EXHIBIT 4.2
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
April 18, 2005, among (i) ISLAND PACIFIC, INC., a Delaware corporation (the
"Company"), (ii) each of the subsidiaries of the Company listed on the signature
page hereto (together with the Company, each a "Note Party" and collectively,
the "Note Parties") and (iii) Multi-Channel Holdings, Inc., a Delaware
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Secured Term Note in the aggregate principal amount of Two Million Dollars
($2,000,000) (the "Note");
WHEREAS, Purchaser desires to purchase the Note on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note to Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section
3), the Company agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, a Note in the aggregate
principal amount of $2,000,000. A form of the Note is annexed hereto as
Exhibit A. The Note will mature on the Maturity Date (as defined in the
Note).
2. FEES AND EXPENSES. On the Closing Date, the Company shall reimburse the
Purchaser for its reasonable expenses not to exceed $100,000 (including
legal fees and expenses) incurred in connection with the preparation
and negotiation of this Agreement and the Related Agreements (as
hereinafter defined), and expenses incurred in connection with the
Purchaser's due diligence review of the Company and its Subsidiaries
(as defined in Section 4(b)) and all related matters.
3. CLOSING, DELIVERY AND PAYMENT.
(a) CLOSING. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the
"Closing"), shall take place on the date hereof, at such time
or place as the Company and Purchaser may mutually agree (such
date is hereinafter referred to as the "Closing Date").
(b) DELIVERY. At the Closing on the Closing Date, the Company will
deliver to the Purchaser, among other things, a Note in the
form attached as Exhibit A representing the aggregate
principal amount of $2,000,000.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as otherwise
specifically identified on the disclosure schedule delivered by the
Company to Purchase pursuant to this Section 4 (the "Disclosure
Schedule"), the Company (and, where specifically provided or
referenced, each of the Note Parties) represents and warrants to the
Purchaser as set forth below in this Section 4. Any disclosure or
exception set forth on the Disclosure Schedule shall be deemed to apply
to any representation and warranty to which it is applicable regardless
of whether or not it is disclosed or cross referenced with respect to a
particular representation or warranty:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Note Parties is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly
existing and in good standing under the laws of its
jurisdiction of organization. Each of the Note Parties has the
corporate power and authority to own and operate its
properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the
date hereof between the Company, certain Subsidiaries of the
Company and the Purchaser (as amended, modified or
supplemented from time to time, the "Master Security
Agreement"), (iv) the Subsidiary Guaranty dated as of the date
hereof made by certain Subsidiaries of the Company (as
amended, modified or supplemented from time to time, the
"Subsidiary Guaranty"), (v) the Stock Pledge Agreement dated
as of the date hereof among the Company, and the Purchaser
(the "Stock Pledge Agreement") and (vi) all other agreements
related to this Agreement and the Note and referred to herein
(the preceding clauses (ii) through (vi), collectively, the
"Related Agreements"), to issue and sell the Note and to carry
out the provisions of this Agreement and the Related
Agreements and to carry on its business as presently
conducted. Each of the Note Parties is duly qualified and is
authorized to do business and is in good standing as a foreign
corporation, partnership or limited liability company, as the
case may be, in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions
in which failure to do so has not, or could not reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects
of the Company and its Subsidiaries, taken individually and as
a whole (a "Material Adverse Effect").
(b) SUBSIDIARIES. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its
percentage ownership thereof, is set forth on Schedule 4(b).
For the purpose of this Agreement, a "Subsidiary" of any
person or entity means (i) a corporation or other entity whose
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shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests
having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar
functions for such person or entity, are owned, directly or
indirectly, by such person or entity or (ii) a corporation or
other entity in which such person or entity owns, directly or
indirectly, more than 50% of the equity interests at such
time.
(c) CAPITALIZATION; VOTING RIGHTS.
(i) The authorized capital stock of the Company, as of
the date hereof consists of 250,000,000 shares of
common stock par value $0.0001 of which 64,437,833
are issued and outstanding and 5,000,000 shares of
preferred stock par value $0.0001, of which 141,000
are designated as Series A Preferred Stock, all of
which are issued and outstanding and 2,517,233 shares
are designated as Series B Preferred Stock, none of
which are issued and outstanding. The authorized
capital stock of each Subsidiary of the Company is
set forth on Schedule 4(c).
