EXHIBIT 10.24
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of May 3, 1999, is by and between ENGAGE
TECHNOLOGIES, INC., a Delaware corporation having its principal place of
business at Xxx Xxxxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the
"Debtor"') and CMGI, INC., a Delaware corporation having an address at One
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Hundred Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Lender").
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W I T N E S S E T H:
WHEREAS, the Lender has agreed, in its sole discretion, to advance funds to
the Debtor from time to time (the "Loans"), which Loans are evidenced by a
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Secured Convertible Demand Note dated as of February 1, 1999 (the "Note"); and
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WHEREAS, the willingness of the Lender to make the Loans is subject to the
condition, among others, that the Debtor shall execute and deliver this
Agreement and grant the security interest hereinafter described;
NOW THEREFORE, in consideration of the willingness of the Lender to make
the Loans to the Debtor, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is hereby agreed,
with the intent to be legally bound, as follows:
1. Defined Terms. Except as otherwise expressly defined herein, all
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capitalized terms shall have the meanings ascribed to them in the Note.
2. Security Interest. As security for the Secured Obligations described
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in paragraph 3 hereof, the Debtor hereby grants to the Lender a security
interest in and lien on all of the tangible and intangible personal property and
fixtures of the Debtor, including without limitation the property described
below, whether now owned or existing or hereafter acquired or arising, together
with any and all additions thereto and replacements therefor and proceeds and
products thereof (hereinafter referred to collectively as the "Collateral"):
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(a) all of the Debtor's tangible personal property, including without
limitation all present and future goods, inventory (including, without
limitation, all printed materials, merchandise, raw materials, work in process,
finished goods and supplies), equipment, merchandise, furniture, fixtures,
office supplies, motor vehicles, machinery, paper, tools, computers, and
associated equipment now owned or hereafter acquired, including, without
limitation, the tangible personal property used in the operation of the
businesses of the Debtor;
(b) to the extent that such rights are assignable as collateral, the
Debtor's rights under all present and future authorizations, permits, licenses
and franchises issued, granted or licensed to the Debtor for the operation of
its business,
including, without limitation, each of the authorizations, permits, licenses and
franchises listed on the Intellectual Property Security Agreement executed this
date from the Debtor to the Lender;
(c) to the extent that such rights are assignable, all of the Debtor's
rights under all present and future vendor or customer contracts and all
franchise, distribution, construction, engineering, management, direct marketing
and advertising and related agreements; and
(d) all of the Debtor's other personal property, including, without
limitation, all present and future accounts, accounts receivable, investment
property, rights to proceeds of letters of credit, contract rights, general
intangibles (including without limitation, all goodwill, all trademarks,
intellectual property, all customer lists, vendor lists, and other printed
materials, including all catalogs, indexes, lists, data and other documents and
papers relating thereto, blue prints, designs and research and development), any
information stored on any medium, including electronic medium, related to any of
the personal property of the Debtor, all instruments, documents and chattel
paper, and all debts, obligations and liabilities in whatever form owing to the
Debtor from any person, firm or corporation or any other legal entity, whether
now existing or hereafter arising, now or hereafter received by or belonging or
owing to the Debtor, and all guaranties and security therefor.
Any of the foregoing terms which are defined in the Uniform Commercial Code
shall have the meaning provided in the Uniform Commercial Code as supplemented
and expanded by the foregoing.
3. Secured Obligations. The security interest hereby granted shall
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secure the due and punctual payment and performance of the following liabilities
and obligations of the Debtor (herein called the "Secured Obligations"):
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(a) Principal of and premium, if any, and interest on the Loans;
(b) Any and all obligations of the Debtor to the Lender under the
Note; and
(c) Any and all other obligations of the Debtor to the Lender.
4. Perfection Certificate. The Debtor has delivered to the Lender a
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Perfection Certificate in the form appended hereto as Schedule I. The Debtor
represents to the Lender that the completed Perfection Certificate delivered to
the Lender is true and correct in every respect and the facts contained in such
certificate are accurate. The Debtor shall supplement the Perfection
Certificate promptly after
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obtaining information which would require a correction or addition to the
Perfection Certificate.
