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Security Documents. The Collateral Representative shall be deemed not
to have knowledge of any Event of Default unless and until written notice
thereof is given to the Collateral Representative by the Company or a Secured
Party, and the Collateral Representative shall not be responsible for or have
any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Security Document, (ii) the
contents of any certificate, report or other document delivered thereunder or in
connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Security
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Security Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in any Security Document.
(d) Authority to Rely on Certain Writings, Statements and Advice. The
Collateral Representative shall be entitled to rely on, and shall not incur any
liability for relying on, any notice, request, certificate, consent, statement,
instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Collateral Representative also may
rely on any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Collateral Representative may consult with legal counsel (who may
be counsel for the Company), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountant or expert.
(e) Sub-Agents and Related Parties. The Collateral Representative may
perform any of its duties and exercise any of its rights and powers through
one or
20
more sub-agents appointed by it. The Collateral Representative and any such sub-
agent may perform any of its duties and exercise any of its rights and powers
through its Related Parties. The exculpatory provisions of Section 12 and this
Section shall apply to any such sub-agent and to the Related Parties of the
Collateral Representative and any such sub-agent.
(f) The Collateral Representative may refuse to act on any notice, consent,
direction or instruction from any Secured Parties or any agent, trustee or
similar representative thereof that, in the Collateral Representative's opinion,
(i) is contrary to law or the provisions of any Security Document or (ii) may
expose the Collateral Representative to liability (unless the Collateral
Representative shall have been indemnified, to its reasonable satisfaction, for
such liability by the Secured Parties that gave such notice, consent, direction
or instruction).
(g) Resignation; Successor Collateral Representative. Subject to the
appointment and acceptance of a successor Collateral Representative as provided
in this subsection, the Collateral Representative may resign at any time by
notifying the Holders and the Company. Upon any such resignation, the Required
Holders shall have the right, in consultation with the Company, to appoint a
successor Collateral Representative. If no successor shall have been so
appointed by the Required Holders and shall have accepted such appointment
within 30 days after the retiring Collateral Representative gives notice of its
resignation, then the retiring Collateral Representative may, on behalf of the
Secured Parties, appoint a successor Collateral Representative. Upon acceptance
of its appointment as Collateral Representative hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Representative hereunder, and
the retiring Collateral Representative shall be discharged from its duties and
obligations hereunder. After the Collateral Representative's resignation
hereunder, the provisions of this Section and Section 12 shall continue in
effect for the benefit of such retiring Collateral Representative, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while the retiring Collateral
Representative was acting as Collateral Representative.
SECTION 14. Termination of Transaction Liens; Release of Collateral. (a)
The Transaction Liens granted by each Guarantor shall terminate when its Secured
Guarantee is released pursuant to Section 2(c).
(b) The Transaction Liens granted by the Company shall terminate when all
the Release Conditions are satisfied.
(c) At any time before the Transaction Liens granted by the Company
terminate, the Collateral Representative may, at the written request of the
21
Company, release any or all of the Collateral with the prior written consent of
the Required Holders.
(d) Upon any termination of a Transaction Lien or release of Collateral,
the Collateral Representative will, at the expense of the relevant Lien Grantor,
execute and deliver to such Lien Grantor such documents as such Lien Grantor
shall reasonably request to evidence the termination of such Transaction Lien or
the release of such Collateral, as the case may be.
SECTION 15. Additional Guarantors and Lien Grantors. Any Subsidiary may
become a party hereto by signing and delivering to the Collateral Representative
a Security Agreement Supplement, whereupon such Subsidiary shall become a
"Guarantor" and a "Lien Grantor" as defined herein.
SECTION 16. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile,
addressed to it at its facsimile number specified below, and such party sends
back an electronic confirmation of receipt or (iii) ten days after being sent to
such party by certified or registered United States mail, addressed to it at its
address specified below, with first class or airmail postage prepaid:
(a) in the case of any Lien Grantor listed on the signature pages
hereof:
[Address]
Attention:
Facsimile:
(b) in the case of any other Lien Grantor, its address or facsimile
number set forth in its first Security Agreement Supplement;
(c) in the case of the Collateral Representative:
Compaq Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: [o]
Facsimile:[o]
22
(d) in the case of any Holder, to such Holder at its address or
facsimile number specified in or pursuant to Section 10.04 of the Note
Purchase Agreement.
Any party may change its address and/or facsimile number for purposes of this
Section by giving notice of such change to the Collateral Representative and the
Lien Grantors in the manner specified above.
SECTION 17. No Implied Waivers; Remedies Not Exclusive. No failure by the
Collateral Representative or any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right or remedy under
any Security Document shall operate as a waiver thereof; nor shall any single or
partial exercise by the Collateral Representative or any Secured Party of any
right or remedy under any Note Document preclude any other or further exercise
thereof or the exercise of any other right or remedy. The rights and remedies
specified in the Note Documents are cumulative and are not exclusive of any
other rights or remedies provided by law.
SECTION 18. Successors and Assigns. This Agreement is for the benefit of the
Collateral Representative and the Secured Parties. If all or any part of any
Secured Party's interest in any Secured Obligation is assigned or otherwise
transferred, the transferor's rights hereunder, to the extent applicable to the
obligation so transferred, shall be automatically transferred with such
obligation. This Agreement shall be binding on the Lien Grantors and their
respective successors and assigns.
SECTION 19. Amendments and Waivers. Neither this Agreement nor any provision
hereof may be waived, amended, modified or terminated except pursuant to an
agreement or agreements in writing enter into by the parties hereto, with the
consent of Required Holders.
SECTION 20. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than the State of New York are
governed by the laws of such jurisdiction.
SECTION 21. Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT
23
OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 22. Severability. If any provision of any Security Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions of the Security Documents shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Collateral Representative and the Secured Parties in
order to carry out the intentions of the parties thereto as nearly as may be
possible and (ii) the invalidity or unenforceability of such provision in such
jurisdiction shall not affect the validity or enforceability thereof in any
other jurisdiction.
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
NAVISITE, INC.
By:
---------------------------------
Name:
Title:
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
-----------------------------------
Name:
Title:
GUARANTORS:
[NAMES OF SUBSIDIARY GUARANTORS]
By:
---------------------------------------
Name:
Title:
25
SCHEDULE 1
EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY ORIGINAL LIEN GRANTORS
(AS OF THE EFFECTIVE DATE)
Jurisdiction Number of
of Owner of Percentage Shares or
Issuer Organization Equity Interest Owned Units
---------- ------------ --------------- ---------- ---------
S-1-1
EXHIBIT A
TO SECURITY AGREEMENT
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _______, ____, between [NAME OF
LIEN GRANTOR] (the "LIEN GRANTOR") and COMPAQ FINANCIAL SERVICES CORPORATION, as
Collateral Representative.
WHEREAS, NAVISITE, INC. the Guarantors party thereto and COMPAQ FINANCIAL
SERVICES CORPORATION, as Collateral Representative, are parties to a Guarantee
and Security Agreement dated as of October , 2001 (as heretofore amended and/or
supplemented, the "SECURITY AGREEMENT") under which NAVISITE, INC. secures
certain of its obligations (the "SECURED OBLIGATIONS") and the Guarantors
guarantee the Secured Obligations and secure their respective guarantees
thereof;
WHEREAS, [name of Lien Grantor] desires to become [is] a party to the
Security Agreement as a Guarantor and Lien Grantor thereunder;2 and
WHEREAS, terms defined in the Security Agreement (or whose definitions are
incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Secured Guarantee.3 The Lien Grantor unconditionally guarantees the full
and punctual payment of each Secured Obligation when due (whether at stated
maturity, upon acceleration or otherwise). The Lien Grantor acknowledges that,
by signing this Security Agreement Supplement and delivering it to the
Collateral Representative, the Lien Grantor becomes a "Guarantor" and "Lien
Grantor" for all purposes of the Security Agreement and that its obligations
under the foregoing Secured Guarantee are subject to all the provisions of the
Security
----------------------
2 If the Lien Grantor is the Company, delete this recital and Section 1
hereof.
3 Delete this Section if the Lien Grantor is the Company or a Guarantor that
is already a party to the Security Agreement.
A-1
Agreement (including those set forth in Section 2 thereof) applicable to the
obligations of a Guarantor thereunder.
2. Grant of Transaction Liens. (a) In order to secure [its Secured
Guarantee]4 [the Secured Obligations]5, the Lien Grantor grants to the
Collateral Representative for the benefit of the Secured Parties a continuing
security interest in all the following property of the Lien Grantor, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (the "NEW COLLATERAL"):
[describe property being added to the Collateral]6
(b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
(c) The foregoing Transaction Liens are granted as security only and shall
not subject the Collateral Representative or any other Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the Lien
Grantor with respect to any of the New Collateral or any transaction in
connection therewith.
3. Party to Security Agreement. Upon delivering this Security Agreement
Supplement to the Collateral Representative, the Lien Grantor will become a
party to the Security Agreement and will thereafter have all the rights and
obligations of a Guarantor and a Lien Grantor thereunder and be bound by all the
provisions thereof as fully as if the Lien Grantor were one of the original
parties thereto.7
---------------------------------
4 Delete bracketed words if the Lien Grantor is the Company.
5 Delete bracketed words if the Lien Grantor is a Guarantor.
6 If the Lien Grantor is not already a party to the Security Agreement,
clauses (i) through (_) of, and the proviso to, Section 3(a) of the Security
Agreement may be appropriate.
7 Delete Sections 4 and 5 if the Lien Grantor is already a party to the
Security Agreement.
A-2
4. Address of Lien Grantor. The address and facsimile number of the Lien
Grantor for purposes of Section 16(b) of the Security Agreement are:
[address and facsimile number of Lien Grantor]
5. Representations and Warranties.8 (a) The Lien Grantor is a corporation
duly organized, validly existing and in good standing under the laws of
[jurisdiction of organization].
(b) The Lien Grantor has delivered a Perfection Certificate to the
Collateral Representative. The information set forth therein is correct and
complete as of the date hereof. Within 60 days after the date hereof, the Lien
Grantor will furnish to the Collateral Representative a file search report from
each UCC filing office listed in such Perfection Certificate, showing the filing
made at such filing office to perfect the Transaction Liens on the New
Collateral.
(c) The execution and delivery of this Security Agreement Supplement
by the Lien Grantor and the performance by it of its obligations under the
Security Agreement as supplemented hereby are within its corporate or other
powers, have been duly authorized by all necessary corporate or other action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its organizational documents, or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon it or result in the creation or imposition of any Lien (except a
Transaction Lien) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a valid
and binding agreement of the Lien Grantor, enforceable in accordance with its
terms, except as limited by (i) applicable bankruptcy, insolvency, fraudulent
conveyance or other similar laws affecting creditors' rights generally and (ii)
general principles of equity.
(e) Each of the representations and warranties set forth in the Security
Agreement is true as applied to the Lien Grantor and the New Collateral. For
purposes of the foregoing sentence, references in said Sections to a "Lien
Grantor" shall be deemed to refer to the Lien Grantor, references to Schedules
to the Security Agreement shall be deemed to refer to the corresponding
Schedules to this Security Agreement Supplement, references to "Collateral"
shall be deemed to refer to the New Collateral, and references to the "Effective
Date" shall be deemed to refer to the date on which the Lien Grantor signs and
delivers this Security Agreement Supplement.
6. Governing Law. This Security Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
-------------
8 Modify as needed if the Lien Grantor is not a corporation.
A-3
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
Supplement to be duly executed by their respective authorized officers as of the
day and year first above written.
[ ], as Lien Grantor
-------------
By:
------------------------------
Name:
Title:
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
----------------------------
Name:
Title:
A-4
SCHEDULE 1
TO SECURITY AGREEMENT
SUPPLEMENT
EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY LIEN GRANTOR
Jurisdiction
of Percentage Number of
Issuer Organization Owned Shares of Units
--------------------- ------------ ----------- ---------------
A-5
EXHIBIT B
TO SECURITY AGREEMENT
PERFECTION CERTIFICATE
The undersigned is a duly authorized officer of [NAME OF LIEN GRANTOR] (the
"LIEN GRANTOR"). With reference to the Guarantee and Security Agreement dated as
of October , 2001 among NAVISITE, INC., the Guarantors party thereto and
[FINANCIAL SERVICES CORPORATION, as Collateral Representative (terms defined
therein being used herein as therein defined), the undersigned certifies to the
Collateral Representative and each other Secured Party as follows:
A. INFORMATION REQUIRED FOR FILINGS AND SEARCHES FOR PRIOR FILINGS.
1. Jurisdiction of Organization. The Lien Grantor is a corporation1
organized under the laws of ___________.
2. Name. The exact [corporate] name of the Lien Grantor as it appears
in its [certificate of incorporation] is as follows:
3. Prior Names. (a) Set forth below is each other [corporate] name that
the Lien Grantor has had since its organization, together with the date of the
relevant change:
(b) Except as set forth in Schedule __ hereto, the Lien Grantor has not
changed its corporate structure2 in any way within the past five years.