(ii) Except as disclosed on Schedule 4(c), other than: (A)
the shares reserved for issuance under the Company's
stock option plans; and (B) shares which may be
granted pursuant to that certain Securities Purchase
Agreement dated as of July 12, 2004 between the
Company and Laurus Master Fund, Ltd. ("Laurus"), a
Cayman Islands company (as amended, modified or
supplemented, the "Laurus Agreement") and the
"Related Agreements" (as such term is defined in the
Laurus Agreement, and as such Related Agreements are
amended modified or supplemented, the "Laurus Related
Agreements"), there are no outstanding options,
warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements
of any kind for the purchase or acquisition from the
Company of any of its securities.
(iii) All issued and outstanding shares of the Company's
Common Stock: (A) have been duly authorized and
validly issued and are fully paid and nonassessable;
and (B) were issued by the Company in compliance with
all applicable state and federal laws concerning the
issuance of securities.
(iv) The rights, preferences, privileges and restrictions
of the shares of the Common Stock are as stated in
the Company's Certificate of Incorporation (the
"Charter") and pursuant to applicable law.
(d) AUTHORIZATION; BINDING OBLIGATIONS. All corporate, partnership
or limited liability company, as the case may be, action on
the part of the Company and each of its Subsidiaries
(including the respective officers and directors) necessary
for the authorization of this Agreement, the Note and the
Related Agreements, the performance of all obligations of the
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Company and its Subsidiaries hereunder and under the other
Related Agreements at the Closing and, the authorization,
sale, issuance and delivery of the Note has been taken or will
be taken prior to the Closing. This Agreement, the Note and
the Related Agreements, when executed and delivered and to the
extent it is a party thereto, will be valid and binding
obligations of each of the Company and each of its
Subsidiaries, enforceable against each such Person in
accordance with their terms, except:
(i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors'
rights; and
(ii) general principles of equity that restrict the
availability of equitable or legal remedies.
(e) LIABILITIES. Neither the Company nor any of its Subsidiaries
has any material contingent liabilities, except current
liabilities incurred in the ordinary course of business and
liabilities disclosed in any of the Company's filings under
the Securities Exchange Act of 1934 (such filings, the
"Exchange Act Filings").
(f) AGREEMENTS; ACTION. Except as set forth on Schedule 4(f) or as
disclosed in any Exchange Act Filings:
(i) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders,
writs or decrees to which the Company or any of its
Subsidiaries is a party or by which it is bound which
may involve: (A) obligations (contingent or
otherwise) of, or payments to, the Company in excess
of $50,000 (other than obligations of, or payments
to, the Company arising from purchase or sale
agreements entered into in the ordinary course of
business); or (B) the transfer or license of any
patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses
arising from the purchase of "off the shelf" or other
standard products); or (C) provisions restricting the
development, manufacture or distribution of the
Company's products or services; or (D)
indemnification by the Company with respect to
infringements of proprietary rights.
(ii) Since December 31, 2004, neither the Company nor any
of its Subsidiaries has: (A) declared or paid any
dividends, or authorized or made any distribution
upon or with respect to any class or series of its
capital stock; (B) incurred any indebtedness for
money borrowed or any other liabilities (other than
ordinary course obligations) individually in excess
of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess
of $100,000 in the aggregate; (C) made any loans or
advances to any Person not in excess, individually or
in the aggregate, of $100,000, other than ordinary
course advances for travel expenses; or (D) sold,
exchanged or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in
the ordinary course of business.
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(iii) For the purposes of subsections (i) and (ii) above,
all indebtedness, liabilities, agreements,
understandings, instruments, contracts and proposed
transactions involving the same person or entity
(including persons or entities the Company has reason
to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
(g) OBLIGATIONS TO RELATED PARTIES. Except as set forth on
Schedule 4(g), there are no obligations of the Company or any
of its Subsidiaries to officers, directors, stockholders or
employees of the Company or any of its Subsidiaries other
than:
(i) for payment of salary for services rendered and for
bonus payments;
(ii) reimbursement for reasonable expenses incurred on
behalf of the Company and its Subsidiaries;
(iii) for other standard employee benefits made generally
available to all employees (including stock option
agreements outstanding under any stock option plan
approved by the Board of Directors of the Company);
and
(iv) obligations listed in the Company's financial
statements or disclosed in any of its Exchange Act
Filings.
