EXHIBIT 10.1
ISLAND PACIFIC, INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services, Ltd.
X.X. Xxx 0000 G.T
Queensgate House
South Church Street
Grand Cayman, Cayman Islands
Date: July 12, 2004
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined),
Island Pacific, Inc., a Delaware corporation (the "Company"), each of the other
undersigned parties (other than Laurus Master Fund, Ltd, "Laurus")) and each
other entity that is required to enter into this Master Security Agreement (each
an "Assignor" and, collectively, the "Assignors") hereby assigns and grants to
Laurus a continuing security interest in all of the following property now owned
or at any time hereafter acquired by any Assignor, or in which any Assignor now
have or at any time in the future may acquire any right, title or interest (the
"Collateral"): all cash, cash equivalents, accounts, deposit accounts
(including, without limitation, the Restricted Accounts (the "Restricted
Accounts") maintained at each of Silicon Valley Bank (Account Name: Cash
Collateral Account, Account Number: 3300397264; Account Name: Payroll Account,
Account Number: 3300397279; Account Name: Operating Accounting, Account Number:
3300400459) referred to in the Silicon Valley Bank Restricted Account Agreement)
and California Bank and Trust (Account Name: Checking, Account Number:
00-000000-00; Account Name: Payroll, Account Number: 00-000000-00; Account Name:
Administrative Division, Account Number: 00-000000-00; Account Name: Money
Market, Account Number: 00-000000-00; Account Name: Store Solutions Division,
Account Number: 00-000000-00; Account Name: IPI Acquisition, Inc. d/b/a Page
Digital, Account Number: 21-400231-01) referred to in the California Bank and
Trust Restricted Account Agreement, inventory, equipment, goods, documents,
instruments (including, without limitation, promissory notes), contract rights,
general intangibles (including, without limitation, payment intangibles and an
absolute right to license on terms no less favorable than those current in
effect among our affiliates), chattel paper, supporting obligations, investment
property (including, without limitation, all equity interests owned by any
Assignor), letter-of-credit rights, trademarks, trademark applications,
tradestyles, patents, patent applications, copyrights, copyright applications
and other intellectual property in which any Assignor now have or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore. In the event any Assignor
wishes to finance the acquisition in the ordinary course of business of any
hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees to
release its security interest on such hereafter acquired equipment so financed
by such third party financing source. Except as otherwise defined herein, all
capitalized terms used herein shall have the meaning provided such terms in the
Securities Purchase Agreement referred to below.
2. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Securities Purchase
Agreement dated as of the date hereof by and between the Company and Laurus (the
"Securities Purchase Agreement") and (ii) the Related Agreements referred to in
the Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Laurus, whether now
existing or hereafter arising, direct or indirect, liquidated or unliquidated,
absolute or contingent, due or not due and whether under, pursuant to or
evidenced by a note, agreement, guaranty, instrument or otherwise, in each case,
irrespective of the genuineness, validity, regularity or enforceability of such
Obligations, or of any instrument evidencing any of the Obligations or of any
collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all of the
Obligations in any case commenced by or against any Assignor under Xxxxx 00,
Xxxxxx Xxxxxx Code, including, without limitation, obligations or indebtedness
of each Assignor for post-petition interest, fees, costs and charges that would
have accrued or been added to the Obligations but for the commencement of such
case.
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:
(a) it is a corporation, partnership or limited liability
company, as the case may be, validly existing, in good standing and
organized under the respective laws of its jurisdiction of organization
set forth on Schedule A, and each Assignor will provide Laurus thirty
(30) days' prior written notice of any change in any of its respective
jurisdiction of organization;
(b) its legal name is as set forth in its respective
Certificate of Incorporation or other organizational document (as
applicable) as amended through the date hereof and as set forth on
Schedule A, and it will provide Laurus thirty (30) days' prior written
notice of any change in its legal name;
(c) its organizational identification number (if applicable)
is as set forth on Schedule A hereto, and it will provide Laurus thirty
(30) days' prior written notice of any change in any of its
organizational identification number;
(d) it is the lawful owner of the respective Collateral and it
has the sole right to grant a security interest therein and will defend
the Collateral against all claims and demands of all persons and
entities;
(e) it will keep its respective Collateral free and clear of
all attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("Encumbrances"), except (i)
Encumbrances securing the Obligations; (ii) Encumbrances permitted
under Section 6.12(e) of the Securities Purchase Agreement ; and (iii)
Encumbrance that do not secure indebtedness in excess of $50,000 and
are removed or otherwise released within ten (10) days of the creation
thereof;
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(f) it will, at its and the other Assignors joint and several
cost and expense keep the Collateral in good state of repair (ordinary
wear and tear excepted) and will not waste or destroy the same or any
part thereof other than ordinary course discarding of items no longer
used or useful in its or such other Assignors' business;
(g) it will not without Laurus' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by
sale, lease or otherwise, except for the sale of inventory in the
ordinary course of business and for the disposition or transfer in the
ordinary course of business during any fiscal year of obsolete and
worn-out equipment or equipment no longer necessary for its ongoing
needs, having an aggregate fair market value of not more than $50,000
and only to the extent that:
(i) the proceeds of any such disposition are used to
acquire replacement Collateral which is subject to Laurus'
first priority perfected security interest, or are used to
repay Obligations or to pay general corporate expenses; and
(ii) following the occurrence of an Event of Default
which continues to exist the proceeds of which are remitted to
Laurus to be held as cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in
Laurus' name against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as Laurus shall
specify in amounts and under policies by insurers acceptable to Laurus
and all premiums thereon shall be paid by such Assignor and the
policies delivered to Laurus. If any such Assignor fails to do so,
Laurus may procure such insurance and the cost thereof shall be
promptly reimbursed by the Assignors, jointly and severally, and shall
constitute Obligations;
(i) it will at all reasonable times allow Laurus or Laurus'
representatives free access to and the right of inspection of the
Collateral;
(j) such Assignor (jointly and severally with each other
Assignor) hereby indemnifies and saves Laurus harmless from all loss,
costs, damage, liability and/or expense, including reasonable
attorneys' fees, that Laurus may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the
enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any
Assignor concerning any matter growing out of or in connection with
this Master Security Agreement, and/or any of the Obligations and/or
any of the Collateral except to the extent caused by Laurus' own gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and nonappealable decision).