5. Special Warranties and Covenants of the Debtor. The Debtor hereby
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warrants and covenants to the Lender that:
(a) The address shown at the beginning of this Agreement is the
current principal place of business of the Debtor, and all of the Debtor's
current additional places of business, if any, and the locations of all of the
Collateral currently are listed in the Perfection Certificate delivered pursuant
to Section 4 above. The Debtor will not change its principal or any other place
of business, or the location of any Collateral from the locations set forth in
the Perfection Certificate, or make any change in the Debtor's name or conduct
the Debtor's business operations under any fictitious business name or trade
name, without, in any such case, at least thirty (30) days' prior written notice
to the Lender.
(b) Except for the security interest created hereunder, the Debtor is
the owner of the Collateral free from any lien, security interest or encumbrance
and the Debtor will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein.
(c) Except as otherwise consented to in writing by the Lender, the
Debtor will not sell or otherwise dispose of any of the Collateral or any
interest therein nor will the Debtor create, incur or permit to exist any
mortgage, lien, charge, encumbrance or security interest whatsoever with respect
to the Collateral.
(d) Except for Collateral that is obsolete or no longer used in the
Debtor's business, the Debtor will keep the Collateral in good order and repair
(normal wear excepted) and adequately insured at all times. The Debtor will pay
promptly when due all taxes and assessments on the Collateral or for its use or
operation, except for taxes and assessments contested in good faith and for
which adequate reserves are created. The Lender may at its option discharge any
taxes, liens, security interests or other encumbrances to which any Collateral
is at any time subject, and may, upon the failure of the Debtor to do so in
accordance with the terms hereof, purchase insurance on any Collateral and pay
for the repair, maintenance or preservation thereof, and the Debtor agrees to
reimburse the Lender on demand for any payments or expenses incurred by the
Lender pursuant to the foregoing authorization and any unreimbursed amounts
shall constitute Secured Obligations for all purposes hereof.
(e) The Collateral may be transferred to a third party upon a default
without the consent of any other third party.
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(f) The Debtor will promptly execute and deliver to the Lender such
financing statements, certificates and other documents or instruments as may be
necessary to enable the Lender to perfect or from time to time renew the
security interest granted hereby, including, without limitation, such financing
statements, certificates and other documents as may be necessary to perfect a
security interest in any additional Collateral hereafter acquired by the Debtor
or in any replacements or proceeds thereof. The Debtor authorizes and appoints
the Lender, in case of need, to execute such financing statements, certificates
and other documents pertaining to the Lender's security interest in the
Collateral in its stead, with full power of substitution, as the Debtor's
attorney in fact. The Lender may from time to time request and the Debtor shall
deliver copies of all customer lists and vendor lists. The Debtor further
agrees that a carbon, photographic or other reproduction of a security agreement
or financing statement is sufficient as a financing statement under this
Agreement.
(g) The Debtor will give the Lender notice of each office at which
records of the Debtor pertaining to all intangible items of Collateral are kept.
Except as may be provided in such notice, the records concerning all intangible
Collateral are and will be kept at the address shown at the beginning of this
Agreement as the principal place of business of the Debtor.
(h) To the extent that the Debtor is a beneficiary under any written
Letter of credit now or hereafter issued in favor of the Debtor, the Debtor
shall deliver such Letter of credit to the Lender. The Lender shall from time
to time, at the request and expense of the Debtor, make such arrangements with
the Debtor as are in the Lender's reasonable judgment necessary and appropriate
so that the Debtor may make any drawing to which the Debtor is entitled under
such Letter of credit, without impairment of the Lender's perfected security
interest in the Debtor's rights to the proceeds of such Letter of credit or in
the actual proceeds of such drawing. At the Lender's request, the Debtor shall,
for any Letter of credit, whether or not written, now or hereinafter issued in
favor of the Debtor as beneficiary, execute and deliver to the issuer any
confirmer of such Letter of credit an assignment of proceeds form, in favor of
the Lender and satisfactory to the Lender and such issuer or (as the case may
be) such confirmer, requiring the proceeds of any drawing under such Letter of
credit to be paid directly to the Lender for application under the Note.