Except as described above or set forth on Schedule 4(g), none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. Except as
set forth on Schedule 4(g), the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(h) CHANGES. Since December 31, 2004, except as disclosed in any
Exchange Act Filing, Schedule 4(h) or any other Schedule to
this Agreement or to any of the Related Agreements, there has
not been:
(i) any change in the business, assets, liabilities,
condition (financial or otherwise), properties,
operations or prospects of the Company or any of its
Subsidiaries, which individually or in the aggregate
has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect;
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(ii) any resignation or termination of any officer, key
employee or group of employees of the Company or any
of its Subsidiaries;
(iii) any material change, except in the ordinary course of
business, in the contingent obligations of the
Company or any of its Subsidiaries by way of
guaranty, endorsement, indemnity, warranty or
otherwise;
(iv) any damage, destruction or loss, whether or not
covered by insurance, has had, or could reasonably be
expected to have, individually or in the aggregate, a
Material Adverse Effect;
(v) any waiver by the Company or any of its Subsidiaries
of a valuable right or of a material debt owed to it;
(vi) any direct or indirect loans made by the Company or
any of its Subsidiaries to any stockholder, employee,
officer or director of the Company or any of its
Subsidiaries, other than advances made in the
ordinary course of business;
(vii) any material change in any compensation arrangement
or agreement with any employee, officer, director or
stockholder of the Company or any of its
Subsidiaries;
(viii) any declaration or payment of any dividend or other
distribution of the assets of the Company or any of
its Subsidiaries;
(ix) any labor organization activity related to the
Company or any of its Subsidiaries;
(x) any debt, obligation or liability incurred, assumed
or guaranteed by the Company or any of its
Subsidiaries, except those for immaterial amounts and
for current liabilities incurred in the ordinary
course of business;
(xi) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other
intangible assets owned by the Company or any of its
Subsidiaries;
(xii) any change in any material agreement to which the
Company or any of its Subsidiaries is a party or by
which either the Company or any of its Subsidiaries
is bound which either individually or in the
aggregate has had, or could reasonably be expected to
have, individually or in the aggregate, a Material
Adverse Effect;
(xiii) any other event or condition of any character that,
either individually or in the aggregate, has had, or
could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; or
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(xiv) any arrangement or commitment by the Company or any
of its Subsidiaries to do any of the acts described
in subsection (a) through (m) above.
(i) TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set
forth on Schedule 4(i), each of the Company and each of its
Subsidiaries has good and marketable title to its properties
and assets, and good title to its leasehold estates, in each
case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(i) those liens arising in connection with the
Obligations (as such term is defined in the Note);
(ii) those liens under the Laurus Indebtedness (as such
term is defined below)
(iii) those resulting from taxes which have not yet become
delinquent;
(iv) minor liens and encumbrances which do not materially
detract from the value of the property subject
thereto or materially impair the operations of the
Company or any of its Subsidiaries; and
(v) those that have otherwise arisen in the ordinary
course of business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4(i), the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound except where such failure to be in
compliance, either individually or in the aggregate has had, or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(j) INTELLECTUAL PROPERTY.
(i) Each of the Company and each of its Subsidiaries owns
or possesses sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other
proprietary rights and processes necessary for its
business as now conducted and to the Company's
knowledge, as presently proposed to be conducted (the
"Intellectual Property"), without any known
infringement of the rights of others. There are no
outstanding options, licenses or agreements of any
kind relating to the foregoing proprietary rights,
nor is the Company or any of its Subsidiaries bound
by or a party to any options, licenses or agreements
of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary
rights and processes of any other person or entity
other than such licenses or agreements arising from
the purchase of "off the shelf" or standard products.
Set forth on Schedule 4(j) is a list of all
Intellectual Property owned by the Note Parties,
indicating, which, if any, is registered.
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(ii) Neither the Company nor any of its Subsidiaries has
received any communications alleging that the Company
or any of its Subsidiaries has violated any of the
patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the
Company or any of its Subsidiaries aware of any basis
therefor.
(iii) The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made
prior to their employment by the Company or any of
its Subsidiaries, except for inventions, trade
secrets or proprietary information that have been
rightfully assigned to the Company or any of its
Subsidiaries.
(k) COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any
of its Subsidiaries is in violation or default of (i) any
material term of its Charter or Bylaws, or (ii) of any
provision of any indebtedness, mortgage, indenture, contract,
agreement or instrument to which it is party or by which it is
bound or of any judgment, decree, order or writ, which
violation or default, in the case of this clause (ii), has
had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
The execution, delivery and performance of and compliance with
this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company
pursuant hereto, will not, with or without the passage of time
or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such
term or provision, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company or any of its Subsidiaries or the
suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization or approval applicable
to the Company, its business or operations or any of its
assets or properties.
