Exhibit 10.16
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, made and entered into as of the later of the two
signature dates below, is by INKTOMI CORPORATION, a California corporation
("Debtor"), in favor of MICROSOFT CORPORATION, a Washington corporation
("Secured Party") and is made with reference to the following facts:
RECITALS
A. Concurrently with the execution hereof, Secured Party and Debtor
entered into a Loan Agreement (together with all supplements, exhibits and
amendments thereto, referred to as the "Loan Agreement"), pursuant to which
Secured Party agreed to from time to time lend to Debtor amounts as more fully
set forth therein ("Loan"). The funds made available by each loan disbursement
("Advance") shall be used to purchase new computer hardware and other equipment
as required to fulfill Debtor's obligations to Secured Party under the terms of
a Software Hosting Agreement of even date ("Hosting Agreement"). The obligation
to repay the Loan is evidenced by a series of promissory notes executed and
delivered by Debtor to Secured Party (the "Promissory Notes"). Upon expiration
of the Loan Agreement at its Maturity Date or when the Loan Agreement is
terminated for certain reasons, the remaining indebtedness evidenced by the
Promissory Notes may be replaced with a new obligation evidenced by a new
promissory note ("New Note"), which obligation shall thereafter become the Loan.
B. Debtor desires to grant to Secured Party a purchase money security
interest in the following assets of Debtor as security for the Loan and the
performance by Debtor of all of its obligations under the Loan Agreement:
(1) All Hosting Servers, as that term is defined in the Hosting
Agreement, and any computer hardware or other equipment (as defined in the
applicable Uniform Commercial Code), purchased with funds provided by each loan
advance, together with all added and substituted parts and equipment, tools,
parts, accessories, supplies and improvements therefor.
(2) All deposit accounts (as defined in the applicable Uniform
Commercial Code) into which the funds from any Loan Advance are deposited prior
to the purchase of Hosting Servers, computer hardware and/or other equipment for
which such Loan Advance is intended (collectively "Equipment"), to the extent of
any such funds deposited ("Deposited Funds");
(3) All increases, substitutions, accessions, additions and
replacements to any of the foregoing; and
(4) All proceeds of any of the foregoing.
"Proceeds" means whatever is received when any of the foregoing is sold,
exchanged or otherwise disposed of, including involuntary dispositions and
claims for damages thereto,
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including without limitation cash proceeds, any insurance proceeds and any other
rights or property arising under or receivable upon any such disposition. The
property described in (1) through (4) above, and all interests in which a
security interest is hereby granted are collectively referred to as the
"Collateral."
NOW THEREFORE, in order for Secured Party to make the Loan, Debtor agrees
as follows:
1. Assignment and Creation of Security Interests. FOR VALUE RECEIVED,
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Debtor hereby assigns, transfers and grants to Secured Party a security interest
in the Collateral for the purpose of securing (a) payment of all of the
indebtedness evidenced by the Promissory Notes or the New Note, as applicable;
(b) the strict performance and observance of all agreements, warranties,
covenants and conditions of Debtor contained in the Promissory Notes, the New
Note, this Security Agreement, and the Loan Agreement; and (c) the repayment of
all moneys expended by Secured Party under the provisions of this Security
Agreement, the Promissory Notes, the New Note or the Loan Agreement, with
interest thereon from the date of expenditure at the Default Rate (as defined in
the Loan Agreement).
2. Representations. Debtor hereby represents and warrants to Secured
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Party that:
(a) Debtor owns or, with respect to Collateral hereafter acquired,
will own all of the Collateral free and clear of all liens, charges,
encumbrances, financing statements and adverse claims of any kind or nature
whatsoever in favor of any entity other than Secured Party or as approved by
Secured Party.
(b) Debtor's chief executive office and chief place of business is
located at the address set forth in the Loan Agreement. Debtor conducts its
business only under the name Inktomi Corporation. The address of the office
where the books and records of Debtor are kept concerning the Collateral is 0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000. All of the
Collateral is or will be located within the state of California.
(c) The Collateral is not used or bought primarily for personal,
family or household purposes.
3. Agreements. Debtor hereby agrees that:
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(a) Debtor will pay any indebtedness owed to Secured Party promptly
when due and will repay immediately upon demand all expenses, including
reasonable attorneys' fees, legal expenses and costs, together with interest at
the Default Rate (as defined in the Loan Agreement) from the date of such
expenditure, incurred by Secured Party in enforcing the Promissory Notes, the
New Note, the Loan Agreement, or this Security Agreement. Payment of such
expenses and interest shall be secured by this Security Agreement.