(c) None of the Lien Grantor's Collateral was acquired from another
Person within the past five years, except
--------
1 Modify as needed if the Lien Grantor is not a corporation.
2 Changes in corporate structure would include mergers and consolidations,
as well as any change in the Lien Grantor's form of organization. If any such
change has occurred, include in Schedule __ the information required by Part A
of this certificate as to each constituent party to a merger or consolidation
and any other predecessor organization.
B-1
(i) property sold to the Lien Grantor by another Person in the
ordinary course of such other Person's business;
(ii) property with respect to which the Transaction Liens are to be
perfected by taking possession or control thereof;
(iii) property acquired in transactions described in Schedule __ hereto;
and
(iv) other property having an aggregate fair market value not exceeding
$_________.
4. Filing Office. In order to perfect the Transaction Liens granted by
the Lien Grantor, a duly signed financing statement on Form UCC-1, with the
collateral described as set forth on Schedule __ hereto, should be on file in
the office of ____________ in _________3 [and a duly signed financing statement
on Form UCC-1 containing, with respect to any as-extracted collateral, the
information required by UCC Section 9-502 should be on file in the relevant
filing office listed under the heading "As-Extracted Collateral" in Schedule ___
hereto]4.
B. ADDITIONAL INFORMATION REQUIRED FOR SEARCHES FOR PRIOR FILINGS UNDER
OLD ARTICLE 9.
1. Current Locations. (a) The chief executive office of the Lien Grantor
is located at the following address:
Mailing Address County State
------------------------------------- ------------------- -----------------
The Lien Grantor [does] [does not] have a place of business in another county of
the State listed above.
(b) The following are all places of business of the Lien Grantor not
identified above:
-----------------------
3 Insert Lien Grantor's "location" determined as provided in UCC Section
9-307.
4 Delete bracketed words unless a Lien Grantor owns or may own
"as-extracted collateral" (as defined in UCC Section 9-102) at a known location.
B-2
Mailing Address County State
------------------------------------ -------------------- ------------------
(c) The following are all locations not identified above where the
Lien Grantor maintains any Inventory:
Mailing Address County State
------------------------------------ -------------------- ------------------
(d) The following are the names and addresses of all Persons (other than
the Lien Grantor) that have possession of any of the Lien Grantor's
Inventory:
Mailing Address County State
------------------------------------ -------------------- ------------------
2. Prior Locations. (a) Set forth below is the information required by
paragraphs (a) and (b) of Part B-1 above with respect to each other location or
place of business maintained by the Lien Grantor at any time during the past
five years:
(b) Set forth below is the information required by paragraphs (c) and (d)
of Part B-1 above with respect to each other location or bailee where or
with whom any of the Lien Grantor's Inventory has been lodged at any time
during the past four months:
C. SEARCH REPORTS.
Attached hereto as Schedule __ is a true copy of a file search report from
the central UCC filing office in each jurisdiction identified in Part A-4 and
Part B- 3 above with respect to each name set forth in Part A-2 and Part A-3
above (searches in local filing offices, if any, are not required). Attached
hereto as Schedule __ is a true copy of each financing statement or other filing
identified in such file search reports.
B-3
D. UCC FILINGS.
Attached hereto as Schedule __ is a schedule setting forth filing
information with respect to the filings referred to in Part A-4 and Part B-3
above. All filing fees and taxes payable in connection with such filings have
been paid. Attached hereto as Schedule __ is a true copy of each such filing
duly acknowledged by the filing officer.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
----------, ----
--------------------------------------
Name:
Title:
B-4
Schedule 1
to Perfection Certificate
DESCRIPTION OF COLLATERAL
All personal property.
B-5
SCHEDULE 2 TO
PERFECTION CERTIFICATE
SCHEDULE OF FILINGS
AGAINST _________________,
AS DEBTOR
Filing Office File Number Date of Filing5
---------------------- ------------------------ --------------------
--------
5 Also indicate lapse date, if other than fifth anniversary.
B-6
EXHIBIT C
TO SECURITY AGREEMENT
ISSUER CONTROL AGREEMENT
ISSUER CONTROL AGREEMENT dated as of ______, _____ among _____________ (the
"LIEN GRANTOR"), COMPAQ FINANCIAL SERVICES CORPORATION, as Collateral
Representative (the "SECURED PARTY"), and _________ (the "ISSUER"). All
references herein to the "UCC" refer to the Uniform Commercial Code as in effect
from time to time in [Issuer's jurisdiction of incorporation].
W I T N E S S E T H :
WHEREAS, the Lien Grantor is the registered holder of [specify Pledged
Uncertificated Securities issued by the Issuer] issued by the Issuer (the
"SECURITIES");
WHEREAS, pursuant to a Guarantee and Security Agreement dated as of October
, 2001 (as such agreement may be amended and/or supplemented from time to time,
the "SECURITY AGREEMENT"), the Lien Grantor has granted to the Secured Party a
continuing security interest (the "TRANSACTION LIEN") in all right, title and
interest of the Lien Grantor in, to and under the Securities, whether now
existing or hereafter arising; and
WHEREAS, the parties hereto are entering into this Agreement in order to
perfect the Transaction Lien on the Securities;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Nature of Securities. The Issuer confirms that (i) the Securities
are "uncertificated securities" (as defined in Section 8-102 of the UCC) and
(ii) the Lien Grantor is registered on the books of the Issuer as the registered
holder of the Securities.
SECTION 2. Instructions. The Issuer agrees to comply with any "instruction"
(as defined in Section 8-102 of the UCC) originated by the Secured Party and
relating to the Securities without further consent by the Lien Grantor or
C-1
any other person. The Lien Grantor consents to the foregoing agreement by the
Issuer.
SECTION 3. Waiver of Lien; Waiver of Set-off. The Issuer waives any security
interest, lien or right of setoff that it may now have or hereafter acquire in
or with respect to the Securities. The Issuer's obligations in respect of the
Securities will not be subject to deduction, set-off or any other right in favor
of any person other than the Secured Party.
SECTION 4. Choice of Law. This Agreement shall be governed by the laws of
[Issuer's jurisdiction of incorporation].1
SECTION 5. Conflict with Other Agreements. There is no agreement (except
this Agreement) between the Issuer and the Lien Grantor with respect to the
Securities [except for [identify any existing other agreements] (the "EXISTING
OTHER AGREEMENTS")]. In the event of any conflict between this Agreement (or any
portion hereof) and any other agreement [(including any Existing Other
Agreement)] between the Issuer and the Lien Grantor with respect to the
Securities, whether now existing or hereafter entered into, the terms of this
Agreement shall prevail.
SECTION 6. Amendments. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it is
in writing and is signed by all the parties hereto.
SECTION 7. Notice of Adverse Claims. Except for the claims and interests of
the Secured Party and the Lien Grantor in the Securities, the Issuer does not
know of any claim to, or interest in, the Securities. If any person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
attachment, execution or similar process) against the Securities, the Issuer
will promptly notify the Secured Party and the Lien Grantor thereof.
SECTION 8. Maintenance of Securities. In addition to, and not in lieu of,
the obligation of the Issuer to honor instructions as agreed in Section 2
hereof, the Issuer agrees as follows:
--------
1 If the Issuer's jurisdiction of incorporation is not a State in the United
States that has adopted the revisions to Articles 8 and 9 of the UCC promulgated
in 1994, this form of Issuer Control Agreement will not be appropriate. It may
be necessary to transfer the relevant securities into the Collateral
Representative's name to obtain comparable results under the laws of such
jurisdiction.
C-2
(i) Lien Grantor Instructions; Notice of Exclusive Control. So long as
the Issuer has not received a Notice of Exclusive Control (as defined
below), the Issuer may comply with instructions of the Lien Grantor or any
duly authorized agent of the Lien Grantor in respect of the Securities.
After the Issuer receives a written notice from the Secured Party that it is
exercising exclusive control over the Securities (a "NOTICE OF EXCLUSIVE
CONTROL"), the Issuer will cease complying with instructions of the Lien
Grantor or any of its agents.
(ii) Non-Cash Dividends and Distributions. The Issuer shall deliver to
the Secured Party all dividends, interest and other distributions paid or
made upon or with respect to the Securities.
(iii) Voting Rights. Until the Issuer receives a Notice of Exclusive
Control, the Lien Grantor shall be entitled to direct the Issuer with
respect to voting the Securities.
(iv) Statements and Confirmations. The Issuer will promptly send copies
of all statements and other correspondence concerning the Securities
simultaneously to each of the Lien Grantor and the Secured Party at their
respective addresses specified in Section 11 hereof.
(v) Tax Reporting. All items of income, gain, expense and loss
recognized in respect of the Securities shall be reported to the Internal
Revenue Service and all state and local taxing authorities under the name
and taxpayer identification number of the Lien Grantor.
SECTION 9. Representations, Warranties and Covenants of the Issuer. The
Issuer makes the following representations, warranties and covenants:
(i) This Agreement is a valid and binding agreement of the Issuer
enforceable in accordance with its terms.
(ii) The Issuer has not entered into, and until the termination of this
Agreement will not enter into, any agreement with any other person relating
to the Securities pursuant to which it has agreed, or will agree, to comply
with instructions (as defined in Section 8-102 of the UCC) of such person.
The Issuer has not entered into any other agreement with the Lien Grantor or
the Secured Party purporting to limit or condition the obligation of the
Issuer to comply with instructions as agreed in Section 2 hereof.
C-3
SECTION 10. Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.
SECTION 11. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile or
other electronic transmission, addressed to it at its facsimile number or
electronic address specified below, and such party sends back an electronic
confirmation of receipt or (iii) ten days after being sent to such party by
certified or registered United States mail, addressed to it at its address
specified below, with first class or airmail postage prepaid:
Lien Grantor:
Secured Party:
Issuer:
Any party may change its address and/or facsimile number for purposes of this
Section by giving notice of such change to the other parties in the manner
specified above.
SECTION 12. Termination. The rights and powers granted herein to the Secured
Party (i) have been granted in order to perfect the Transaction Lien, (ii) are
powers coupled with an interest and (iii) will not be affected by any bankruptcy
of the Lien Grantor or any lapse of time. The obligations of the Issuer
hereunder shall continue in effect until the Secured Party has notified the
Issuer in writing that the Transaction Lien has been terminated pursuant to the
Security Agreement.
SECTION 13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
[NAME OF LIEN GRANTOR]
By:
--------------------------------
Name:
Title:
C-4
COMPAQ FINANCIAL SERVICES
CORPORATION, as
Collateral Representative
By:
-------------------------------
Name:
Title:
[NAME OF ISSUER]
By:
------------------------------
Name:
Title:
C-5
EXHIBIT A
[Letterhead of Secured Party]
[Date]
[Name and Address of Issuer]
Attention: ________________________
Re: Notice of Exclusive Control
Ladies and Gentlemen:
As referenced in the Issuer Control Agreement dated as of ______, ____ among
[name of Lien Grantor], us and you (a copy of which is attached), we notify you
that we will hereafter exercise exclusive control over [specify Pledged
Uncertificated Securities] registered in the name of [name of Lien Grantor] (the
"SECURITIES"). You are instructed not to accept any directions or instructions
with respect to the Securities from any person other than the undersigned unless
otherwise ordered by a court of competent jurisdiction.
You are instructed to deliver a copy of this notice by facsimile
transmission to [name of Lien Grantor].
Very truly yours,
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
----------------------------------
Title:
cc: [name of Lien Grantor]
C-6
EXHIBIT B
to the Note Purchase Agreement
GUARANTEE AND SECURITY AGREEMENT
dated as of
October __, 2001
among
NAVISITE, INC.
THE GUARANTORS PARTY HERETO
and
COMPAQ FINANCIAL SERVICES CORPORATION,
as Collateral Representative
TABLE OF CONTENTS
-----------
PAGE
----
SECTION 1. Definitions................................................... 1
SECTION 2. Guarantees by Guarantors...................................... 6
SECTION 3. Grant of Transaction Liens.................................... 8
SECTION 4. General Representations and Warranties........................ 9
SECTION 5. Further Assurances; General Covenants......................... 11
SECTION 6. Investment Property........................................... 13
SECTION 7. Collateral Accounts........................................... 14
SECTION 8. Remedies upon Event of Default................................ 15
SECTION 9. Application of Proceeds....................................... 16
SECTION 10. Fees and Expenses; Indemnification............................ 17
SECTION 11. Authority to Administer Collateral............................ 18
SECTION 12. Limitation on Duty in Respect of Collateral................... 19
SECTION 13. General Provisions Concerning the Collateral Representative... 19
SECTION 14. Termination of Transaction Liens; Release of Collateral....... 21
SECTION 15. Additional Guarantors and Lien Grantors....................... 22
SECTION 16. Notices....................................................... 22
SECTION 17. No Implied Waivers; Remedies Not Exclusive.................... 23
SECTION 18. Successors and Assigns........................................ 23
SECTION 19. Amendments and Waivers........................................ 23
SECTION 20. Choice of Law................................................. 23
SECTION 21. Waiver of Jury Trial.......................................... 23
SECTION 22. Severability.................................................. 24
PAGE
----
SCHEDULES:
---------
SCHEDULE 1 Equity Interests in Subsidiaries and Affiliates Owned by
Original Lien Grantors
EXHIBITS:
--------
EXHIBIT A Security Agreement Supplement
EXHIBIT B Perfection Certificate
EXHIBIT C Issuer Control Agreement
GUARANTEE AND SECURITY AGREEMENT
AGREEMENT dated as of October __, 2001 among NAVISITE, INC., the
GUARANTORS party hereto and COMPAQ FINANCIAL SERVICES CORPORATION, as Collateral
Representative.