(l) LITIGATION. Except as set forth on Schedule 4(l) hereto, there
is no action, suit, proceeding or investigation pending or, to
the Company's knowledge, currently threatened against the
Company or any of its Subsidiaries that prevents the Company
or any of its Subsidiaries from entering into this Agreement
or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had,
or could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect or any change
in the current equity ownership of the Company or any of its
Subsidiaries, nor is the Company aware that there is any basis
to assert any of the foregoing. Neither the Company nor any of
its Subsidiaries is a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company or any of its
Subsidiaries currently pending or which the Company or any of
its Subsidiaries intends to initiate.
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(m) TAX RETURNS AND PAYMENTS. Each of the Company and each of its
Subsidiaries has timely filed all tax returns (federal, state
and local) required to be filed by it. All taxes shown to be
due and payable on such returns, any assessments imposed, and
all other taxes due and payable by the Company or any of its
Subsidiaries on or before the Closing, have been paid or will
be paid prior to the time they become delinquent. Except as
set forth on Schedule 4(m), neither the Company nor any of its
Subsidiaries has been advised:
(i) that any of its returns, federal, state or other,
have been or are being audited as of the date hereof;
or
(ii) of any deficiency in assessment or proposed judgment
to its federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
(n) EMPLOYEES. Except as set forth on Schedule 4(n), neither the
Company nor any of its Subsidiaries has any collective
bargaining agreements with any of its employees. There is no
labor union organizing activity pending or, to the Company's
knowledge, threatened with respect to the Company or any of
its Subsidiaries. Except as disclosed in the Exchange Act
Filings or on Schedule 4(n), neither the Company nor any of
its Subsidiaries is a party to or bound by any currently
effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or
agreement. To the Company's knowledge, no employee of the
Company or any of its Subsidiaries, nor any consultant with
whom the Company or any of its Subsidiaries has contracted, is
in violation of any term of any employment contract,
proprietary information agreement or any other agreement
relating to the right of any such individual to be employed
by, or to contract with, the Company or any of its
Subsidiaries because of the nature of the business to be
conducted by the Company or any of its Subsidiaries; and to
the Company's knowledge the continued employment by the
Company or any of its Subsidiaries of its present employees,
and the performance of the Company's and its Subsidiaries'
contracts with its independent contractors, will not result in
any such violation. Neither the Company nor any of its
Subsidiaries is aware that any of its employees is obligated
under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company
or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has received any notice alleging that any such
violation has occurred. Except for employees who have a
current effective employment agreement with the Company or any
of its Subsidiaries, no employee of the Company or any of its
Subsidiaries has been granted the right to continued
9
employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with
the Company or any of its Subsidiaries. Except as set forth on
Schedule 4(n), the Company is not aware that any officer, key
employee or group of employees intends to terminate his, her
or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries
have a present intention to terminate the employment of any
officer, key employee or group of employees.
(o) COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor any of
its Subsidiaries is in violation of any applicable statute,
rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its
properties which has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material
Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement
or any other Related Agreement and the issuance of any of the
Securities, except such as has been duly and validly obtained
or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. Each
of the Company and its Subsidiaries has all material
franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(p) ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor any of
its Subsidiaries is in violation of any applicable statute,
law or regulation relating to the environment or occupational
health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with
any such existing statute, law or regulation except for such
violations that individually, or in the aggregate, have had,
or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4(p), no Hazardous Materials (as defined below)
are used or have been used, stored, or disposed of by the
Company or any of its Subsidiaries or, to the Company's
knowledge, by any other person or entity on any property
owned, leased or used by the Company or any of its
Subsidiaries. For the purposes of the preceding sentence,
"Hazardous Materials" shall mean:
(i) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local,
state, federal and/or foreign laws and regulations
that govern the existence and/or remedy of
contamination on property, the protection of the
environment from contamination, the control of
hazardous wastes, or other activities involving
hazardous substances, including building materials;
or
(ii) any petroleum products or nuclear materials.