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(b) Debtor will maintain complete and accurate financial records
concerning the Collateral. Debtor will permit Secured Party's representatives to
enter on Debtor's property at any reasonable time to inspect the Collateral and
Debtor's books and records relating thereto and to make extracts from such books
and records.
(c) Debtor shall promptly notify Secured Party of all claims and
demands made against the Collateral and any information received that may affect
the value of the Collateral or the rights and remedies of Secured Party relating
thereto (including any liens, encumbrances or security interests purporting to
affect the title to the Collateral). In the event of any such claim or demand,
Debtor shall promptly take such action as may be necessary to protect the value
of the Collateral.
(d) Debtor will pay when due all taxes, assessments or similar
obligations affecting the Collateral. Debtor shall have the right to contest
the amount or validity of any such taxes, assessments or obligations by
appropriate proceedings conducted in good faith and with due diligence in
accordance with the provisions of the Loan Agreement.
(e) Debtor shall promptly deploy any Hosting Servers purchased with
Loan Advances in the appropriate server cluster on the premises of Exodus
Communications, Inc. located at 0000 Xxxxx Xxxxx, Xxxxx Xxxxx, XX 00000-0000.
The Hosting Servers, computer hardware equipment and all other tangible personal
property serving as Collateral shall be kept on such premises, except as
required under the terms of the Hosting Agreement. Debtor shall not permanently
remove such Collateral over the term hereof from such property without the
written consent of Secured Party.
(f) Debtor shall inform Secured Party of the name and address of the
financial institution, and the account number of any deposit account into which
funds from any Loan Advance are deposited. At the request of Secured Party,
Debtor shall promptly provide written notice to the financial institution of
Secured Party's security interest in such Deposited Funds. Debtor shall take all
actions reasonably requested by Secured Party or the financial institution in
order to perfect Secured Party's interest in the Deposited Funds. If so
requested, Debtor shall immediately waive its right to withdraw the deposited
funds without prior written consent from Secured Party. Debtor hereby agrees
that a copy of this Security Agreement, plus a copy of the Promissory Note
associated with such Deposited Funds, may be presented to the financial
institution by Secured Party as evidence of such waiver, and Debtor further
agrees that such presentation to the financial institution by Secured Party
shall also constitute its instruction to the financial institution to prohibit
Debtor's right to withdraw the Deposited Funds without the delivery of prior
written consent of Secured Party to the financial institution.
(g) Debtor will keep the Collateral free from any lien, charge,
encumbrance, financing statement or adverse claim in favor of any entity other
than Secured Party. If third parties make adverse claims against the Collateral,
Debtor will promptly satisfy such claims or provide security for their removal
satisfactory to Secured Party if Secured Party so requires. Debtor will protect
and defend the Collateral against all claims thereto and will indemnify and
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save Secured Party harmless with respect to any liability or claim in connection
therewith. Debtor will not sell or dispose of Collateral over the term hereof
without the prior written consent of Secured Party. Debtor will not grant a
security interest or other encumbrance in any portion of the Collateral or
execute any financing statement covering any portion of the Collateral in favor
of any person other than Secured Party.
(h) Debtor will do all acts necessary to maintain, preserve, protect
and keep the Collateral in good condition and repair, will not permit any waste
or unusual or unreasonable depreciation of Collateral to occur and will not
commit any act for which any portion of the Collateral might be confiscated by
any governmental or private entity.
4. Secured Party's Actions. Secured Party may, but shall not be
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obligated to, discharge taxes, liens or security interests or other encumbrances
at any time levied or placed on the Collateral, pay for insurance on the
Collateral, pay for the maintenance and preservation of the Collateral, sign and
endorse any invoice, freight or express xxxx, xxxx of lading, or other documents
relating to the Collateral, demand, bring suit, collect or give acquittances for
any moneys due or compromise, prosecute or defend any action, claim or
proceeding arising from the Collateral. Secured Party may do any or all of the
foregoing in the name of Debtor or otherwise. Should Debtor fail or refuse to
make any payment, perform any covenant or obligation, observe any condition or
take any action which Debtor is obligated hereunder to make, perform, observe,
take or do, at the time or in the manner herein provided, then Secured Party
may, at Secured Party's sole discretion, without notice to or demand upon Debtor
with respect to any such payment and after 30 days' notice with respect to any
non-monetary covenant, obligations, condition or act, and without releasing
Debtor from any obligation, covenant or condition hereof, make, perform,
observe, take or do the same in such manner and to such extent as Secured Party
may, during any period of time that Debtor is in default hereunder, deem
necessary to protect its security interest under this Security Agreement.