WHEREAS, the Company is entering into the Note Purchase Agreement (as this
and other capitalized terms are defined in Section 1 hereof), pursuant to which
the Company intends to issue the Notes to the Purchasers;
WHEREAS, the Company is willing to secure its obligations under the Notes
and the Note Purchase Agreement by granting Liens on its assets to the
Collateral Representative as provided in the Security Documents;
WHEREAS, the Company is willing to cause each of its Subsidiaries to
guarantee the foregoing obligations of the Company and to secure its guarantee
thereof by granting Liens on its assets to the Collateral Representative as
provided in the Security Documents;
WHEREAS, the Purchasers are not willing to purchase the Notes unless (i)
the foregoing obligations of the Company are secured and guaranteed as described
above and (ii) each guarantee thereof is secured by Liens on assets of the
relevant Guarantor as provided in the Security Documents;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
(a) Terms Defined in Note Purchase Agreement. Terms defined in the Note
Purchase Agreement and not otherwise defined in subsection (b) or (c) of this
Section have, as used herein, the respective meanings provided for therein.
(b) Terms Defined in UCC. As used herein, each of the following terms has
the meaning specified in the UCC:
Term UCC
---- ---
Account 9-102
Authenticate 9-102
Certificated Security 8-102
Chattel Paper 9-102
Document 9-102
Equipment 9-102
Financial Asset 8-102 & 103
General Intangibles 9-102
Instrument ▇-▇▇▇
▇▇▇▇▇▇▇▇▇ 9-102
Investment Property 9-102
Payment Intangible 9-102
Record 9-102
Securities Intermediary 8-102
Security 8-102 & 103
Supporting Obligations 9-102
Uncertificated Security 8-102
(c) Additional Definitions. The following additional terms, as used
herein, have the following meanings:
"ARTICLE 9" means Article 9 of the Uniform Commercial Code as set forth in
the 1998 Official Text thereof; provided that, when used with respect to any
jurisdiction on or after the date when such Article 9 (with or without local
changes therein) first becomes effective in such jurisdiction, " Article 9"
refers to Article 9 as in effect in such jurisdiction from time to time.
"COLLATERAL" means all property, whether now owned or hereafter acquired,
on which a Lien is granted or purports to be granted to the Collateral
Representative pursuant to the Security Documents. When used with respect to a
specific Lien Grantor, the term "Collateral" means all its property on which
such a Lien is granted or purports to be granted.
"COLLATERAL ACCOUNT" has the meaning specified in Section 7.
"COLLATERAL REPRESENTATIVE" means Compaq Financial Services Corporation, a
Delaware corporation, in its capacity as representative of the Secured Parties
under the Security Documents, and its successors in such capacity.
"COMPANY" means Navisite, Inc., a Delaware corporation.
"EQUITY INTEREST" means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in this definition.
2
"GUARANTORS" means each Subsidiary listed on the signature pages hereof
under the caption "Guarantors" and each Subsidiary that shall, at any time after
the date hereof, become a "Guarantor" pursuant to Section 15.
"ISSUER CONTROL AGREEMENT" means an Issuer Control Agreement substantially
in the form of Exhibit C (with any changes that the Collateral Representative
shall have approved).
"LIEN GRANTORS" means the Company and the Guarantors.
"LLC INTEREST" means a membership interest or similar interest in a
limited liability company.
"NOTE" has the meaning specified in the Note Purchase Agreement.
"NOTE DOCUMENTS" means the Note Purchase Agreement, the Notes, the
Registration Rights Agreement and the Security Documents and any documents or
agreements contemplated therein.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement of even date
herewith among the Company and the Purchasers named therein.
"OPINION OF COUNSEL" means a written opinion of legal counsel (who may be
counsel to a Lien Grantor or other counsel, in either case reasonably acceptable
to the Collateral Representative) addressed and delivered to the Collateral
Representative.
"ORIGINAL LIEN GRANTOR" means any Lien Grantor that grants a Lien on any
of its assets hereunder on the Effective Date.
"OWN" refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and "ACQUIRE"
refers to the acquisition of any such rights.
"PARTNERSHIP INTEREST" means a partnership interest, whether general or
limited.
"PERFECTION CERTIFICATE" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit B, completed and supplemented
with the schedules contemplated thereby to the satisfaction of the Collateral
Representative, and signed by an officer of such Lien Grantor.
3
"PERMITTED LIENS" means (i) the Transaction Liens and (ii) any other Liens
on the Collateral permitted to be created or assumed or to exist pursuant to
Section 6.02 of the Note Purchase Agreement.
"PLEDGED", when used in conjunction with any type of asset, means at any
time an asset of such type that is included (or that creates rights that are
included) in the Collateral at such time. For example, "Pledged Equity Interest"
means an Equity Interest that is included in the Collateral at such time.
"POST-PETITION INTEREST" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company (or would accrue but for the
operation of applicable bankruptcy or insolvency laws), whether or not such
interest is allowed or allowable as a claim in any such proceeding.
"PROCEEDS" means all proceeds of, and all other profits, products, rents
or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, any Collateral, including all claims of the relevant Lien Grantor against
third parties for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance in respect
of, any Collateral, and any condemnation or requisition payments with respect to
any Collateral.
"PURCHASERS" has the meaning specified in the Note Purchase Agreement.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and its Affiliates.
"RELEASE CONDITIONS" means the following condition for releasing all the
Secured Guarantees and terminating all the Transaction Liens: all Secured
Obligations shall have been paid in full.
"REQUIRED HOLDERS" means the holders of more than 50% of the aggregate
outstanding principal amount of the Notes.
"SECURED AGREEMENT", when used with respect to any Secured Obligation,
refers collectively to each instrument, agreement or other document that sets
forth obligations of the Company, obligations of a guarantor and/or rights of
the holder with respect to such Secured Obligation.
4
"SECURED GUARANTEE" means, with respect to each Guarantor, its guarantee
of the Secured Obligations under Section 2 hereof or Section 1 of a Security
Agreement Supplement.
"SECURED OBLIGATIONS" means all principal of all Notes outstanding from
time to time under the Note Purchase Agreement, all interest (including
Post-Petition Interest) on such Notes and all other amounts now or hereafter
payable by the Company pursuant to the Note Documents.
"SECURED PARTIES" means the holders from time to time of the Secured
Obligations.
"SECURITY AGREEMENT SUPPLEMENT" means a Security Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the Collateral
Representative for the purpose of adding a Subsidiary as a party hereto pursuant
to Section 15 and/or adding additional property to the Collateral.
"SECURITY DOCUMENTS" means this Agreement, the Security Agreement
Supplements and all other supplemental or additional security agreements,
control agreements, mortgages or similar instruments delivered pursuant to the
Note Documents.
"SUPPORTING LETTER OF CREDIT" means a letter of credit that supports the
payment or performance of one or more items included in the Collateral.
"TRANSACTION LIENS" means the Liens granted by the Lien Grantors under the
Security Documents.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "UCC" means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
(a) Terms Generally. The definitions of terms herein (including those
incorporated by reference to the UCC or to another document) apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. The words "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be
followed by the phrase "WITHOUT LIMITATION". The word "WILL" shall be construed
5
to have the same meaning and effect as the word "SHALL". Unless the context
requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "HEREIN", "HEREOF" and "HEREUNDER", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections, Exhibits
and Schedules shall be construed to refer to Sections of, and Exhibits and
Schedules to, this Agreement and (e) the word "PROPERTY" shall be construed to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.
SECTION 2. Guarantees by Guarantors.
(a) Secured Guarantees. Each Guarantor unconditionally guarantees the full
and punctual payment of each Secured Obligation when due (whether at stated
maturity, upon acceleration or otherwise). If the Company fails to pay any
Secured Obligation punctually when due, each Guarantor agrees that it will
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the relevant Secured Agreement.
(b) Secured Guarantees Unconditional. The obligations of each Guarantor
under its Secured Guarantee shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Company,
any other Guarantor or any other Person under any Secured
Agreement, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to
any Secured Agreement;
(iii) any release, impairment, non-perfection or
invalidity of any direct or indirect security for any
obligation of the Company, any other Guarantor or any other
Person under any Secured Agreement;
(iv) any change in the corporate existence, structure or
ownership of the Company, any other Guarantor or any other
Person or any of their
6
respective subsidiaries, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the
Company, any other Guarantor or any other Person or any of
their assets or any resulting release or discharge of any
obligation of the Company, any other Guarantor or any other
Person under any Secured Agreement;
(v) the existence of any claim, set-off or other right
that such Guarantor may have at any time against the Company,
any other Guarantor, any Secured Party or any other Person,
whether in connection with the Notes or any unrelated
transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Company, any other Guarantor or any other Person
for any reason of any Secured Agreement, or any provision of
applicable law or regulation purporting to prohibit the
payment of any Secured Obligation by the Company, any other
Guarantor or any other Person; or
(vii) any other act or omission to act or delay of any kind
by the Company, any other Guarantor, any other party to any
Secured Agreement, any Secured Party or any other Person, or
any other circumstance whatsoever that might, but for the
provisions of this clause (vii), constitute a legal or
equitable discharge of or defense to any obligation of any
Guarantor hereunder.
(c) Release of Secured Guarantees. (i) All the Secured Guarantees will be
released when all the Release Conditions are satisfied. If at any time any
payment of a Secured Obligation is rescinded or must be otherwise restored or
returned upon the insolvency or receivership of the Company or otherwise, the
Secured Guarantees shall be reinstated with respect thereto as though such
payment had been due but not made at such time.
(ii) The Collateral Representative may release any Secured Guarantee with
the prior written consent of the Required Holders.
(d) Waiver by Guarantors. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Company, any other Guarantor or any other Person.
(e) Subrogation. A Guarantor that makes a payment with respect to a
Secured Obligation hereunder shall be subrogated to the rights of the payee
7
against the Company with respect to such payment; provided that no Guarantor
shall enforce any payment by way of subrogation against the Company, or by
reason of contribution against any other guarantor of such Secured Obligation,
until all the Release Conditions have been satisfied.
(f) Stay of Acceleration. If acceleration of the time for payment of any
Secured Obligation by the Company is stayed by reason of the insolvency or
receivership of the Company or otherwise, all Secured Obligations otherwise
subject to acceleration under the terms of any Secured Agreement shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Collateral Representative.
(g) Continuing Guarantee. Each Secured Guarantee is a continuing
guarantee, shall be binding on the relevant Guarantor and its successors and
assigns, and shall be enforceable by the Collateral Representative or the
Secured Parties. If all or part of any Secured Party's interest in any Secured
Obligation is assigned or otherwise transferred, the transferor's rights under
each Secured Guarantee, to the extent applicable to the obligation so
transferred, shall automatically be transferred with such obligation.
(h) Limitation on Obligations of Subsidiary Guarantor. The obligations of
each Subsidiary Guarantor under its Secured Guarantee shall be limited to an
aggregate amount equal to the largest amount that would not render such Secured
Guarantee subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of applicable law.
SECTION 3. Grant of Transaction Liens.
(a) The Company, in order to secure the Secured Obligations, and each
Guarantor listed on the signature pages hereof, in order to secure its Secured
Guarantee, grants to the Collateral Representative for the benefit of the
Secured Parties a continuing security interest in all the following property of
the Company or such Guarantor, as the case may be, whether now owned or existing
or hereafter acquired or arising and regardless of where located:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
8
(v) all General Intangibles (including any Equity
Interests in other Persons that do not constitute Investment
Property);
(vi) all Instruments;
(vii) all Inventory;
(viii) all Investment Property;
(ix) all books and records (including customer lists,
credit files, computer programs, printouts and other computer
materials and records) of such Original Lien Grantor
pertaining to any of its Collateral;
(x) such Original Lien Grantor's ownership interest in
(1) its Collateral Accounts, (2) all Financial Assets credited
to its Collateral Accounts from time to time and all Security
Entitlements in respect thereof, (3) all cash held in its
Collateral Accounts from time to time and (4) all other money
in the possession of the Collateral Representative; and
(xi) all Proceeds of the Collateral described in the
foregoing clauses (i) through (x).
(b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
(c) The Transaction Liens are granted as security only and shall not
subject the Collateral Representative or any other Secured Party to, or transfer
or in any way affect or modify, any obligation or liability of any Lien Grantor
with respect to any of the Collateral or any transaction in connection
therewith.
