EXHIBIT 4.6
AMENDMENT NO. 2
This AMENDMENT (this "AMENDMENT"), dated effective as of March 31,
2005, is entered into by and between ISLAND PACIFIC, INC., a Delaware
corporation (the "COMPANY"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company ("LAURUS"), for the purpose of amending the terms of (i) the Securities
Purchase Agreement, dated as of July 12, 2004, by and between the Company and
Laurus (as amended, modified and/or supplemented from time to time, the
"SECURITIES PURCHASE AGREEMENT"), (ii) the Amended and Restated Secured
Convertible Term Note, dated July 12, 2004 (as amended, modified and/or
supplemented from time to time, the "TERM NOTE") issued by the Company pursuant
to the Securities Purchase Agreement and (iii) the Amended and Restated
Registration Rights Agreement by and between the Company and Laurus, dated as of
July 12, 2004 (as amended, modified and/or supplemented from time to time, the
"REGISTRATION RIGHTS AGREEMENT" and, together with the Securities Purchase
Agreement and the Term Note, the "LOAN DOCUMENTS"). Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Securities Purchase Agreement.
WHEREAS, Laurus has agreed to postpone scheduled principal payments and
penalty payments and waive accrual of damages in respect of the Term Note and,
in consideration therefore and in consideration of the other agreements set
forth herein, the receipt and sufficiency of which is hereby acknowledged, the
Company has agreed to issue the Additional Warrant (as defined below) to Laurus;
WHEREAS, the Company and Laurus have agreed to make certain changes to
the Term Note and the Registration Rights Agreement as set forth herein; and
NOW, THEREFORE, in consideration of the above, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Laurus and the Company hereby agree that the Company shall not be
required to pay the portion of the Monthly Amount (as defined in the Term Note)
consisting of Principal Amount (as defined in the Term Note) that is due on the
first business day of April 2005, May 2005, June 2005, July 2005, August 2005
and September 2005 (collectively, the "POSTPONED PRINCIPAL"); provided that, the
Postponed Principal shall be due and payable in full on the Maturity Date (as
defined in the Term Note), together with all other amounts due and payable on
such date under the Securities Purchase Agreement and the Related Agreements.
2. Laurus and the Company hereby agree that the payment of the
liquidated damages accrued under the Registration Rights Agreement shall be
postponed until the earlier of: (i) payment of the Term Note in full or (ii) the
Maturity Date under the Term Note.
3. Laurus hereby waives its rights to liquidated damages that would
otherwise accrue for the period from April 1, 2005 to May 31, 2005 under the
Registration Rights Agreement for the Company's failure to have a registration
statement covering the shares issuable upon conversion of the Term Note or
exercise of Laurus' warrants declared effective by the SEC.
4. In the event that, (x) on or prior to June 30, 2005, the Company
issues at least $4,000,000 in aggregate principal amount of indebtedness, equity
securities, or indebtedness convertible into Common Stock of the Company which
by its terms, contract or otherwise is subordinated in right of payment to
Laurus on terms and conditions satisfactory to Laurus ("Satisfactory
Subordinated Indebtedness"), the following Section 3.4(b)(iii) shall replace the
existing Section 3.4(b)(iii) of the Term Note solely with respect to such
issuance of Satisfactory Subordinated Indebtedness:
"(iii) Subject to the provisions of this Section 3.4,
if the Borrower shall at any time prior to the conversion or repayment
in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the
Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant
to options, warrants, or other obligations to issue shares outstanding
on the date hereof as disclosed to Holder in writing; or (iii) pursuant
to options that may be issued under any employee incentive stock option
and/or any qualified stock option plan adopted by the Borrower) for a
consideration per share (the "Offer Price") less than the Fixed
Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset pursuant to the formula
below.