Debtor agrees to reimburse Secured Party on demand for any payment made, or any
expense incurred, including but not limited to attorneys' fees, court costs and
expenses of litigation, by Secured Party in connection with the foregoing,
together with interest thereon at the Default Rate (as defined in the Hosting
Agreement).
5. Default. The failure of Debtor to comply with or duly and punctually
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observe or perform any of its obligations hereunder, or the occurrence of any
event of default under the Promissory Notes, the New Note, or Loan Agreement,
shall constitute an event of default hereunder. Upon the occurrence of any one
or more events of default hereunder, Secured Party may at its option and without
further notice or demand declare all indebtedness secured hereby immediately due
and payable, and do one or more of the following:
(a) Foreclose or otherwise enforce Secured Party's security interest
on any of the Collateral in any manner permitted by the applicable Uniform
Commercial Code or other applicable laws, or provided for in the Promissory
Notes, the New Note, the Loan Agreement or this Security Agreement.
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(b) With respect to the Deposited Funds, at any time give notice to
the appropriate financial institution of Debtor's irrevocable assignment of the
Deposited Funds to Secured Party and to any and all persons who may have an
interest in the Deposited Funds or the deposit accounts in which they are held.
Debtor hereby covenants and agrees that Debtor will cooperate fully with Secured
Party, and its employees and agents, and will provide any and all documents
deemed by Secured Party to be necessary or desirable to perfect its interest in
the Deposited Funds and collect and control same.
(c) Sell or otherwise dispose of any tangible personal property
Collateral, including equipment, at one or more public or private sales, whether
or not such Collateral is present at the place of sale, for cash or credit or
future delivery, on such terms and in such manner as Secured Party may
determine. In the event of a sale or other disposition of such Collateral:
(1) Any person, including Debtor and Secured Party, may purchase
at the sale.
(2) In connection with any sale or other disposition of the
Collateral, the parties agree that notwithstanding such other commercially
reasonable conduct as may be followed by Secured Party, the following procedures
shall comprise and constitute a commercially reasonable sale (the "sale"):
(i) Secured Party shall mail to Debtor written notice of
the sale not less than ten (10) days prior to such sale;
(ii) Once per week during the four weeks immediately
preceding the sale, Secured Party will publish notice of the sale in an
appropriate publication that secured party selects. The notice will advise
prospective purchasers as to where they may obtain information with respect
to the Collateral.
(iii) Upon receipt of any written request to do so, Secured
Party will make available to any bona fide prospective purchaser for
inspection, within five (5) business days following receipt of such request
and during reasonable business hours, such information as shall be
necessary to enable a prospective purchaser to prepare a bid.
(3) Notwithstanding paragraph (2) above, in the event Secured
Party offers to sell all or any part of the Collateral, Secured Party will be
under no obligation to consummate a sale if, in its reasonable business
judgment, none of the offers received by it reasonably approximates the fair
value of such Collateral.
(4) Secured Party shall apply the proceeds of any sale,
collection, or disposition hereunder to payment of the following: (v) the
expenses of such sale or disposition together with reasonable attorneys' fees,
and the actual costs of publishing, recording, mailing and posting notice; (w)
the cost of any search and other evidence of title procured in connection
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therewith and any transfer tax on any deed or conveyance; (x) all sums expended
under the terms hereof, not then repaid, with accrued interest in the amount
provided herein; (y) all other sums secured hereby; and (z) the remainder, if
any, to the person or persons legally entitled thereto.
(5) Secured Party may require debtor to make the collateral
available to Secured Party at a reasonable place designated by Secured Party.
(6) If the holder of a Promissory Note or the New Note is a
purchaser at such sale, such holder shall be entitled to apply any portion of
the indebtedness then secured hereby for or in settlement or payment of any
portion of the purchase price of the property purchased at such sale.