SECTION 4. General Representations and Warranties. Each Original Lien
Grantor represents and warrants that:
(a) Such Lien Grantor is a corporation1 duly organized, validly existing
and in good standing under the laws of the jurisdiction identified as its
jurisdiction of organization in its Perfection Certificate.
--------
1 Modify as needed if any Original Lien Grantor is not a corporation.
9
(b) Schedule 1 lists all Equity Interests in Subsidiaries and Affiliates
owned by such Lien Grantor as of the Effective Date. Such Lien Grantor holds all
such Equity Interests directly (i.e., not through a Subsidiary, a Securities
Intermediary or any other Person).
(c) Except as set forth on the Perfection Certificate of such Lien
Grantor, all Pledged Equity Interests owned by such Lien Grantor are owned by it
free and clear of any Lien other than (i) the Transaction Liens and (ii) any tax
liens, judgment liens and other Permitted Liens. All shares of capital stock
included in such Pledged Equity Interests (including shares of capital stock in
respect of which such Lien Grantor owns a Security Entitlement) have been duly
authorized and validly issued and are fully paid and non-assessable. None of
such Pledged Equity Interests is subject to any option to purchase or similar
right of any Person. Such Lien Grantor is not and will not become a party to or
otherwise bound by any agreement (except the Note Documents) which restricts in
any manner the rights of any present or future holder of any Pledged Equity
Interest with respect thereto.
(d) Except as set forth on the Perfection Certificate of such Lien
Grantor, such Lien Grantor has good and marketable title to all its Collateral
(subject to exceptions that are, in the aggregate, not material), free and clear
of any Lien other than Permitted Liens.
(e) Such Lien Grantor has not performed any acts that might prevent the
Collateral Representative from enforcing any of the provisions of the Security
Documents or that would limit the Collateral Representative in any such
enforcement. No financing statement, security agreement, mortgage or similar or
equivalent document or instrument covering all or part of the Collateral owned
by such Lien Grantor is on file or of record in any jurisdiction in which such
filing or recording would be effective to perfect or record a Lien on such
Collateral, except financing statements, mortgages or other similar or
equivalent documents with respect to Permitted Liens. After the Effective Date,
no Collateral owned by such Lien Grantor will be in the possession or under the
Control of any other Person having a claim thereto or security interest therein,
other than a Permitted Lien.
(f) The Transaction Liens on all Collateral owned by such Lien Grantor (i)
have been validly created, (ii) will attach to each item of such Collateral on
the Effective Date (or, if such Lien Grantor first obtains rights thereto on a
later date, on such later date) and (iii) when so attached, will secure all the
Secured Obligations or such Lien Grantor's Secured Guarantee, as the case may
be.
(g) Such Lien Grantor has delivered a Perfection Certificate to the
Collateral Representative. The information set forth therein is correct and
10
complete as of the Effective Date. Within 60 days after the Effective Date, such
Lien Grantor will furnish to the Collateral Representative a file search report
from each UCC filing office listed in its Perfection Certificate, showing the
filing made at such filing office to perfect the Transaction Liens on its
Collateral.
(h) When UCC financing statements describing the Collateral as set forth
in Schedule 1 to such Lien Grantor's Perfection Certificate have been filed in
the offices specified in such Perfection Certificate, the Transaction Liens will
constitute perfected security interests in the Collateral owned by such Lien
Grantor to the extent that a security interest therein may be perfected by
filing pursuant to the UCC, prior to all Liens and rights of others therein
except Permitted Liens.
(i) Such Lien Grantor has taken, and will continue to take, all actions
necessary under the UCC to perfect its interest in (i) any Accounts or Chattel
Paper purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors and (ii) any Payment Intangibles or promissory notes
purchased or otherwise acquired by it, as against its assignors and creditors of
its assignors.
(j) Such Lien Grantor's Collateral is insured as required by the Note
Purchase Agreement.
(k) All of such Lien Grantor's Inventory has or will have been produced in
compliance, in all material respects, with the applicable requirements of the
Fair Labor Standards Act, as amended.
SECTION 5. Further Assurances; General Covenants. Each Lien Grantor
covenants as follows:
(a) Such Lien Grantor will, from time to time, at the Company's expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
intellectual property filing and any filing of financing or continuation
statements under the UCC) that from time to time may be necessary or desirable,
or that the Collateral Representative may request, in order to:
(i) create, preserve, perfect, confirm or validate the
Transaction Liens on such Lien Grantor's Collateral;
(ii) enable the Collateral Representative and the other
Secured Parties to obtain the full benefits of the Security
Documents; or
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(iii) enable the Collateral Representative to exercise and
enforce any of its rights, powers and remedies with respect to
any of such Lien Grantor's Collateral.
To the extent permitted by applicable law, such Lien Grantor authorizes the
Collateral Representative to execute and file such financing statements or
continuation statements without such Lien Grantor's signature appearing thereon.
Such Lien Grantor agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Such Lien Grantor constitutes the Collateral Representative
its attorney-in-fact to execute and file all intellectual property filings and
other filings required or so requested for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed; and such power, being coupled
with an interest, shall be irrevocable until all the Transaction Liens granted
by such Lien Grantor terminate pursuant to Section 14. The Company will pay the
costs of, or incidental to, any intellectual property filings and any recording
or filing of any financing or continuation statements or other documents
recorded or filed pursuant hereto in accordance with clause (ii) of the second
sentence of Section 9.01 of the Note Purchase Agreement.
(b) Such Lien Grantor will not (i) change its name or corporate structure,
(ii) change its location (determined as provided in UCC Section 9-307) or (iii)
become bound, as provided in UCC Section 9-203(d) or otherwise, by a security
agreement entered into by another Person, unless it shall have given the
Collateral Representative prior notice thereof.
(c) At least 30 days before it takes any action contemplated by Section
5(b), such Lien Grantor will, at the Company's expense and at the request of the
Purchasers, cause to be delivered to the Collateral Representative an Opinion of
Counsel, in form and substance satisfactory to the Collateral Representative, to
the effect that (i) all financing statements and amendments or supplements
thereto, continuation statements and other documents required to be filed or
recorded in order to perfect and protect the Transaction Liens against all
creditors of and purchasers from such Lien Grantor after it takes such action
(except any continuation statements specified in such Opinion of Counsel that
are to be filed more than six months after the date thereof) have been filed or
recorded in each office necessary for such purpose, (ii) all fees and taxes, if
any, payable in connection with such filings or recordations have been paid in
full and (iii) except as otherwise agreed by the Required Holders, such action
will not adversely affect the perfection or priority of the Transaction Lien on
any Collateral to be owned by such Lien Grantor after it takes such action or
the accuracy of such Lien Grantor's representations and warranties herein
relating to such Collateral.
12
(d) If any Collateral is located on premises leased by a Lien Grantor as
lessee, such Lien Grantor shall, within 60 days of the date hereof in the case
of leases in existence on the date hereof, and substantially simultaneously with
the execution and delivery of such lease, in the case of leases hereafter
entered into, use its reasonable efforts to secure from the landlord a waiver of
contractual and statutory landlord's liens, an agreement to permit access to and
removal of Collateral and other customary matters, all pursuant to an instrument
in form and substance satisfactory to the Collateral Representative.
(e) Such Lien Grantor will not sell, lease, exchange, assign or otherwise
dispose of, or grant any option with respect to, any of its Collateral; provided
that such Lien Grantor may do any of the foregoing unless (i) doing so would
violate a covenant in the Note Purchase Agreement or (ii) an Event of Default
shall have occurred and be continuing and the Collateral Representative shall
have notified such Lien Grantor that its right to do so is terminated, suspended
or otherwise limited. Concurrently with any sale, lease or other disposition
(except a sale or disposition to another Lien Grantor or a lease) permitted by
the foregoing proviso, the Transaction Liens on the assets sold or disposed of
(but not in any Proceeds arising from such sale or disposition) will cease
immediately without any action by the Collateral Representative or any other
Secured Party. The Collateral Representative will, at the Company's expense,
execute and deliver to the relevant Lien Grantor such documents as such Lien
Grantor shall reasonably request to evidence the fact that any asset so sold or
disposed of is no longer subject to a Transaction Lien.
(f) Such Lien Grantor will, promptly upon request, provide to the
Collateral Representative all information and evidence concerning such Lien
Grantor's Collateral that the Collateral Representative may reasonably request
from time to time to enable it to enforce the provisions of the Security
Documents.
SECTION 6. Investment Property. Each Lien Grantor represents, warrants and
covenants as follows:
(a) Certificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will deliver to the Collateral Representative as Collateral hereunder
all certificates representing Pledged Certificated Securities then owned by such
Lien Grantor. Thereafter, whenever such Lien Grantor acquires any other
certificate representing a Pledged Certificated Security, such Lien Grantor will
immediately deliver such certificate to the Collateral Representative as
Collateral hereunder.
13
(b) Uncertificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will enter into (and cause the relevant issuer to enter into) an Issuer
Control Agreement in respect of each Pledged Uncertificated Security then owned
by such Lien Grantor and deliver such Issuer Control Agreement to the Collateral
Representative (which shall enter into the same). Thereafter, whenever such Lien
Grantor acquires any other Pledged Uncertificated Security, such Lien Grantor
will enter into (and cause the relevant issuer to enter into) an Issuer Control
Agreement in respect of such Pledged Uncertificated Security and deliver such
Issuer Control Agreement to the Collateral Representative (which shall enter
into the same).
(c) Delivery of Pledged Certificates. All Pledged Certificates, when
delivered to the Collateral Representative, will be in suitable form for
transfer by delivery, or accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, all in form and
substance satisfactory to the Collateral Representative.
SECTION 7. Collateral Accounts. (a) If and when required for purposes
hereof, the Collateral Representative will establish with respect to each Lien
Grantor an account (its "COLLATERAL ACCOUNT"), in the name and under the
exclusive control of the Collateral Representative, into which all amounts owned
by such Lien Grantor that are to be deposited therein pursuant to the Note
Documents shall be deposited from time to time. Each Cash Collateral Account
will be operated as provided in this Section.
(b) The Collateral Representative shall deposit the following amounts, as
and when received by it, in the Collateral Account of the applicable Lien
Grantor:
(i) each amount required by the Note Documents to be
deposited therein, including, without limitation, all proceeds
specified in Section 5.04(d) of the Note Purchase Agreement;
and
(ii) each amount realized or otherwise received by the
Collateral Representative with respect to assets of such Lien
Grantor upon any exercise of remedies pursuant to any Security
Document.
(c) Unless (x) an Event of Default shall have occurred and be continuing
and the Required Holders shall have instructed the Collateral Representative to
stop withdrawing amounts from the Collateral Account pursuant to this subsection
or (y) the maturity of the Notes shall have been accelerated pursuant to
Article 7
14
of the Note Purchase Agreement, the Collateral Representative shall withdraw
amounts deposited in the Collateral Account in accordance with Section 5.04(d)
of the Note Purchase Agreement and apply them to pay, or reimburse the Company
and its Subsidiaries for paying, the cost of repairing, restoring or replacing
the affected property to the extent that the Company has certified, no less than
5 Business Days prior to the date of such withdrawal, that (i) it and its
Subsidiaries intend to apply all or any portion of such amounts to pay the cost
of repairing, restoring or replacing the affected property and (ii) if such
property is to be replaced, the property acquired to replace it will be included
in the Collateral at least to the extent that the property to be replaced was
included therein;
(d) Funds held in any Collateral Account may, until withdrawn, be invested
and reinvested in such Temporary Cash Investments as the relevant Lien Grantor
shall request from time to time; provided that, if an Event of Default shall
have occurred and be continuing, the Collateral Representative may select such
Temporary Cash Investments.
(e) If an Event of Default shall have occurred and be continuing, the
Collateral Representative may withdraw any amounts held therein and apply such
amounts as provided in Section 9.
SECTION 8. Remedies upon Event of Default. (a) If an Event of Default
shall have occurred and be continuing, the Collateral Representative may
exercise (or cause its sub-agents to exercise) any or all of the remedies
available to it (or to such sub-agents) under the Security Documents.
(b) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Collateral Representative may
exercise on behalf of the Secured Parties all the rights of a secured party
under the UCC (whether or not in effect in the jurisdiction where such rights
are exercised) with respect to any Collateral and, in addition, the Collateral
Representative may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law, withdraw all cash
held in the Collateral Accounts and apply such cash as provided in Section 9
and, if there shall be no such cash or if such cash shall be insufficient to pay
all the Secured Obligations in full, sell, lease, license or otherwise dispose
of the Collateral or any part thereof. Notice of any such sale or other
disposition shall be given to the relevant Lien Grantor(s) as required by
Section 11. The foregoing provisions of this subsection shall apply to Real
Property Collateral only to the extent permitted by applicable law and the
provisions of any applicable Mortgage or other document.