If the Borrower issues any additional shares of
Common Stock for a consideration per share less than the
then-applicable Fixed Conversion Price pursuant to this Section 3.4
then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable
Fixed Conversion Price by the following fraction:
--------------------------------------
A + B
--------------------------------------
(A + B) + [((C - D) x B) / C]
--------------------------------------
A = Total amount of shares convertible pursuant to
this Note
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offer Price"
or (y) in the event that, on or prior to June 30, 2005, the Company issues
Satisfactory Subordinated Indebtedness greater than $0 but less than $4,000,000
the following Section 3.4(b)(iii) shall replace the existing Section 3.4(b)(iii)
of the Term Note solely with respect to such issuance of Satisfactory
Subordinated Indebtedness:
"(iii) Subject to the provisions of this Section 3.4,
if the Borrower shall at any time prior to the conversion or repayment in full
of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a person other than the Holder (except (i)
pursuant to Subsections A or B above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed to
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Holder in writing; or (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan adopted
by the Borrower) for a consideration per share (the "Offer Price") less than the
Fixed Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price applicable to a portion of the outstanding principal amount of
this Note (and all interest, fees, costs and expenses related thereto) equal to
the fair market value of the aggregate consideration paid for, or attributable
to, such shares of Common Stock or securities convertible into Common Stock (the
"Aggregate Consideration") shall be immediately reset to such lower Offer Price
at the time of issuance of such securities (provided that, in the event that the
outstanding principal amount of this Note is greater than the respective
Aggregate Consideration, the portion of the outstanding principal amount of the
Note with the lowest Fixed Conversion Price shall have a "reset" Fixed
Conversion Price as a result of such issuance). For example, in the event that
(i) the Offer Price is less than or equal to the Closing Date Market Price and
(ii) the Aggregate Consideration equals $1,000,000, a Fixed Conversion Price
applicable a principal amount of this Note equal to $1,000,000 (plus all
interest, fees, costs and expenses related thereto) shall be reset to the Offer
Price if the Offer Price is less than such Fixed Conversion Price in effect at
the time of such issuance."
For the avoidance of doubt each of the Company and Laurus agree that
after June 30, 2005, Section 3.4(b)(iii) shall exist as such Section was in
effect immediately prior to the Amendment Effective Date, without giving any
effect to this Section 3 of this Amendment.
5. In consideration of Laurus' agreements contained in this Amendment,
the Company hereby agrees to issue to Laurus the Warrant in the form attached
hereto as Exhibit A (as amended, modified or supplemented from time to time, the
"ADDITIONAL WARRANT").
6. Laurus and the Company hereby agree that the Additional Warrant
shall be subject to the terms and conditions of the Registration Rights
Agreement, provided that, (i) with respect to the New Warrant, the "Filing Date"
under and as defined in the Registration Rights Agreement shall be a date no
later than September 30, 2005 and (ii) the term "Warrants" under and as defined
in the Registration Rights Agreement shall include the Additional Warrant.
7. The Company hereby agrees that as promptly as possible after the
date hereof, but in no event later than April 25, 2005, the Company will deliver
to Purchaser the stock certificates representing the Pledged Stock (as defined
in the Stock Pledge Agreement referred to below), together with executed but
undated blank stock powers authorizing the transfer of the Pledged Stock (as
defined in the Stock Pledge Agreement between the Company and Purchaser dated
July 12, 2004 entered in connection with the sale and issuance of the Term Note
(the "Stock Pledge Agreement")), subject to the terms and conditions of the Term
Note, the Stock Pledge Agreement and the Master Security Agreement between the
Company and Purchaser dated July 12, 2004 entered connection with the sale and
issuance of Term Note.
8. The Company hereby agrees that as promptly as possible after the
date hereof, but in no event later than May 10, 2005, the Company will, in
accordance with the Securities Purchase Agreement, establish a lock-box account
with each of Silicon Valley National Bank and California Bank & Trust to hold
all of the cash, cash equivalents, accounts, deposit accounts or other holdings
of the Company and all of its Subsidiaries (the "Lock-box Accounts"). The
Company shall also enter into Deposit Account Control Agreements with the
Purchaser to secure the Purchaser's security interest in the Lock-box Accounts
and that provides the Purchaser can assume control of the Lock-box accounts in
the event of a material uncured default by Company under this Agreement or any
related agreement.