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) Breach of any covenant, warranty, representation or
statement made or furnished to Laurus by any Assignor or on any
Assignor's benefit was false or misleading in any material respect when
made or furnished, and if subject to cure, shall not be cured for a
period of fifteen (15) days; provided that, if such breach is of a
nature that it can not be cured within fifteen (15) days and Assignor
has taken reasonable steps to cure such default within fifteen (15)
days, upon written notice to and the consent of Laurus, the Assignor
will have a commercially reasonable amount of time to cure such breach
before such breach shall be deemed an Event of Default;
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(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which
are used to replace the item or repay Laurus; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within
ten (10) days of the creation or the assertion thereof;
(c) any Assignor shall become insolvent, cease operations,
dissolve, terminate our business existence, make a general assignment
for the benefit of creditors, suffer the appointment of a receiver,
trustee, liquidator or custodian of all or any part of Assignors'
property;
(d) any proceedings under any bankruptcy or insolvency law
shall be commenced by or against any Assignor and if commenced against
any Assignor shall not be dismissed within thirty (30) days;
(e) the Company shall repudiate, purport to revoke or fail to
perform any or all of its obligations under the Note (after passage of
applicable cure period, if any); or
(f) an Event of Default shall have occurred and be continuing
beyond any applicable grace period under and as defined in any
Document.
5. Upon the occurrence of any Event of Default and at any time
thereafter, Laurus may declare all Obligations immediately due and payable and
Laurus shall have the remedies of a secured party provided in the Uniform
Commercial Code as in effect in the State of New York , this Agreement and other
applicable law. Upon the occurrence of any Event of Default and at any time
thereafter following the expiration of the applicable cure period, Laurus will
have the right to take possession of the Collateral and to maintain such
possession on our premises or to remove the Collateral or any part thereof to
such other premises as Laurus may desire. Upon Laurus' request, each of the
Assignors shall assemble or cause the Collateral to be assembled and make it
available to Laurus at a place designated by Laurus. If any notification of
intended disposition of any Collateral is required by law, such notification, if
mailed, shall be deemed properly and reasonably given if mailed at least ten
(10) days before such disposition, postage prepaid, addressed to any Assignor
either at such Assignor's address shown herein or at any address appearing on
Laurus' records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency. For the avoidance of doubt, following the occurrence and
during the continuance of an Event of Default which has not been cured, Laurus
shall have the immediate right to withdraw any and all monies contained in the
Restricted Account and apply same to the repayment of the Obligations (in such
order of application as Laurus may elect).
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6. If any Assignor defaults in the performance or fulfillment of any of
the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Laurus' option, debited by
Laurus from the Restricted Accounts referred to in the respective Restricted
Account Agreements.
7. Each Assignor appoints Laurus, any of Laurus' officers, employees or
any other person or entity whom Laurus may designate as our attorney, with power
to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as "all assets and all personal property,
whether now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records; and to do all other
things Laurus reasonably deems necessary to carry out this Master Security
Agreement. This power being coupled with an interest, is irrevocable so long as
any Obligations remains unpaid.
8. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. Each Assignor agrees to join with Laurus in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.
9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Laurus hereunder shall inure to the benefit of Laurus' successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus',
any of Laurus' subsidiaries and any co-subsidiaries of Laurus' parent, whether
now existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor. Laurus and each Assignor hereby (a)
waive any and all right to trial by jury in litigation relating to this
Agreement and the transactions contemplated hereby and each Assignor agrees not
to assert any counterclaim in such litigation, (b) submit to the nonexclusive
jurisdiction of any New York State court sitting in the borough of Manhattan,
the city of New York and (c) waive any objection Laurus or each Assignor may
have as to the bringing or maintaining of such action with any such court.
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10. All notices from Laurus to any Assignor shall be sufficiently given
if mailed or delivered to such Assignor's address set forth below.
Very truly yours,
ISLAND PACIFIC, INC.
By: ____________________
Name:
Title:
Address:
PAGE DIGITAL INCORPORATED
By: ____________________
Name:
Title:
Address:
IPI MERGER SUB II, INC.
By: ____________________
Name:
Title:
Address:
SABICA VENTURES, INC.
By: ____________________
Name:
Title:
Address:
ACKNOWLEDGED:
LAURUS MASTER FUND, LTD.
By:______________________
Name:
Title
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