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(q) SOLVENCY. On the Closing Date, after giving effect to the
transactions contemplated hereby, each of the Company and each
of its Subsidiaries is, and the Note Parties on a consolidated
basis are, Solvent. For purposes of this Agreement,
"Solvent" means, with respect to any Person (as such term is
defined below) on a particular date, that on such Person's
total assets exceed their total liabilities. For purposes of
this Agreement, "Person" means an individual, corporation,
limited liability company, partnership, association,
joint-stock company, trust, unincorporated organization, joint
venture or other enterprise or entity or governmental
authority.
(r) INSURANCE. Each of the Company and each of its Subsidiaries
has general commercial, product liability, fire and casualty
insurance policies with coverages which the Company believes
are customary for companies similarly situated to the Company
and its Subsidiaries in the same or similar business.
(s) FULL DISCLOSURE. Each of the Company and each of its
Subsidiaries has provided the Purchaser with its SEC Reports
(below) and all information requested by the Purchaser in
connection with its decision to purchase the Note. Neither
this Agreement, the Related Agreements, the exhibits and
schedules hereto and thereto nor any other document delivered
by the Company or any of its Subsidiaries to Purchaser or its
attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, as
qualified by the statements of the Company in its SEC Reports,
contain any untrue statement of a material fact nor omit to
state a material fact necessary in order to make the
statements contained herein or therein, in light of the
circumstances in which they are made, not misleading. Any
financial projections and other estimates provided to the
Purchaser by the Company or any of its Subsidiaries were based
on the Company's and its Subsidiaries' experience in the
industry and on assumptions of fact and opinion as to future
events which the Company or any of its Subsidiaries, at the
date of the issuance of such projections or estimates,
believed to be reasonable.
(t) SEC REPORTS. Except as set forth on Schedule 4(t), the Company
has filed all proxy statements, reports and other documents
required to be filed by it under the Securities Xxxxxxxx Xxx
0000, as amended (the "Exchange Act"). The Company has
furnished the Purchaser with copies of: (i) its Annual Reports
on Form 10-K for its fiscal years ended March 31, 2004; (ii)
its quarterly reports on Form 10-Q for the fiscal quarters
ended June 30, 2004, September 30, 2004 and December 31, 2004
and (iii) its reports on Form 8-K which have been filed from
December 31, 2004 to date (collectively, the "SEC Reports").
Except as set forth on Schedule 4(t), each SEC Report was, at
the time of its filing, in substantial compliance with the
requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto)
included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(u) LISTING. The Company's Common Stock is listed for trading on
the American Stock Exchange ("AMEX") and satisfies all
requirements for the continuation of such listing. The Company
has not received any notice that its Common Stock will be
delisted from AMEX or that its Common Stock does not meet all
requirements for such continued listing.
(v) PATRIOT ACT. The Company certifies that, to the best of
Company's knowledge, neither the Company nor any of its
Subsidiaries has been designated, and is not owned or
controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning
money laundering and related activities. In furtherance of
those efforts, the Company hereby represents, warrants and
agrees that: (i) none of the cash or property that the Company
or any of its Subsidiaries will pay or will contribute to the
Purchaser has been or shall be derived from, or related to,
any activity that is deemed criminal under United States law;
and (ii) no contribution or payment by the Company or any of
its Subsidiaries to the Purchaser, to the extent that they are
within the Company's and/or its Subsidiaries' control shall
cause the Purchaser to be in violation of the United States
Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001. The Company shall promptly notify the
Purchaser if any of these representations ceases to be true
and accurate regarding the Company or any of its Subsidiaries.
The Company agrees to provide the Purchaser any additional
information regarding the Company or any of its Subsidiaries
that the Purchaser reasonably deems necessary or convenient to
ensure compliance with all applicable laws concerning money
laundering and similar activities. The Company understands and
agrees that if at any time it is discovered that any of the
foregoing representations are incorrect, or if otherwise
required by applicable law or regulation related to money
laundering similar activities, the Purchaser may undertake
appropriate actions to ensure compliance with applicable law
or regulation, including but not limited to segregation and/or
redemption of the Purchaser's investment in the Company. The
Company further understands that the Purchaser may release
confidential information about the Company and its
Subsidiaries and, if applicable, any underlying beneficial
owners, to proper authorities if and as required by applicable
law .
(w) CONSENT OF EXISTING LENDERS. Laurus has consented to the
issuance of the Note and the incurrence of debt thereunder and
hereunder and Xxxx Xxxxxxx and Xxxx Xxxxx have consented to
full subordination of their right to payment under the Xxxxxxx
Note and the Xxxxx Note, respectively, until the Note is paid
in full.