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9. In consideration of Laurus' agreements contained in this Amendment,
the Company hereby agrees that until the Term Note has been indefeasibly paid in
full, the Company shall not, and shall not permit any of its Subsidiaries to,
except as permitted under the Subordination Agreement between Laurus and
Multi-Channel Holdings, Inc. dated as of April 15, 2005 make (i) any prepayment
of principal or interest on any of its indebtedness other than the Term Note and
(ii) any interest payments on the promissory notes dated June 1, 2004 held by
Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx.
10. The Company hereby agrees that as promptly as possible after the
date hereof, but in no event later than April 25, 2005, the Company will deliver
executed but undated stock powers to Purchaser authorizing the transfer of the
Pledged Stock (as defined in the Stock Pledge Agreement between the Company and
Purchaser dated July 12, 2004 entered in connection with the sale and issuance
of the Term Note (the "Stock Pledge Agreement")), to Purchaser subject to the
terms and conditions of the Term Note, the Stock Pledge Agreement and the Master
Security Agreement between the Company and Purchaser dated July 12, 2004 entered
connection with the sale and issuance of Term Note.
11. The Company hereby agrees that as promptly as possible after the
date hereof, but in no event later than May 10, 2005, the Company will, in
accordance with the Securities Purchase Agreement, establish a lock-box account
with each of Silicon Valley National Bank and California Bank & Trust to hold
all of the cash, cash equivalents, accounts, deposit accounts or other holdings
of the Company and all of its Subsidiaries (the "Lock-box Accounts"). The
Company shall also enter into Deposit Account Control Agreements with the
Purchaser to secure the Purchaser's security interest in the Lock-box Accounts
and that provides the Purchaser can assume control of the Lock-box accounts in
the event of a material uncured default by Company under this Agreement or any
related agreement.
12. In consideration of Laurus' agreements contained in this Amendment,
the Company hereby agrees that until the Term Note has been indefeasibly paid in
full, the Company shall not, except as permitted under the Subordination
Agreement between Laurus and Multi-Channel Holdings, Inc. dated as of April 15,
2005 make (i) any prepayment of principal or interest on any indebtedness other
than the Term Note and (ii) any interest payments on the promissory notes dated
June 1, 2004 held by Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx.
13. Each amendment set forth herein shall be effective as of the date
first above written (the "AMENDMENT EFFECTIVE DATE") on the date when (i) each
of the Company and Laurus shall have executed and the Company shall have
delivered to Laurus its respective counterpart to this Amendment and (ii) the
Company shall have executed and delivered to Laurus the Additional Warrant.
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14. Except as specifically set forth in this Amendment, there are no
other amendments, modifications or waivers to the Loan Documents, and all of the
other forms, terms and provisions of the Loan Documents remain in full force and
effect.
15. Except as set forth in Schedule I hereto, the Company hereby
represents and warrants to Laurus that (i) no Event of Default exists on the
date hereof, after giving effect to this Amendment, (ii) on the date hereof,
after giving effect to this Amendment, all representations, warranties and
covenants made by the Company in connection with the Loan Documents are true,
correct and complete and (iii) on the date hereof, after giving effect to this
Amendment, all of the Company's and its Subsidiaries' covenant requirements have
been met.
16. From and after the Amendment Effective Date, all references in the
Loan Documents and in the other Related Agreements to the Securities Purchase
Agreement, the Term Note and/or the Registration Rights Agreement shall be
deemed to be references to the Securities Purchase Agreement, the Term Note
and/or the Registration Rights Agreement, as the case may be, as modified
hereby.
17. This Amendment shall be binding upon the parties hereto and their
respective successors and permitted assigns and shall inure to the benefit of
and be enforceable by each of the parties hereto and their respective successors
and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the Company and Laurus has caused this
Amendment to the Loan Documents to be signed in its name effective as of this
31st day of March, 2005.
ISLAND PACIFIC, INC.
By: /s/ X. Xxxxxxx
---------------------------------
Name: Xxxx Xxxxxxx
Title: President
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxxx Xxxx
---------------------------------
Name: Xxxxxx Xxxx
Title: Director