(c) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing:
15
(i) the Collateral Representative may license or
sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any Pledged
intellectual property (including any Pledged Recordable
Intellectual Property) throughout the world for such term or
terms, on such conditions and in such manner as the Collateral
Representative shall in its sole discretion determine;
provided that such licenses or sublicenses do not conflict
with any existing license made available to the Collateral
Representative;
(ii) the Collateral Representative may (without assuming
any obligation or liability thereunder), at any time and from
time to time, in its sole and reasonable discretion, enforce
(and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of any Lien
Grantor in, to and under any of its Pledged intellectual
property and take or refrain from taking any action under any
thereof, and each Lien Grantor releases the Collateral
Representative and each other Secured Party from liability
for, and agrees to hold the Collateral Representative and each
other Secured Party free and harmless from and against any
claims and expenses arising out of, any lawful action so taken
or omitted to be taken with respect thereto, except for claims
and expenses arising from the Collateral Representative's or
such Secured Party's gross negligence or willful misconduct;
and
(iii) upon request by the Collateral Representative (which
shall not be construed as implying any limitation on its
rights or powers), each Lien Grantor will execute and deliver
to the Collateral Representative a power of attorney, in form
and substance satisfactory to the Collateral Representative,
for the implementation of any sale, lease, license or other
disposition of any of such Lien Grantor's Pledged intellectual
property or any action related thereto. In connection with any
such disposition, but subject to any confidentiality
restrictions imposed on such Lien Grantor in any license or
similar agreement, such Lien Grantor will supply to the
Collateral Representative its know-how and expertise relating
to the relevant intellectual property or the products or
services made or rendered in connection with such intellectual
property, and its customer lists and other records relating to
such intellectual property and to the distribution of said
products or services.
SECTION 9. Application of Proceeds. (a) If an Event of Default
shall have occurred and be continuing, the Collateral Representative may apply
(i) any cash held in the Collateral Accounts and (ii) the proceeds of any sale
or other disposition of all or any part of the Collateral, in the following
order of priorities:
16
first, to pay the expenses of such sale or other
disposition, including reasonable compensation to agents of
and counsel for the Collateral Representative, and all
expenses, liabilities and advances incurred or made by the
Collateral Representative in connection with the Security
Documents;
second, to pay the unpaid principal of the Secured
Obligations ratably until payment in full of the principal of
all Secured Obligations shall have been made;
third, to pay ratably all interest (including
Post-Petition Interest) on the Secured Obligations until
payment in full of all such interest shall have been made;
fourth, to pay all other Secured Obligations ratably
until payment in full of all such other Secured Obligations
shall have been made; and
finally, to pay to the relevant Lien Grantor, or as a
court of competent jurisdiction may direct, any surplus then
remaining from the proceeds of the Collateral owned by it;
provided that Collateral owned by a Guarantor and any proceeds thereof shall be
applied pursuant to the foregoing clauses first, second, third and fourth only
to the extent permitted by the limitation in Section 2(h). The Collateral
Representative may make such distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
(b) In making the payments and allocations required by this Section, the
Collateral Representative may rely upon information supplied to it by the
Secured Parties. All distributions made by the Collateral Representative
pursuant to this Section shall be final (except in the event of manifest error)
and the Collateral Representative shall have no duty to inquire as to the
application by any Secured Party of any amount distributed to it.
SECTION 10. Fees and Expenses; Indemnification. (a) The Company will
forthwith upon demand pay to the Collateral Representative:
(i) the amount of any taxes that the Collateral
Representative may have been required to pay by reason of the
Transaction Liens or to free any Collateral from any other
Lien thereon;
(ii) the amount of any and all reasonable out-of-pocket
expenses, including transfer taxes and reasonable fees and
expenses of counsel and
17
other experts, that the Collateral Representative may incur in
connection with (x) the administration or enforcement of the
Security Documents, including such expenses as are incurred to
preserve the value of the Collateral or the validity,
perfection, rank or value of any Transaction Lien, (y) the
collection, sale or other disposition of any Collateral or (z)
the exercise by the Collateral Representative of any of its
rights or powers under the Security Documents; and
(iii) the amount required to indemnify the Collateral
Representative for, or hold it harmless and defend it against,
any loss, liability or expense (including the reasonable fees
and expenses of its counsel and any experts or sub-agents
appointed by it hereunder) incurred or suffered by the
Collateral Representative in connection with the Security
Documents, except to the extent that such loss, liability or
expense arises from the Collateral Representative's gross
negligence or willful misconduct or a breach of any duty that
the Collateral Representative has under this Agreement (after
giving effect to Sections 12 and 13).
Any such amount not paid to the Collateral Representative in accordance with the
Security Documents will bear interest for each day thereafter until paid at a
rate of 14% per annum.
(b) If any transfer tax, documentary stamp tax or other tax is payable in
connection with any transfer or other transaction provided for in the Security
Documents, the Company will pay such tax and provide any required tax stamps to
the Collateral Representative or as otherwise required by law.
SECTION 11. Authority to Administer Collateral. Each Lien Grantor
irrevocably appoints the Collateral Representative its true and lawful attorney,
with full power of substitution, in the name of such Lien Grantor, any Secured
Party or otherwise, for the sole use and benefit of the Secured Parties, but at
the Company's expense, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default shall have occurred and be
continuing, all or any of the following powers with respect to all or any of
such Lien Grantor's Collateral:
(a) to demand, ▇▇▇ for, collect, receive and give
acquittance for any and all monies due or to become due upon
or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend
any action or proceeding with respect thereto,
18
(c) to sell, lease, license or otherwise dispose of the
same or the proceeds or avails thereof, as fully and
effectually as if the Collateral Representative were the
absolute owner thereof, and
(d) to extend the time of payment of any or all thereof
and to make any allowance or other adjustment with reference
thereto;
provided that, except in the case of Collateral that is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Representative will give the relevant Lien Grantor at
least ten days' prior written notice of the time and place of any public sale
thereof or the time after which any private sale or other intended disposition
thereof will be made. Any such notice shall (i) contain the information
specified in UCC Section 9-613, (ii) be Authenticated and (iii) be sent to the
parties required to be notified pursuant to UCC Section 9-611(c); provided that,
if the Collateral Representative fails to comply with this sentence in any
respect, its liability for such failure shall be limited to the liability (if
any) imposed on it as a matter of law under the UCC.
SECTION 12. Limitation on Duty in Respect of Collateral. Beyond the
exercise of reasonable care in the custody and preservation thereof, the
Collateral Representative will have no duty as to any Collateral in its
possession or control or in the possession or control of any sub-agent or bailee
or any income therefrom or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Collateral Representative
will be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in its possession or control if such Collateral is accorded
treatment substantially equal to that which it accords its own property, and
will not be liable or responsible for any loss or damage to any Collateral, or
for any diminution in the value thereof, by reason of any act or omission of any
sub-agent or bailee selected by the Collateral Representative in good faith,
except to the extent that such liability arises from the Collateral
Representative's gross negligence or willful misconduct.
SECTION 13. General Provisions Concerning the Collateral Representative.
(a) Authority. The Collateral Representative is authorized to take such actions
and to exercise such powers as are delegated to the Collateral Representative by
the terms of the Security Documents, together with such actions and powers as
are reasonably incidental thereto.
(b) Rights and Powers as a Secured Party. The Collateral Representative
shall, in its capacity as a Secured Party, have the same rights and powers as
any other Secured Party and may exercise the same as though it were not the
Collateral Representative.
19
(c) Limited Duties and Responsibilities. The Collateral Representative
shall not have any duties or obligations under the Security Documents except
those expressly set forth therein. Without limiting the generality of the
foregoing, (a) the Collateral Representative shall not be subject to any
fiduciary or other implied duties, regardless of whether an Event of Default has
occurred and is continuing and (b) the Collateral Representative shall not have
any duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Security
Documents that the Collateral Representative is required in writing to exercise
by the Required Holders. The Collateral Representative shall not be liable for
any action taken or not taken by it with the consent or at the request of the
Required Holders or in the absence of its own gross negligence or willful
misconduct. The Collateral Representative shall not be responsible for the
existence, genuineness or value of any Collateral or for the validity,
perfection, priority or enforceability of any Transaction Lien, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Security Documents. The Collateral Representative shall be deemed not
to have knowledge of any Event of Default unless and until written notice
thereof is given to the Collateral Representative by the Company or a Secured
Party, and the Collateral Representative shall not be responsible for or have
any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Security Document, (ii) the
contents of any certificate, report or other document delivered thereunder or in
connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Security
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Security Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in any Security Document.
(d) Authority to Rely on Certain Writings, Statements and Advice. The
Collateral Representative shall be entitled to rely on, and shall not incur any
liability for relying on, any notice, request, certificate, consent, statement,
instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Collateral Representative also may
rely on any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. The Collateral Representative may consult with legal counsel (who may
be counsel for the Company), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountant or expert.
(e) Sub-Agents and Related Parties. The Collateral Representative may
perform any of its duties and exercise any of its rights and powers through one
or
20
more sub-agents appointed by it. The Collateral Representative and any such sub-
agent may perform any of its duties and exercise any of its rights and powers
through its Related Parties. The exculpatory provisions of Section 12 and this
Section shall apply to any such sub-agent and to the Related Parties of the
Collateral Representative and any such sub-agent.
(f) The Collateral Representative may refuse to act on any notice,
consent, direction or instruction from any Secured Parties or any agent, trustee
or similar representative thereof that, in the Collateral Representative's
opinion, (i) is contrary to law or the provisions of any Security Document or
(ii) may expose the Collateral Representative to liability (unless the
Collateral Representative shall have been indemnified, to its reasonable
satisfaction, for such liability by the Secured Parties that gave such notice,
consent, direction or instruction).
(g) Resignation; Successor Collateral Representative. Subject to the
appointment and acceptance of a successor Collateral Representative as provided
in this subsection, the Collateral Representative may resign at any time by
notifying the Holders and the Company. Upon any such resignation, the Required
Holders shall have the right, in consultation with the Company, to appoint a
successor Collateral Representative. If no successor shall have been so
appointed by the Required Holders and shall have accepted such appointment
within 30 days after the retiring Collateral Representative gives notice of its
resignation, then the retiring Collateral Representative may, on behalf of the
Secured Parties, appoint a successor Collateral Representative. Upon acceptance
of its appointment as Collateral Representative hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Representative hereunder, and
the retiring Collateral Representative shall be discharged from its duties and
obligations hereunder. After the Collateral Representative's resignation
hereunder, the provisions of this Section and Section 12 shall continue in
effect for the benefit of such retiring Collateral Representative, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while the retiring Collateral
Representative was acting as Collateral Representative.
SECTION 14. Termination of Transaction Liens; Release of Collateral. (a)
The Transaction Liens granted by each Guarantor shall terminate when its Secured
Guarantee is released pursuant to Section 2(c).
(b) The Transaction Liens granted by the Company shall terminate when all
the Release Conditions are satisfied.
(c) At any time before the Transaction Liens granted by the Company
terminate, the Collateral Representative may, at the written request of the
21
Company, release any or all of the Collateral with the prior written consent of
the Required Holders.
(d) Upon any termination of a Transaction Lien or release of Collateral,
the Collateral Representative will, at the expense of the relevant Lien Grantor,
execute and deliver to such Lien Grantor such documents as such Lien Grantor
shall reasonably request to evidence the termination of such Transaction Lien or
the release of such Collateral, as the case may be.
SECTION 15. Additional Guarantors and Lien Grantors. Any Subsidiary may
become a party hereto by signing and delivering to the Collateral Representative
a Security Agreement Supplement, whereupon such Subsidiary shall become a
"Guarantor" and a "Lien Grantor" as defined herein.
SECTION 16. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile,
addressed to it at its facsimile number specified below, and such party sends
back an electronic confirmation of receipt or (iii) ten days after being sent to
such party by certified or registered United States mail, addressed to it at its
address specified below, with first class or airmail postage prepaid:
(a) in the case of any Lien Grantor listed on the
signature pages hereof:
[Address]
Attention:
Facsimile:
(b) in the case of any other Lien Grantor, its address
or facsimile number set forth in its first Security Agreement
Supplement;
(c) in the case of the Collateral Representative:
Compaq Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: [o]
Facsimile:[o]
22
(d) in the case of any Holder, to such Holder at its
address or facsimile number specified in or pursuant to
Section 10.04 of the Note Purchase Agreement.
Any party may change its address and/or facsimile number for purposes of this
Section by giving notice of such change to the Collateral Representative and the
Lien Grantors in the manner specified above.
SECTION 17. No Implied Waivers; Remedies Not Exclusive. No failure by the
Collateral Representative or any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right or remedy under
any Security Document shall operate as a waiver thereof; nor shall any single or
partial exercise by the Collateral Representative or any Secured Party of any
right or remedy under any Note Document preclude any other or further exercise
thereof or the exercise of any other right or remedy. The rights and remedies
specified in the Note Documents are cumulative and are not exclusive of any
other rights or remedies provided by law.
SECTION 18. Successors and Assigns. This Agreement is for the benefit of
the Collateral Representative and the Secured Parties. If all or any part of any
Secured Party's interest in any Secured Obligation is assigned or otherwise
transferred, the transferor's rights hereunder, to the extent applicable to the
obligation so transferred, shall be automatically transferred with such
obligation. This Agreement shall be binding on the Lien Grantors and their
respective successors and assigns.