6. Fixtures, etc. It is the intention of the parties hereto that none of
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the Collateral shall become fixtures and the Debtor will take all such
reasonable action or actions as may be necessary to prevent any of the
Collateral from becoming fixtures. Without limiting the generality of the
foregoing, the Debtor will, if requested by the Lender, use commercially
reasonable efforts to obtain waivers of lien, in form satisfactory to the
Lender, from each lessor of real property on which any of the Collateral is or
is to be located.
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7. Events of Default. The Debtor shall be in default under this
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Agreement (an "Event of Default") upon the happening of any Event of Default
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under the Note.
8. Rights and Remedies of Lender. Upon the occurrence of any Event of
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Default, such default not having previously been waived, remedied or cured, the
Lender shall have the following rights and remedies:
(a) All rights and remedies provided by law, including, without
limitation, those provided by the Uniform Commercial Code;
(b) All rights and remedies provided in this Agreement; and
(c) All rights and remedies provided in any other agreement, document
or instrument pertaining to the Secured Obligations.
9. Right of Lender to Dispose of Collateral, etc. Upon the occurrence of
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any Event of Default, such Event of Default not having previously been waived,
remedied or cured, but subject to the provisions of the Uniform Commercial Code
or other applicable law, the Lender shall have the right to take possession of
the Collateral and, in addition thereto, the right to enter upon any premises on
which the Collateral or any part thereof may be situated and remove the same
therefrom. The Lender may require the Debtor to make the Collateral (to the
extent the same is moveable) available to the Lender at a place to be designated
by the Lender which is reasonably convenient to both parties or transfer any
information related to the Collateral to the Lender by electronic medium.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, the Lender will give the
Debtor at least ten (10) days' prior written notice in accordance with paragraph
18 hereof of the time and place of any public sale of any of the Collateral or
of the time after which any private sale or any other intended disposition
thereof is to be made. Any such notice shall be deemed to meet any requirement
hereunder or under any applicable law (including the Uniform Commercial Code)
that reasonable notification be given of the time and place of such sale or
other disposition.
10. Note. Notwithstanding any other provision of this Agreement, the
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rights of the parties hereunder are subject to the provisions of the Note.
11. Right of Lender to Use and Operate Collateral, etc. Upon the
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occurrence of any Event of Default, such default not having previously been
waived, remedied or cured, but subject to the provisions of the Uniform
Commercial Code or other applicable law, the Lender shall have the right and
power to take possession of all or any part of the Collateral, and to exclude
the Debtor and all persons claiming under the Debtor wholly or partly therefrom,
and thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the
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Lender may, from time to time, at the expense of the Debtor, make all such
repairs, replacements, alterations, additions and improvements to and of the
Collateral as the Lender may deem proper. In any such case the Lender shall have
the right to manage and control the Collateral and to carry on the business and
to exercise all rights and powers of the Debtor in respect thereto as the Lender
shall deem best, including the right to enter into any and all such agreements
with respect to the operation of the Collateral or any part thereof as the
Lender may see fit; and the Lender shall be entitled to collect and receive all
rents, issues, profits, fees, revenues and other income of the same and every
part thereof. Such rents, issues, profits, fees, revenues and other income shall
be applied to pay the expenses of holding and operating the Collateral and of
conducting the business thereof, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments which the
Lender may be required or may elect to make, if any, for taxes, assessments,
insurance and other charges upon the Collateral or any part thereof, and all