(x) NO VIOLATION OF CONTRACTS The Company is not, by its execution
and delivery of this Agreement, the Notes and the Related
Agreements and its taking all actions contemplated by such
documents, including the incurrence of indebtedness, the
granting of security interests and the provision of
guaranties, in violation of (A) the terms of the 9%
Convertible Debenture due May 15, 2006 between Midsummer
Investment, Ltd. ("Midsummer") and the Company (the "Midsummer
Debenture"), including Section 9 thereof and (B) any other
contract to which it is a party.
12
(y) REPAYMENT OF ALL AMOUNTS OWED TO MAUERER TRUSTS. The Company
hereby confirms that all amounts (including the Earnout
Consideration and the Escrow Indemnity Amount, each as defined
in the Stock Purchase Agreement referred to below) payable to
the Xxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx Revocable Trust
(the "Revocable Trust"), the Xxxxxx Xxxxxx Mauerer Charitable
Remainder Trust (the "Xxxxxx Trust") and the Xxxxxxx Xxxxxxx
Charitable Remainder Trust (the "Xxxxxxx Trust", and together
with the Revocable Trust and the Caremen Trust, each a
"Mauerer Trust" and collectively, the "Mauerer Trusts") under
that certain Stock Purchase Agreement, dated as of December
20, 2002 among the Company, Xxxxxxx X. Xxxxxxx and each of the
Mauerer Trusts, have been paid in full.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
(a) REQUISITE POWER AND AUTHORITY. The Purchaser has all necessary
power and authority under all applicable provisions of law to
execute and deliver this Agreement and the Related Agreements
and to carry out their provisions. All corporate action on
Purchaser's part required for the lawful execution and
delivery of this Agreement and the Related Agreements have
been or will be effectively taken prior to the Closing. Upon
their execution and delivery, this Agreement and the Related
Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except:
(i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting enforcement of creditors'
rights; and
(ii) as limited by general principles of equity that
restrict the availability of equitable and legal
remedies.
(b) INVESTMENT REPRESENTATIONS. Purchaser understands that the
Note is being offered and sold pursuant to an exemption from
registration contained in the Securities Act of 1933, as
amended, based in part upon Purchaser's representations
contained in the Agreement. The Purchaser confirms that it has
received or has had full access to all the information it
considers necessary or appropriate to make an informed
investment decision with respect to the Note to be purchased
by it under this Agreement. The Purchaser further confirms
that it has had an opportunity to ask questions and receive
answers from the Company regarding the Company's and its
Subsidiaries' business, management and financial affairs and
the terms and conditions of the Note and to obtain additional
information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.
13
(c) ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the
Note for the Purchaser's own account for investment only, and
not as a nominee or agent and not with a view towards or for
resale in connection with their distribution.
(d) LEGENDS. The Note shall bear substantially the following
legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO ISLAND PACIFIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
6. COVENANTS OF THE COMPANY. The Company (and, where specifically provided
or referenced, each of the Note Parties) covenants and agrees with the
Purchaser as follows:
(a) STOP-ORDERS. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and
Exchange Commission (the "SEC"), any state securities
commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering
or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) LISTING. The Company will maintain the listing of its Common
Stock on the American Stock Exchange, and will comply in all
material respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges,
as applicable.
(c) MARKET REGULATIONS. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of
the Securities to the Purchaser and promptly provide copies
thereof to the Purchaser.
(d) REPORTING REQUIREMENTS. The Company will timely file with the
SEC all reports required to be filed pursuant to the Exchange
Act and refrain from terminating its status as an issuer
required by the Exchange Act to file reports thereunder even
if the Exchange Act or the rules or regulations thereunder
would permit such termination.
14
(e) USE OF FUNDS. The Company agrees that it will use the proceeds
of the sale of the Note for general working capital purposes
and to make the payments substantially as indicated on the
cash flow statement attached hereto as Schedule 6(e) attached
hereto.
(f) ACCESS TO FACILITIES. Each of the Note Parties will permit any
representatives designated by the Purchaser (or any successor
of the Purchaser), upon reasonable notice and during normal
business hours, at such person's expense and accompanied by a
representative of the Company, to:
(i) visit and inspect any of the properties of the
Company or any of its Subsidiaries;
(ii) examine the corporate and financial records of the
Company or any of its Subsidiaries (unless such
examination is not permitted by federal, state or
local law or by contract) and make copies thereof or
extracts therefrom; and
(iii) discuss the affairs, finances and accounts of the
Company or any of its Subsidiaries with the
directors, officers and independent accountants of
the Company or any of its Subsidiaries.