SECTION 19. Amendments and Waivers. Neither this Agreement nor any
provision hereof may be waived, amended, modified or terminated except pursuant
to an agreement or agreements in writing enter into by the parties hereto, with
the consent of Required Holders.
SECTION 20. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than the State of New York are
governed by the laws of such jurisdiction.
SECTION 21. Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT
23
OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 22. Severability. If any provision of any Security Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions of the Security Documents shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Collateral Representative and the Secured Parties in
order to carry out the intentions of the parties thereto as nearly as may be
possible and (ii) the invalidity or unenforceability of such provision in such
jurisdiction shall not affect the validity or enforceability thereof in any
other jurisdiction.
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NAVISITE, INC.
By:
----------------------------
Name:
Title:
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
----------------------------
Name:
Title:
GUARANTORS:
[NAMES OF SUBSIDIARY GUARANTORS]
By:
----------------------------
Name:
Title:
25
SCHEDULE 1
EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY ORIGINAL LIEN GRANTORS
(AS OF THE EFFECTIVE DATE)
JURISDICTION NUMBER OF
OF OWNER OF PERCENTAGE SHARES OR
ISSUER ORGANIZATION EQUITY INTEREST OWNED UNITS
------ ------------ --------------- ----- -----
S-1-1
EXHIBIT A
TO SECURITY AGREEMENT
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _______, ____, between [NAME OF
LIEN GRANTOR] (the "LIEN GRANTOR") and COMPAQ FINANCIAL SERVICES CORPORATION, as
Collateral Representative.
WHEREAS, NAVISITE, INC. the Guarantors party thereto and COMPAQ FINANCIAL
SERVICES CORPORATION, as Collateral Representative, are parties to a Guarantee
and Security Agreement dated as of October , 2001 (as heretofore amended and/or
supplemented, the "SECURITY AGREEMENT") under which NAVISITE, INC. secures
certain of its obligations (the "SECURED OBLIGATIONS") and the Guarantors
guarantee the Secured Obligations and secure their respective guarantees
thereof;
WHEREAS, [name of Lien Grantor] desires to become [is] a party to the
Security Agreement as a Guarantor and Lien Grantor thereunder;2 and
WHEREAS, terms defined in the Security Agreement (or whose definitions are
incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Secured Guarantee.3 The Lien Grantor unconditionally guarantees the
full and punctual payment of each Secured Obligation when due (whether at stated
maturity, upon acceleration or otherwise). The Lien Grantor acknowledges that,
by signing this Security Agreement Supplement and delivering it to the
Collateral Representative, the Lien Grantor becomes a "Guarantor" and "Lien
Grantor" for all purposes of the Security Agreement and that its obligations
under the foregoing Secured Guarantee are subject to all the provisions of the
Security
-----------------------
2 If the Lien Grantor is the Company, delete this recital and Section 1
hereof.
3 Delete this Section if the Lien Grantor is the Company or a Guarantor
that is already a party to the Security Agreement.
A-1
Agreement (including those set forth in Section 2 thereof) applicable to the
obligations of a Guarantor thereunder.
2. Grant of Transaction Liens. (a) In order to secure [its Secured
Guarantee]4 [the Secured Obligations]5, the Lien Grantor grants to the
Collateral Representative for the benefit of the Secured Parties a continuing
security interest in all the following property of the Lien Grantor, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (the "NEW COLLATERAL"):
[describe property being added to the Collateral]6
(b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
(c) The foregoing Transaction Liens are granted as security only and shall
not subject the Collateral Representative or any other Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the Lien
Grantor with respect to any of the New Collateral or any transaction in
connection therewith.
3. Party to Security Agreement. Upon delivering this Security Agreement
Supplement to the Collateral Representative, the Lien Grantor will become a
party to the Security Agreement and will thereafter have all the rights and
obligations of a Guarantor and a Lien Grantor thereunder and be bound by all the
provisions thereof as fully as if the Lien Grantor were one of the original
parties thereto.7
-----------------
4 Delete bracketed words if the Lien Grantor is the Company.
5 Delete bracketed words if the Lien Grantor is a Guarantor.
6 If the Lien Grantor is not already a party to the Security Agreement,
clauses (i) through (_) of, and the proviso to, Section 3(a) of the Security
Agreement may be appropriate.
7 Delete Sections 4 and 5 if the Lien Grantor is already a party to the
Security Agreement.
A-2
4. Address of Lien Grantor. The address and facsimile number of the Lien
Grantor for purposes of Section 16(b) of the Security Agreement are:
[address and facsimile number of Lien Grantor]
5. Representations and Warranties.8 (a) The Lien Grantor is a corporation
duly organized, validly existing and in good standing under the laws of
[jurisdiction of organization].
(b) The Lien Grantor has delivered a Perfection Certificate to the
Collateral Representative. The information set forth therein is correct and
complete as of the date hereof. Within 60 days after the date hereof, the Lien
Grantor will furnish to the Collateral Representative a file search report from
each UCC filing office listed in such Perfection Certificate, showing the filing
made at such filing office to perfect the Transaction Liens on the New
Collateral.
(c) The execution and delivery of this Security Agreement Supplement by
the Lien Grantor and the performance by it of its obligations under the Security
Agreement as supplemented hereby are within its corporate or other powers, have
been duly authorized by all necessary corporate or other action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of its organizational documents, or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
it or result in the creation or imposition of any Lien (except a Transaction
Lien) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a valid and
binding agreement of the Lien Grantor, enforceable in accordance with its terms,
except as limited by (i) applicable bankruptcy, insolvency, fraudulent
conveyance or other similar laws affecting creditors' rights generally and (ii)
general principles of equity.
(e) Each of the representations and warranties set forth in the Security
Agreement is true as applied to the Lien Grantor and the New Collateral. For
purposes of the foregoing sentence, references in said Sections to a "Lien
Grantor" shall be deemed to refer to the Lien Grantor, references to Schedules
to the Security Agreement shall be deemed to refer to the corresponding
Schedules to this Security Agreement Supplement, references to "Collateral"
shall be deemed to refer to the New Collateral, and references to the "Effective
Date" shall be deemed to refer to the date on which the Lien Grantor signs and
delivers this Security Agreement Supplement.
-------------------
8 Modify as needed if the Lien Grantor is not a corporation.
A-3
6. Governing Law. This Security Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
Supplement to be duly executed by their respective authorized officers as of the
day and year first above written.
[ ], as Lien Grantor
-------------
By:
----------------------------------
Name:
Title:
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
----------------------------------
Name:
Title:
A-4
SCHEDULE 1
TO SECURITY AGREEMENT
SUPPLEMENT
EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY LIEN GRANTOR
JURISDICTION NUMBER OF
OF PERCENTAGE SHARES OR
ISSUER ORGANIZATION OWNED UNITS
------ ------------ ----- -----
A-6
EXHIBIT B
TO SECURITY AGREEMENT
PERFECTION CERTIFICATE
The undersigned is a duly authorized officer of [NAME OF LIEN GRANTOR]
(the "LIEN GRANTOR"). With reference to the Guarantee and Security Agreement
dated as of October , 2001 among NAVISITE, INC., the Guarantors party thereto
and [FINANCIAL SERVICES CORPORATION, as Collateral Representative (terms defined
therein being used herein as therein defined), the undersigned certifies to the
Collateral Representative and each other Secured Party as follows:
A. INFORMATION REQUIRED FOR FILINGS AND SEARCHES FOR PRIOR
FILINGS.
1. Jurisdiction of Organization. The Lien Grantor is a corporation1
organized under the laws of ___________.
2. Name. The exact [corporate] name of the Lien Grantor as it appears in
its [certificate of incorporation] is as follows:
3. Prior Names. (a) Set forth below is each other [corporate] name that
the Lien Grantor has had since its organization, together with the date of the
relevant change:
(b) Except as set forth in Schedule __ hereto, the Lien
Grantor has not changed its corporate structure2 in any way
within the past five years.
(c) None of the Lien Grantor's Collateral was acquired
from another Person within the past five years, except
----------------------
1 Modify as needed if the Lien Grantor is not a corporation.
2 Changes in corporate structure would include mergers and consolidations,
as well as any change in the Lien Grantor's form of organization. If any such
change has occurred, include in Schedule __ the information required by Part A
of this certificate as to each constituent party to a merger or consolidation
and any other predecessor organization.
B-1
(i) property sold to the Lien Grantor by another Person
in the ordinary course of such other Person's business;
(ii) property with respect to which the Transaction
Liens are to be perfected by taking possession or control
thereof;
(iii) property acquired in transactions described in
Schedule __ hereto; and
(iv) other property having an aggregate fair market
value not exceeding $_________.
4. Filing Office. In order to perfect the Transaction Liens granted by the
Lien Grantor, a duly signed financing statement on Form UCC-1, with the
collateral described as set forth on Schedule __ hereto, should be on file in
the office of ____________ in _________3 [and a duly signed financing statement
on Form UCC-1 containing, with respect to any as-extracted collateral, the
information required by UCC Section 9-502 should be on file in the relevant
filing office listed under the heading "As-Extracted Collateral" in Schedule ___
hereto]4.
B. ADDITIONAL INFORMATION REQUIRED FOR SEARCHES FOR PRIOR FILINGS
UNDER OLD ARTICLE 9.
1. Current Locations. (a) The chief executive office of the Lien Grantor
is located at the following address:
MAILING ADDRESS COUNTY STATE
------------------------------ -------------------- --------------
The Lien Grantor [does] [does not] have a place of business in another county of
the State listed above.
(b) The following are all places of business of the Lien
Grantor not identified above:
--------
3 Insert Lien Grantor's "location" determined as provided in UCC Section
9-307.
4 Delete bracketed words unless a Lien Grantor owns or may own
"as-extracted collateral" (as defined in UCC Section 9-102) at a known location.
B-2
MAILING ADDRESS COUNTY STATE
------------------------------ -------------------- --------------
(c) The following are all locations not identified above
where the Lien Grantor maintains any Inventory:
MAILING ADDRESS COUNTY STATE
------------------------------ -------------------- --------------
(d) The following are the names and addresses of all
Persons (other than the Lien Grantor) that have possession of
any of the Lien Grantor's Inventory:
MAILING ADDRESS COUNTY STATE
------------------------------ -------------------- --------------
2. Prior Locations. (a) Set forth below is the information required by
paragraphs (a) and (b) of Part B-1 above with respect to each other location or
place of business maintained by the Lien Grantor at any time during the past
five years:
(b) Set forth below is the information required by
paragraphs (c) and (d) of Part B-1 above with respect to each
other location or bailee where or with whom any of the Lien
Grantor's Inventory has been lodged at any time during the
past four months:
C. SEARCH REPORTS.
Attached hereto as Schedule __ is a true copy of a file search report from
the central UCC filing office in each jurisdiction identified in Part A-4 and
Part B- 3 above with respect to each name set forth in Part A-2 and Part A-3
above (searches in local filing offices, if any, are not required). Attached
hereto as Schedule __ is a true copy of each financing statement or other filing
identified in such file search reports.
B-3
D. UCC FILINGS.
Attached hereto as Schedule __ is a schedule setting forth filing
information with respect to the filings referred to in Part A-4 and Part B-3
above. All filing fees and taxes payable in connection with such filings have
been paid. Attached hereto as Schedule __ is a true copy of each such filing
duly acknowledged by the filing officer.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
----------, ----
-------------------------
Name:
Title:
B-4
SCHEDULE 1
TO PERFECTION CERTIFICATE
DESCRIPTION OF COLLATERAL
All personal property.
B-5
SCHEDULE 2 TO
PERFECTION CERTIFICATE
SCHEDULE OF FILINGS
AGAINST _________________,
AS DEBTOR
FILING OFFICE FILE NUMBER DATE OF FILNG5
------------- ----------- --------------
-----------------
5 Also indicate lapse date, if other than fifth anniversary.
B-6
EXHIBIT C
TO SECURITY AGREEMENT
ISSUER CONTROL AGREEMENT
ISSUER CONTROL AGREEMENT dated as of ______, _____ among _____________
(the "LIEN GRANTOR"), COMPAQ FINANCIAL SERVICES CORPORATION, as Collateral
Representative (the "SECURED PARTY"), and _________ (the "ISSUER"). All
references herein to the "UCC" refer to the Uniform Commercial Code as in effect
from time to time in [Issuer's jurisdiction of incorporation].
W I T N E S S E T H :
WHEREAS, the Lien Grantor is the registered holder of [specify Pledged
Uncertificated Securities issued by the Issuer] issued by the Issuer (the
"SECURITIES");
WHEREAS, pursuant to a Guarantee and Security Agreement dated as of
October , 2001 (as such agreement may be amended and/or supplemented from time
to time, the "SECURITY AGREEMENT"), the Lien Grantor has granted to the Secured
Party a continuing security interest (the "TRANSACTION LIEN") in all right,
title and interest of the Lien Grantor in, to and under the Securities, whether
now existing or hereafter arising; and
WHEREAS, the parties hereto are entering into this Agreement in order to
perfect the Transaction Lien on the Securities;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Nature of Securities. The Issuer confirms that (i) the
Securities are "uncertificated securities" (as defined in Section 8-102 of the
UCC) and (ii) the Lien Grantor is registered on the books of the Issuer as the
registered holder of the Securities.