other payments which the Lender may be required or authorized to make under any
provision of this Agreement (including legal costs and attorneys' fees). The
remainder of such rents, issues, profits, fees, revenues and other income shall
be applied as provided in paragraph 13. Without limiting the generality of the
foregoing or limiting in any way the rights of the Lender under applicable law,
at any time after (i) the entire principal balance of any Loan shall have become
due and payable (whether at maturity, by acceleration or otherwise) and (ii) the
Lender shall have provided to the Debtor not less than ten (10) days prior
written notice of its intention to apply for a receiver, the Lender shall be
entitled to apply for and have a receiver appointed under state or federal law
by a court of competent jurisdiction in any action taken by the Lender to
enforce its rights and remedies hereunder in order to manage, protect, preserve,
sell and otherwise dispose of all or any portion of the Collateral and continue
the operation of the business of the Debtor, and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, including the compensation of the receiver, and to
the payment of the Secured Obligations as aforesaid until a sale or other
disposition of such Collateral shall be finally made and consummated. THE DEBTOR
HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE
CONTEST THE APPOINTMENT OF RECEIVER AS PROVIDED ABOVE. THE DEBTOR (I) GRANTS
SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS
THEREOF WITH COUNSEL, (II) ACKNOWLEDGES THAT (A) THE UNCONTESTED RIGHT TO HAVE A
RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE
LENDER IN CONNECTION WITH THE ENFORCEMENT OF IT S RIGHTS AND REMEDIES HEREUNDER
AND UNDER THE NOTE, AND (B) THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY
UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDER
TO MAKE THE LOANS TO THE DEBTOR, AND (III) AGREES TO ENTER INTO ANY AND ALL
STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN
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CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE LENDER IN
CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL
OR ANY PORTION OF THE COLLATERAL. THE LENDER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS PARAGRAPH 11 SHALL BE DEEMED TO CONSTITUTE A WAIVER OF THE
DEBTOR'S RIGHT TO FILE FOR PROTECTION UNDER TITLE 11 OF THE UNITED STATES CODE
AT ANY TIME PRIOR TO THE APPOINTMENT OF A RECEIVER.
12. Collection of Accounts Receivable, etc. Upon the occurrence of any
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Event of Default, such default not having previously been waived, remedied or
cured, the Lender may notify or may require the Debtor to notify account
debtors, including without limitation, customers and vendors, obligated on any
or all of the Debtor's accounts receivable, whether now existing or hereafter
arising, to make payment directly to the Lender, and may take possession of all
proceeds of any accounts in the Debtor's possession, and may take any other
steps which the Lender deems necessary or advisable to collect any or all such
accounts receivable or other Collateral or proceeds thereof.
13. Proceeds of Collateral. After deducting all costs and expenses of
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collection, storage, custody, sale or other disposition and delivery (including
legal costs and attorneys' fees) and all other charges against the Collateral,
the residue of the proceeds of any such sale or disposition shall be applied to
the payment of the Secured Obligations in such order of priority as the Lender
shall determine (consistent with the Credit Agreement) and any surplus shall be
returned to the Debtor or to any person or party lawfully entitled thereto
(including, if applicable, any subordinated creditors of the Debtor). By way of
enlargement and not by way of limitation of the rights of the Lender under
applicable law or the Note, the Lender shall be entitled to allocate its
application of the Collateral, and the proceeds thereof, to the Secured
Obligations (including without limitation the Loans) in such proportions and in
such order as the Lender, in its sole discretion, shall decide (consistent with
the Note). In the event the proceeds of any sale, lease or other disposition of
the Collateral hereunder are insufficient to pay all of the Secured Obligations
in full, the Debtor will be liable for the deficiency, together with interest
thereon at the maximum rate provided in the Note, and the cost and expenses of
collection of such deficiency, including (to the extent permitted by law),
without limitation, reasonable attorneys' fees, expenses and disbursements.