(iv) attend as an observer the Company's Board of
Directors meetings; provided that such attendance
does not violate applicable law or subject the
Company to any liability and that Purchaser and its
representative and Agent (as defined below) agree to
the restrictions set forth in this Agreement
regarding confidentiality and those prohibitions
pursuant to applicable law on trading in the
Company's securities.
(g) BOARD OBSERVATION RIGHTS. The Company shall allow any
representatives designated by the Purchaser (or any successor
of the Purchaser) to attend as an observer all meetings of the
Board of Directors. The Company shall send to such
representatives all of the notices, information and other
materials that are distributed to the directors of the
Company, including copies of the minutes of all meetings of
the Board of Directors and all notices, information and other
materials that are distributed by or to the directors of the
Company with respect to the meetings of the Board or the
Executive Committee of the Board; provided, however, that upon
the request of Purchaser's representative, the Company shall
refrain from sending such notices, information and other
materials to such representative for so long as such
representative shall request. If Company proposes to take any
action by written consent in lieu of a meeting of the Board of
Directors, the Company shall give notice thereof to
Purchaser's representative at the same time and in the same
manner as notice is given to the directors of the Company.
Purchaser shall provide to the Borrower the identity and
address of, or any change with respect to the identity or
address of, its representative. The Borrower shall reimburse
Purchaser's representative for the reasonable out-of-pocket
expenses of such representative incurred in connection with
the attendance at such meetings.
15
(h) TAXES. Each of the Note Parties will promptly pay and
discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property
or business of the Company and its Subsidiaries; provided,
however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the
Company and/or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto, and provided,
further, that the Company and its Subsidiaries will pay all
such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may
have attached as security therefor.
(i) INSURANCE. Each of the Note Parties will keep its assets which
are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion
and other risks customarily insured against by companies in
similar business similarly situated as the Company and its
Subsidiaries; and the Note Parties will maintain, with
financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property
to the extent and in the manner which the Company reasonably
believes is customary for companies in similar business
similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The
Company, and each of its Subsidiaries will jointly and
severally bear the full risk of loss from any loss of any
nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under
the Related Agreements. At the Company's and each of its
Subsidiaries' joint and several cost and expense in amounts
and with carriers reasonably acceptable to Purchaser, the
Company and each of its Subsidiaries shall (i) keep all its
insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance
and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the
Company's or the respective Subsidiary's including business
interruption insurance; (ii) maintain a bond in such amounts
as is customary in the case of companies engaged in businesses
similar to the Company's or the respective Subsidiary's
insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access
to the assets or funds of the Company or any of its
Subsidiaries either directly or through governmental authority
to draw upon such funds or to direct generally the disposition
of such assets; (iii) maintain public and product liability
insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such
worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which the
Company or the respective Subsidiary is engaged in business;
and (v) furnish Purchaser with (x) copies of all policies and
evidence of the maintenance of such policies at least thirty
(30) days before any expiration date, (y) policy endorsements
to its Liability Insurance issued by Chubb (policy #
3578-26-61 NBO), which covers General Liability and Employee
Benefits Errors or Omissions and its Commercial Excess and
Umbrella Insurance issued by Chubb (policy #7979-84-13) naming
Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance
satisfactory to Purchaser, naming Purchaser as loss payee, and
(z) evidence that as to Purchaser the insurance coverage shall
not be impaired or invalidated by any act or neglect of any
Note Party and the insurer will provide Purchaser with at
least thirty (30) days notice prior to cancellation. The Note
Parties shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment
for such loss to the Note Parties and Purchaser jointly. In
the event that as of the date of receipt of each loss recovery
upon any such insurance, the Purchaser has not declared an
Event of Default (as such term is defined in the Note) with
respect to this Agreement, the Note or any of the Related
Agreements, then the Company and/or such Subsidiary shall be
permitted to direct the application of such loss recovery
16
proceeds toward investment in property, plant and equipment
that would comprise Collateral (as such term is defined in the
Master Security Agreement) with any surplus funds, upon an
Event of Default which has occurred and is continuing beyond
any applicable grace period, to be applied toward payment of
the obligations of the Company to Purchaser. In the event that
Purchaser has properly declared an Event of Default with
respect to this Agreement or any of the Related Agreements,
then all loss recoveries received by Purchaser upon any such
insurance thereafter may be applied to the obligations of the
Company hereunder and under the Related Agreements, in such
order as the Purchaser may determine. Any surplus (following
satisfaction of all Company obligations to Purchaser) shall be
paid by Purchaser to the Company or applied as may be
otherwise required by law. Any deficiency thereon shall be
paid by the Company or the Subsidiary, as applicable, to
Purchaser, on demand.