SECTION 2. Instructions. The Issuer agrees to comply with any
"instruction" (as defined in Section 8-102 of the UCC) originated by the Secured
Party and relating to the Securities without further consent by the Lien Grantor
or
C-1
any other person. The Lien Grantor consents to the foregoing agreement by the
Issuer.
SECTION 3. Waiver of Lien; Waiver of Set-off. The Issuer waives any
security interest, lien or right of setoff that it may now have or hereafter
acquire in or with respect to the Securities. The Issuer's obligations in
respect of the Securities will not be subject to deduction, set-off or any other
right in favor of any person other than the Secured Party.
SECTION 4. Choice of Law. This Agreement shall be governed by the laws of
[Issuer's jurisdiction of incorporation].1
SECTION 5. Conflict with Other Agreements. There is no agreement (except
this Agreement) between the Issuer and the Lien Grantor with respect to the
Securities [except for [identify any existing other agreements] (the "EXISTING
OTHER AGREEMENTS")]. In the event of any conflict between this Agreement (or any
portion hereof) and any other agreement [(including any Existing Other
Agreement)] between the Issuer and the Lien Grantor with respect to the
Securities, whether now existing or hereafter entered into, the terms of this
Agreement shall prevail.
SECTION 6. Amendments. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it is
in writing and is signed by all the parties hereto.
SECTION 7. Notice of Adverse Claims. Except for the claims and interests
of the Secured Party and the Lien Grantor in the Securities, the Issuer does not
know of any claim to, or interest in, the Securities. If any person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
attachment, execution or similar process) against the Securities, the Issuer
will promptly notify the Secured Party and the Lien Grantor thereof.
SECTION 8. Maintenance of Securities. In addition to, and not in lieu of,
the obligation of the Issuer to honor instructions as agreed in Section 2
hereof, the Issuer agrees as follows:
------------------
1 If the Issuer's jurisdiction of incorporation is not a State in the
United States that has adopted the revisions to Articles 8 and 9 of the UCC
promulgated in 1994, this form of Issuer Control Agreement will not be
appropriate. It may be necessary to transfer the relevant securities into the
Collateral Representative's name to obtain comparable results under the laws of
such jurisdiction.
C-2
(i) Lien Grantor Instructions; Notice of Exclusive
Control. So long as the Issuer has not received a Notice of
Exclusive Control (as defined below), the Issuer may comply
with instructions of the Lien Grantor or any duly authorized
agent of the Lien Grantor in respect of the Securities. After
the Issuer receives a written notice from the Secured Party
that it is exercising exclusive control over the Securities (a
"NOTICE OF EXCLUSIVE CONTROL"), the Issuer will cease
complying with instructions of the Lien Grantor or any of its
agents.
(ii) Non-Cash Dividends and Distributions. The Issuer
shall deliver to the Secured Party all dividends, interest and
other distributions paid or made upon or with respect to the
Securities.
(iii) Voting Rights. Until the Issuer receives a Notice of
Exclusive Control, the Lien Grantor shall be entitled to
direct the Issuer with respect to voting the Securities.
(iv) Statements and Confirmations. The Issuer will
promptly send copies of all statements and other
correspondence concerning the Securities simultaneously to
each of the Lien Grantor and the Secured Party at their
respective addresses specified in Section 11 hereof.
(v) Tax Reporting. All items of income, gain, expense and
loss recognized in respect of the Securities shall be reported
to the Internal Revenue Service and all state and local taxing
authorities under the name and taxpayer identification number
of the Lien Grantor.
SECTION 9. Representations, Warranties and Covenants of the Issuer. The
Issuer makes the following representations, warranties and covenants:
(i) This Agreement is a valid and binding agreement of
the Issuer enforceable in accordance with its terms.
(ii) The Issuer has not entered into, and until the
termination of this Agreement will not enter into, any
agreement with any other person relating to the Securities
pursuant to which it has agreed, or will agree, to comply with
instructions (as defined in Section 8-102 of the UCC) of such
person. The Issuer has not entered into any other agreement
with the Lien Grantor or the Secured Party purporting to limit
or condition the obligation of the Issuer to comply with
instructions as agreed in Section 2 hereof.
C-3
SECTION 10. Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.
SECTION 11. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile or
other electronic transmission, addressed to it at its facsimile number or
electronic address specified below, and such party sends back an electronic
confirmation of receipt or (iii) ten days after being sent to such party by
certified or registered United States mail, addressed to it at its address
specified below, with first class or airmail postage prepaid:
Lien Grantor:
Secured Party:
Issuer:
Any party may change its address and/or facsimile number for purposes of this
Section by giving notice of such change to the other parties in the manner
specified above.
SECTION 12. Termination. The rights and powers granted herein to the
Secured Party (i) have been granted in order to perfect the Transaction Lien,
(ii) are powers coupled with an interest and (iii) will not be affected by any
bankruptcy of the Lien Grantor or any lapse of time. The obligations of the
Issuer hereunder shall continue in effect until the Secured Party has notified
the Issuer in writing that the Transaction Lien has been terminated pursuant to
the Security Agreement.
SECTION 13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.
[NAME OF LIEN GRANTOR]
By:
--------------------------
Name:
Title:
C-4
COMPAQ FINANCIAL SERVICES
CORPORATION, as
Collateral Representative
By:
--------------------------
Name:
Title:
[NAME OF ISSUER]
By:
--------------------------
Name:
Title:
C-5
EXHIBIT A
[Letterhead of Secured Party]
[Date]
[Name and Address of Issuer]
Attention: ________________________
Re: Notice of Exclusive Control
Ladies and Gentlemen:
As referenced in the Issuer Control Agreement dated as of ______, ____
among [name of Lien Grantor], us and you (a copy of which is attached), we
notify you that we will hereafter exercise exclusive control over [specify
Pledged Uncertificated Securities] registered in the name of [name of Lien
Grantor] (the "SECURITIES"). You are instructed not to accept any directions or
instructions with respect to the Securities from any person other than the
undersigned unless otherwise ordered by a court of competent jurisdiction.
You are instructed to deliver a copy of this notice by facsimile
transmission to [name of Lien Grantor].
Very truly yours,
COMPAQ FINANCIAL SERVICES
CORPORATION, as Collateral
Representative
By:
-----------------------------
Title:
cc: [name of Lien Grantor]
C-6
CROSS-REFERENCE TARGET LIST
===========================
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
TARGET PULL-DOWN LIST. (This list is for the use of the wordprocessor only, is
not a part of this document and may be discarded.)
ARTICLE/SECTION TARGET NAME
=============== ===========
1..........................................001
1....................................guarantee
2.................................guar.by.guar
2.........................limit.on.obligations
2(a), 3....................................002
3(a).......................................003
3(a)(x)....................................004
3(c).......................................005
4..........................................007
4(b).......................................008
4(c).......................................010
4(d).......................................011
4(e).......................................012
4(f).......................................013
4(g).......................................014
4(h).......................................015
4(j).......................................022
4(k).......................................023
6..........................▇▇▇▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇
13(a)..........................cert.securities
6(b).......................................029
6(c).......................................034
13(p)..........................so.long.as.coll
5..........................................037
5(b).......................................038
5(c).......................................039
5(a).......................................040
5(d).......................................043
4(i).......................................045
5(e).......................................047
5(f).......................................048
?..........................................049
7..........................................057
7(a).......................................058
7(b).......................................059
11.........................................078
11(a)......................................079
11(b)......................................080
11(c)......................................081
11(d)......................................082
8..........................................083
8(a).......................................084
8(b).......................................085
8(c).......................................087
10.........................................088
10(a)......................................089
10(b)......................................090
12.............................limitation.duty
9..........................................093
9(a).......................................094
9(b).......................................096
13(b)........................rights_and_powers
13.........................................097
13(a)......................................098
13(e)...............................sub.agents
13(f)......................................109
13(g)..............................resignation
14.........................................112
14(a)......................................113
14(b)....................trans.liens.terminate
14(c)......................................114
14(d)......................................115
15.........................................116
16.........................................117
16(a)......................................118
16(b)......................................119
16(c)......................................120
16(d)......................................121
17.........................................127
18.........................................128
19.........................................129
20.........................................130
22.........................................131
EXHIBIT A
1............................secured.guarantee
2..........................................132
3..........................................134
4..........................................135
5..........................................136
6..........................................138
EXHIBIT B
1..................................juris.organ
2.........................................name
3..................................prior.names
4................................▇▇▇▇▇▇.▇▇▇▇▇▇
EXHIBIT C
1..........................................151
2.................................instructions
3..........................................153
4..........................................154
5..........................................155
6..........................................156
7..........................................157
8..........................................158
9..........................................159
10.........................................160
11.....................................notices
12.........................................162
13.........................................163
EXHIBIT C
to the Note Purchase Agreement
NAVISITE, INC.
AMENDMENT TO AND RESTATEMENT OF THE
INVESTOR RIGHTS AGREEMENT
This Agreement dated as of October 29, 2001 is entered into by and among
NaviSite, Inc., a Delaware corporation (the "COMPANY"), Compaq Financial
Services Corporation, a Delaware corporation ("CFS"), and CMGI, Inc., a Delaware
corporation ("CMGI," together with CFS, the "PURCHASERS").
RECITALS
WHEREAS, the Company and the Purchasers are entering into a Note Purchase
Agreement dated the date hereof (the "NOTE PURCHASE AGREEMENT");
WHEREAS, in order to induce the Purchasers to enter into the Note Purchase
Agreement, the Company has agreed to provide for certain arrangements with
respect to the registration of shares of capital stock of the Company under the
Securities Act of 1933, as amended;
WHEREAS, the Company and CMGI entered into the Investor Rights Agreement on
October 27, 1999 (the "INVESTOR RIGHTS AGREEMENT"), as amended on June 8, 2000
and December 12, 2000; and
WHEREAS, the Company and CMGI desire to amend and restate in its entirety
the Investor Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
I. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" means the common stock, $.01 par value per share, of the
Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"INITIATING HOLDERS" means the Stockholders initiating a request for
registration pursuant to Section 2.1(a).
"INITIAL PUBLIC OFFERING" means the initial underwritten public offering of
shares of Common Stock pursuant to an effective Registration Statement.
"PROSPECTUS" means the prospectus included in any Registration Statement,
as amended or supplemented by an amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in Section 2.4.
"REGISTRABLE SHARES" means (i) the shares of Common Stock held by CMGI upon
the closing of the Initial Public Offering; (ii) the shares of Common Stock
acquired by CMGI in connection with the Common Stock Purchase Agreement between
the Company and CMGI, dated as of June 8, 2000; (iii) the shares of Common Stock
acquired by CMGI upon any conversion of the Notes issued pursuant to the Note
and Warrant Purchase Agreement between the Company and CMGI, dated as of
December 12, 2000, (the "NOTE AND WARRANT PURCHASE AGREEMENT"); (iv) the shares
of Common Stock acquired by CMGI as payment for interest accrued on the Notes
issued pursuant to the Note and Warrant Purchase Agreement; (v) the shares of
Common Stock acquired by CMGI upon exercise or conversion of the Warrants issued
pursuant to the Note and Warrant Purchase Agreement; (vi) the shares of Common
Stock acquired by CFS and CMGI upon any conversion of the Notes issued pursuant
to the Note Purchase Agreement; (vii) the shares of Common Stock acquired by CFS
and CMGI as payment for interest accrued on the Notes issued pursuant to the
Note Purchase Agreement; and (viii) any other shares of Common Stock issued in
respect of such shares of Common Stock referred to in clause (i), (ii), (iii),
(iv), (v), (vi), or (vii) (because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events); provided, however, that
shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon (i) any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) any sale in any manner to a person or
entity which, by virtue of Section 3.3 of this Agreement, is not entitled to the
rights provided by this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
2
"SELLING STOCKHOLDER" means any Stockholder owning Registrable Shares
included in a Registration Statement.
"STOCKHOLDERS" means the Purchasers and any persons or entities to whom the
rights granted under this Agreement are transferred by the Purchasers, its
successors or assigns, pursuant to Section 3.3 hereof.
II. Registration Rights.
2.1 Required Registrations.
(a) At any time, a Stockholder or Stockholders may request, in writing,
that the Company effect the registration on Form S-1 or Form S-3 (or successor
forms) of Registrable Shares owned by such Stockholder or Stockholders having an
aggregate value of at least $2,500,000 (based on the then current public market
price).
(b) Upon receipt of any request for registration pursuant to this Section
2.1, the Company shall promptly give written notice of such proposed
registration to all other Stockholders. Such Stockholders shall have the right,
by giving written notice to the Company within 15 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election, subject in the case of an underwritten offering to the approval of the
managing underwriter as provided in Section 2.1(c) below. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration on an appropriate registration form of all Registrable Shares which
the Company has been requested to so register.