14. Waivers, etc. The Debtor hereby waives presentment, demand, notice,
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protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the Lender's
rights hereunder or in connection with any Secured Obligations or any
Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Debtor or to any
account debtor in respect of any account
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receivable or to any other third party, or substitution, release or surrender of
any Collateral, the addition or release of persons primarily or secondarily
liable on any Secured Obligation or on any account receivable or other
Collateral, the acceptance of partial payments on any Secured Obligation or on
any account receivable or other Collateral and/or the settlement or compromise
thereof. No delay or omission on the part of the Lender in exercising any right
hereunder shall operate as a waiver of such right or of any other right
hereunder. Any waiver of any such right on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion. THE
DEBTOR FURTHER WAIVES ANY RIGHT IT MAY HAVE UNDER THE CONSTITUTION OF THE STATE
OF NEW YORK, UNDER THE CONSTITUTION OF ANY STATE IN WHICH ANY OF THE COLLATERAL
MAY BE LOCATED, OR UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA, TO
NOTICE (OTHER THAN ANY REQUIREMENT OF NOTICE PROVIDED HEREIN) OR TO A JUDICIAL
HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS AGREEMENT
TO THE LENDER AND WAIVES ITS RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE
DULY CONSUMMATED IN ACCORDANCE WITH THE FOREGOING PROVISIONS HEREOF ON THE
GROUNDS (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING. The Debtor's waivers under this section have been made
voluntarily, intelligently and knowingly and after the Debtor has been apprized
and counseled by its attorneys as to the nature thereof and its possible
alternative rights.
15. Termination; Assignment, etc. This Agreement and the security
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interest in the Collateral created hereby shall terminate when all of the
Secured Obligations have been paid and finally discharged in full and no Lender
is obligated to make additional Loans under the Credit Agreement. In such
event, the Lender agrees to execute appropriate releases of liens on the
Collateral. No waiver by the Lender or by any other holder of Secured
Obligations of any default shall be effective unless in writing nor operate as a
waiver of any other default or of the same default on a future occasion. In the
event of a sale or assignment of part or all of the Secured Obligations by the
Lender, the Lender may assign or transfer its respective rights and interest
under this Agreement in whole or in part to the purchaser or purchasers of such
Secured Obligations, whereupon such purchaser or purchasers shall become vested
with all of the powers and rights of the Lender hereunder.
16. Reinstatement. Notwithstanding the provisions of paragraph 15, this
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Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any amount received by the Lender in respect of the Secured
Obligations is rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Debtor or any subsidiary or upon the appointment of any intervener or
conservator of, or trustee or similar official for, the Debtor or any subsidiary
or any substantial part of
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any of their properties, or otherwise, all as though such payments had not been
made.
17. Governmental Approval. Prior to or, where permitted, upon the
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exercise by the Lender of any power, right, privilege or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, the Debtor will
execute and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments and other documents and papers that the
Debtor may be required to obtain for such governmental consent, approval,
registration, qualification or authorization.
18. Notices. All notices, consents, approvals, elections and other
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communications hereunder shall be in writing (whether or not the other
provisions of this Agreement expressly so provide) and shall be deemed to have
been duly given if delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telephonic facsimile (fax), as follows:
(i) if to the Lender, to CMGI, Inc., 000 Xxxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx, 00000, Attention: Chief Financial Officer, and (ii) if to the
Debtor, to Engage Technologies, Inc., 000 Xxxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000, Attention: President.
19. Miscellaneous. This Agreement shall inure to the benefit of the
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Lender and be binding upon the Lender and the Debtor and their respective
successors and assigns. In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
20. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement,
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including the validity hereof and the rights and obligations of the parties
hereunder, shall be construed in accordance with and governed by the laws of the
Commonwealth of Massachusetts. The Debtor, to the extent that it may lawfully
do so, hereby consents to service of process, and to be sued, in the
Commonwealth of Massachusetts and consents to the jurisdiction of the courts of
the Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction of all courts to which
an appeal may be taken from such courts, for the purpose of any suit, action or
other proceeding arising out of any of the Secured Obligations or with respect
to the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts. The Debtor further agrees
that a summons and complaint commencing an action or proceeding in any of such
courts shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address provided in
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paragraph 18 hereof or as otherwise provided under the laws of the Commonwealth
of Massachusetts.
THE DEBTOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE DEBTOR IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
ENGAGE TECHNOLOGIES, INC.
By: /s/ [signature illegible]
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CMGI, INC.
By: /s/ Xxxxxx X. Xxxxxxxx III
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Xxxxxx X. Xxxxxxxx III
Chief Financial Officer
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