(d) Tecover from Debtor all costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred or paid by Secured Party in
exercising any right, power or remedy provided by this security agreement or by
law.
6. Exercise of Remedies; No Waiver. All remedies conferred upon Secured
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Party shall be deemed cumulative with, and not exclusive of, any other remedy
conferred by this Security Agreement, by the Promissory Notes, by the New Note,
by any other document securing payment of the notes, or by law. The exercise of
any one remedy shall not preclude the exercise of any other. Failure of Secured
Party to exercise any rights it may have upon Debtor's default hereunder shall
not be deemed to be a waiver of Secured Party's rights thereupon or to be a
release of Debtor from any of its obligations to Secured Party. The acceptance
by Secured Party of any sum after the same is due shall not constitute a waiver
of the right either to require prompt payment, when due, of all other sums
hereby secured or to declare a default as herein provided. The acceptance by
Secured Party of any sum in an amount less than the sum then due shall not
constitute a waiver of the obligation of Debtor to pay the entire sum then due.
The waiver by Secured Party of any default hereunder shall not be deemed to
constitute a waiver of any succeeding default. Debtor waives any right to
require Secured Party to proceed against any person or to exhaust any Collateral
or to pursue any remedy in Secured Party's power.
7. Successors. All agreements, covenants, conditions and provisions of
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this Security Agreement shall inure to the benefit of Secured Party and its
successors and assigns, and shall bind the heirs, executors, administrators,
successors and permitted assigns of Debtor, and shall also bind the successors
in interest of Debtor in the Collateral. In the event that there is more than
one Debtor or successor in interest of Debtor in the Collateral, they shall be
jointly and severally liable hereunder.
8. Term. This Security Agreement shall remain in full force and effect
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until the indebtedness and all other obligations secured hereby, including all
charges, expenses, fees, costs, and interest, shall have been paid in full and
otherwise performed, or until its release and termination as provided in the
Hosting Agreement, or until its release and termination is given in writing by
Secured Party. No party to this Security Agreement shall be discharged by any
extension of time, additional advances, renewals and extensions of the
Promissory Notes, the
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taking of further security, releases of a part or all of the Collateral, the
replacement of all or a portion of the outstanding indebtedness evidenced by the
Promissory Notes with the new note, or by any other acts except as provided in
this section. Time is of the essence in connection with this Security Agreement.
upon termination of this Security Agreement, Secured Party shall take all steps
necessary (including without limitation executing and filing any required
financing statement termination notices) to terminate and release the security
interest granted hereunder.
9. Governing Law. This Security Agreement, and the rights and
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obligations hereunder of each of the parties hereto, shall be governed by and
construed in accordance with the laws of the state of Washington.
10. Integration. This Security Agreement, together with the loan
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agreement (and Promissory Notes and the New Note referred to therein), the
Hosting Agreement and a Software Development Agreement, Information Services
Agreement and Escrow Agreement between the parties each of even date, shall
constitute the entire agreement between the parties hereto with respect to the
subject matter of this Security Agreement and shall supersede all other
agreements, written or oral, with respect thereto.
11. No Modification. This Security Agreement may not be modified or
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amended except by a written instrument executed by the party sought to be
charged or bound thereby. If any provision hereof should be held unenforceable
or void, then such provision shall be deemed separable from the remaining
provisions hereof and shall in no way affect the validity of this Security
Agreement except that if such provision relates to the payment of any monetary
sum, then Secured Party may at its option declare the indebtedness evidenced by
the Promissory Notes or the New Note, as applicable, and all other sums secured
hereby immediately due and payable.
12. Notices. All notices, requests, consents, demands, approvals and
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other communications hereunder shall be given in accordance with the loan
agreement.
13. Waivers. Debtor hereby waives diligence, presentment, protest and
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demand, and notices of every kind.
NOTICE. NOTICE IS HEREBY GIVEN THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
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MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
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IN WITNESS WHEREOF, This Agreement is executed as of the date first set forth
above.
Debtor: Secured Party:
INKTOMI CORPORATION, a california MICROSOFT CORPORATION, a Washington
corporation corporation
/s/ Xxxxx X. Xxxxxxxxxxxx /s/ Xxxxx Xxxxxxxx
By __________________________ By __________________________
CEO Vice President
Its ______________________ Its ______________________
July 27, 1997 July 27, 1997
Date: ____________________ Date: ____________________
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