(c) If the Initiating Holders intend to distribute the Registrable Shares
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2.1(a) and the
Company shall include such information in its written notice referred to in
Section 2.1(b). The right of any other Stockholder to include its Registrable
Shares in such registration pursuant to Section 2.1(a) shall be conditioned upon
such other Stockholder's participation in such underwriting on the terms set
forth herein. If the managing underwriter determines that the marketing factors
require a limitation of the number of shares to be underwritten, the number of
Registrable Shares to be included in a Registration Statement filed pursuant to
this Section 2.1 shall be reduced pro rata among the requesting Stockholders
based on the quotient of (i) the total Registrable Shares to be included in the
Registration Statement, divided by (ii) the total number of Registrable Shares
that requested registration.
(d) The Initiating Holders shall have the right to select the managing
underwriter(s) for any underwritten offering requested pursuant to Section
2.1(a), subject to the approval of the Company, which approval will not be
unreasonably withheld.
3
(e) The Company shall not be required to effect more than five
registrations initiated by CMGI pursuant to Section 2.1(a) or more than ten
registrations initiated by CFS pursuant to Section 2.1(a). In addition, the
Company shall not be required to effect any registration within 90 days after
the effective date of any other Registration Statement of the Company relating
to an underwritten offering. For purposes of this Section 2.1(e), a Registration
Statement shall not be counted until such time as such Registration Statement
has been declared effective by the Commission, unless the Initiating Holders
withdraw their request for such registration (other than as a result of
information concerning the business or financial condition of the Company which
is made known to the Stockholders after the date on which such registration was
requested) and elect not to pay the Registration Expenses therefor pursuant to
Section 2.4.
(f) If at the time of any request to register Registrable Shares by the
Initiating Holders pursuant to this Section 2.1, the Company is engaged or has
plans to engage in a registered public offering or is engaged in any other
activity which, in the good faith determination of the Company's board of
directors, would be adversely affected by the requested registration or if
financial statements required for the requested registration are not then
available, then the Company may at its option direct that such request be
delayed for a period not in excess of 90 days from the date of such request,
such right to delay a request to be exercised by the Company not more than once
in any 12-month period.
2.2 Incidental Registration.
(a) Whenever the Company proposes to file a Registration Statement (other
than a Registration Statement filed pursuant to Section 2.1) at any time and
from time to time, it will, prior to such filing, give written notice to all
Stockholders of its intention to do so; provided, that no such notice need be
given if no Registrable Shares are to be included therein as a result of a
determination of the managing underwriter pursuant to Section 2.2(b). Upon the
written request of a Stockholder or Stockholders given within 20 days after the
Company provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by such
Stockholder or Stockholders to register to be registered under the Securities
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in the request of
such Stockholder or Stockholders; provided, that the Company shall have the
right to postpone or withdraw any registration effected pursuant to this Section
2.2 without obligation to any Stockholder.
(b) If the registration for which the Company gives notice pursuant to
Section 2.2(a) involves an underwriting, the Company shall so advise the
Stockholders as a part of the written notice given pursuant to Section 2.2(a).
In such event, the right of any Stockholder to include its Registrable Shares in
such
4
registration pursuant to Section 2.2 shall be conditioned upon such
Stockholder's participation in such underwriting on the terms set forth herein.
All Stockholders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for the underwriting by the Company.
Notwithstanding any other provision of this Agreement, if the Company and the
managing underwriter(s) determine in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the Company and the
managing underwriter(s) may exclude shares from the registration and the
underwriting, and the number of shares that may be included in the registration
and the underwriting shall be allocated, first to the Company or the Company
stockholder(s) for which the registration was initiated, and second to each of
the Stockholders requesting inclusion of their Registrable Shares in such
registration and each of the other holders of piggyback registration rights on a
parity with those Stockholders on a pro rata basis based on the total number of
Registrable Shares and other securities requested for inclusion in such
registration by each such Stockholder or other holder. If any holder of
Registrable Shares or any other Company stockholder requesting inclusions of
securities in the registration disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, and any Registrable Shares or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) Notwithstanding the foregoing, the Company shall not be required,
pursuant to this Section 2.2, to include any Registrable Shares in a
Registration Statement if such Registrable Shares can then be sold pursuant to
Rule 144(k) under the Securities Act and represent less than 1% of the then
outstanding shares of Common Stock.
2.3 Registration Procedures.
(a) If and whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any Registrable
Shares under the Securities Act, the Company shall:
(i) file with the Commission a Registration Statement with respect to
such Registrable Shares and use its best efforts to cause that Registration
Statement to become effective as soon as possible;
(ii) as expeditiously as possible, prepare and file with the
Commission any amendments and supplements to the Registration Statement and
the prospectus included in the Registration Statement as may be necessary
to comply with the provisions of the Securities Act (including the anti-
fraud provisions thereof) and to keep the Registration Statement effective
for 12 months from the effective date or such lesser period until all such
Registrable Shares are sold;
5
(iii) as expeditiously as possible, furnish to each Selling
Stockholder such reasonable numbers of copies of the Prospectus, including
any preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by such Selling Stockholder;
(iv) as expeditiously as possible, use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under
the securities or Blue Sky laws of such states as the Selling Stockholders
shall reasonably request and do any and all other acts and things that may
be necessary or desirable to enable the Selling Stockholders to consummate
the public sale or other disposition in such states of the Registrable
Shares owned by the Selling Stockholder; provided, however, that the
Company shall not be required in connection with this paragraph (iv) to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction;
(v) as expeditiously as possible, cause all such Registrable Shares to
be listed on each securities exchange or automated quotation system on
which similar securities issued by the Company are then listed; and
(vi) promptly make available for inspection by the Selling
Stockholders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant or
other agent retained by any such underwriter or selected by the Selling
Stockholders, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such Selling Stockholder, underwriter,
attorney, accountant or agent in connection with such Registration
Statement.
(b) If the Company has delivered a Prospectus to the Selling Stockholders,
and after having done so, the Prospectus is amended to comply with the
requirements of the Securities Act, the Company shall promptly notify the
Selling Stockholders and, if requested, the Selling Stockholders shall
immediately cease making offers of Registrable Shares and return all
Prospectuses to the Company. The Company shall promptly provide the Selling
Stockholders with revised Prospectuses, and following receipt of the revised
Prospectuses, the Selling Stock holders shall be free to resume making offers of
the Registrable Shares.
(c) In the event that, in the judgment of the Company, it is advisable to
suspend use of a Prospectus included in a Registration Statement due to pending
material developments or other events that have not yet been publicly disclosed
6
and as to which the Company believes public disclosure would be detrimental to
the Company, the Company shall notify all Selling Stockholders to such effect,
and upon receipt of such notice, each such Selling Stockholder shall immediately
discontinue any sales of Registrable Shares pursuant to such Registration
Statement until such Selling Stockholder has received copies of a supplemented
or amended Prospectus or until such Selling Stockholder is advised in writing by
the Company that the then current Prospectus may be used and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. Notwithstanding anything to the
contrary herein, the Company shall not exercise its rights under this Section
2.3(c) to suspend sales of Registrable Shares for a period in excess of 90 days
in any 365-day period.
2.4 Allocation of Expenses. The Company will pay all Registration
Expenses for all registrations under this Agreement; provided, however, that if
a registration under Section 2.1 is withdrawn at the request of the Initiating
Holders (other than as a result of information concerning the business or
financial condition of the Company which is made known to the Stockholders after
the date on which such registration was requested) and if the Initiating Holders
elect not to have such registration counted as a registration requested under
Section 2.1, the requesting Stockholders shall pay the Registration Expenses of
such registration pro rata in accordance with the number of their Registrable
Shares included in such registration. For purposes of this Section, the term
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and expenses of
counsel for the Company and the fees and expenses of one counsel selected by the
Selling Stockholders to represent the Selling Stockholders, state Blue Sky fees
and expenses and the expense of any special audits incident to or required by
any such registration, but excluding underwriting discounts, selling commissions
and the fees and expenses of Selling Stockholders' own counsel (other than the
counsel selected to represent all Selling Stockholders).
2.5 Indemnification and Contribution.
(a) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the Selling Stockholder, each underwriter of such Registrable
Shares and each other person, if any, who controls such Selling Stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or several, to which such
Selling Stockholder, underwriter or controlling person may become subject under
the Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) (i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary
7
prospectus or final prospectus contained in the Registration Statement or any
amendment or supplement to such Registration Statement or (ii) arise out of or
are based upon the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse such Selling Stockholder, underwriter
and controlling person for any legal or any other expenses reasonably incurred
by such Selling Stockholder, underwriter or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such Selling Stockholder, underwriter or controlling
person specifically for use in the preparation thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each Selling Stockholder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors and officers and each underwriter (if any) and each person, if
any, who controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) (i) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such Registrable Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus contained in the Registration
Statement or any amendment or supplement to the Registration Statement or (ii)
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information relating to such Selling Stockholder
furnished in writing to the Company by or on behalf of such Selling Stockholder
specifically for use in connection with the preparation of such Registration
Statement, prospectus, amendment or supplement; provided, however, that the
obligations of a Selling Stockholder hereunder shall be limited to an amount
equal to the net proceeds to such Selling Stockholder of Registrable Shares sold
in connection with such registration.
(c) Each party entitled to indemnification under this Section 2.5 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim
8
or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.5 except to the
extent that the Indemnifying Party is adversely affected by such failure. The
Indemnified Party may participate in such defense at such Indemnified Party's
expense; provided, however, that the Indemnifying Party shall pay such expense
if representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding; provided further that in no event shall the
Indemnifying Party be required to pay the expenses of more than one law firm per
jurisdiction as counsel for the Indemnified Party. The Indemnifying Party also
shall be responsible for the expenses of such defense if the Indemnifying Party
does not elect to assume such defense. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 2.5 is
due in accordance with its terms but for any reason is held to be unavailable to
an Indemnified Party in respect to any losses, claims, damages and liabilities
referred to herein, then the Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities to
which such party may be subject in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Selling Stockholders
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company and the Selling
Stockholders shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of material fact related to information
supplied by the Company or the Selling Stockholders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Stockholders agree that it would
not be just and equitable if contribution pursuant to this Section 2.5 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 2.5(d), (a) in no case shall any
one Selling Stockholder be liable or responsible for any amount in excess of the
net proceeds received by such Selling Stockholder from the offering
9
of Registrable Shares and (b) the Company shall be liable and responsible for
any amount in excess of such proceeds; provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 2.5(d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties from whom contribution may be sought shall not
relieve such party from any other obligation it may have thereunder or otherwise
under this Section 2.5(d). No party shall be liable for contribution with
respect to any action, suit, proceeding or claim settled without its prior
written consent, which consent shall not be unreasonably withheld.
2.6 Other Matters with Respect to Underwritten Offerings. In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2.1, the Company agrees to enter into
an underwriting agreement containing customary representations and warranties
with respect to the business and operations of the Company and customary
covenants and agreements to be performed by the Company, including without
limitation customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
2.7 Information by Holder. Each Selling Stockholder shall furnish to the
Company such information regarding such Selling Stockholder and the distribution
proposed by such Selling Stockholder as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
III. General.
3.1 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
3.2 Specific Performance. In addition to any and all other remedies that
may be available at law in the event of any breach of this Agreement, each
Purchaser shall be entitled to specific performance of the agreements and
obligations of the Company hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
3.3 Transfers of Rights. The rights and obligations of the Purchasers
under Section 2 may be assigned by either Purchaser to any person or entity that
acquires shares of Common Stock having an aggregate value of at least $2,500,000
(as adjusted in stock splits and similar events) from such Purchaser. In the
event of any such assignment, the assignee must provide written notice of
10
such assignment to the Company and agree in writing to be bound by the
applicable provisions of this Agreement.
3.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of New York.
3.5 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including prepaid overnight courier, facsimile
transmission or similar writing) and shall be given to such party at its address
or facsimile number set forth below or at such other address or facsimile number
as such party may hereafter specify for the purpose by notice to the Company.
If to the Company to: NaviSite, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to CFS to: Compaq Financial Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention : General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to CMGI to: CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Each such notice, request or other communication shall be effective (i) when
delivered to such party at its address specified above, (ii) when sent to such
party by facsimile, addressed to it at its facsimile number specified above, and
such party sends back an electronic confirmation of receipt, or (iii) ten days
after being sent to such party by certified or registered United States mail,
addressed to it at its address specified below, with first class or airmail
postage.
3.6 Complete Agreement. This Agreement constitutes the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
3.7 Amendments and Waivers. Any term of this Agreement may be amended or
terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the Purchasers.
3.8 Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
3.9 Counterparts; Facsimile Signatures. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an original, and both of
which together shall constitute one and the same document. This Agreement may be
executed by facsimile signatures.
3.10 Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit or restrict the
contractual obligations of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
NAVISITE, INC.
By:
----------------------------------
Name:
Title:
COMPAQ FINANCIAL SERVICES
CORPORATION
By:
----------------------------------
Name:
Title:
CMGI, INC.
By:
----------------------------------
Name:
Title:
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