(j) INTELLECTUAL PROPERTY. Each of the Note Parties shall maintain
in full force and effect its existence, rights and franchises
and all licenses and other rights to use Intellectual Property
owned or possessed by it and reasonably deemed to be necessary
to the conduct of its business.
(k) PROPERTIES. Each of the Note Parties will keep its properties
in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and
proper repairs, renewals, replacements, additions and
improvements thereto; and each of the Company and each of its
Subsidiaries will at all times comply with each provision of
all leases to which it is a party or under which it occupies
property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
17
(l) CONFIDENTIALITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of
the Purchaser, unless expressly agreed to by the Purchaser or
unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may
disclose Purchaser's identity and the terms of this Agreement
in a Form 8-K filed with the SEC disclosing this transaction
within four (4) days after the Closing Date and the Company
may disclose to its current and prospective debt and equity
financing sources, subject to the exclusivity restrictions in
Section 9 herein.
(m) REQUIRED APPROVALS. For so long as any obligations under the
Note are outstanding, the Company, without the prior written
consent of the Purchaser, shall not, and shall not permit any
of its Subsidiaries to:
(i) directly or indirectly declare or pay any dividends,
other than dividends paid to the Company or any of
its wholly-owned Subsidiaries;
(ii) liquidate, dissolve or effect a material
reorganization (it being understood that in no event
shall the Company dissolve, liquidate or merge with
any other person or entity (unless the Company is the
surviving entity);
(iii) become subject to (including, without limitation, by
way of amendment to or modification of) any agreement
or instrument which by its terms would (under any
circumstances) restrict the Company's or any of its
Subsidiaries right to perform the provisions of this
Agreement, any Related Agreement or any of the
agreements contemplated hereby or thereby;
(iv) materially alter or change the scope of the business
of the Company and its Subsidiaries taken as a whole;
(v) (i) create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt and debt
incurred to finance the purchase of equipment (not in
excess of ten percent (10%) per annum of the fair
market value of the Company's assets) whether secured
or unsecured other than (A) the Company's
indebtedness to the Purchaser, (B) the obligations
owing to Laurus under the Laurus Agreement and the
Laurus Related Agreements (such obligations, the
"Laurus Indebtedness"), (C) indebtedness set forth on
Schedule 6(m)(v) attached hereto and made a part
hereof and any refinancings or replacements thereof
on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, (D) any
debt incurred in connection with the purchase of
assets in the ordinary course of business, or any
refinancings or replacements thereof on terms no less
favorable to the Purchaser than the indebtedness
18
being refinanced or replaced; (E) cancel any debt
owing to it in excess of $50,000 in the aggregate
during any 12 month period; and (F) assume,
guarantee, endorse or otherwise become directly or
contingently liable in connection with any
obligations of any other Person, except the
endorsement of negotiable instruments by the Company
for deposit or collection or similar transactions in
the ordinary course of business or guarantees of
indebtedness otherwise permitted to be outstanding
pursuant to this clause (v);
(vi) create or allow to exist any Liens other than Liens
directly related to indebtedness allowed under
Section 6(m)(v) above, existing Liens disclosed on
the Disclosure Schedule or statutory liens arising as
a matter of law.
(vii) sell, transfer, lease or otherwise dispose of all or
any part of its property, other than the sale or
lease of inventory or the non-exclusive licensing of
Intellectual Property in the ordinary course or any
transactions disclosed on the Disclosure Schedule.
(viii) create or acquire any Subsidiary after the date
hereof unless (A) such Subsidiary is controlled by
the Company, (B) the capital stock of such Subsidiary
is pledged pursuant to the terms of the Stock Pledge
Agreement (either by an amendment or joinder in
respect thereof) and (C) such Subsidiary becomes
party to the Master Security Agreement and the
Subsidiary Guaranty (either by executing a
counterpart thereof or an assumption or joinder
agreement in respect thereof) and, to the extent
reasonably required by the Purchaser, satisfies each
condition of this Agreement and the Related
Agreements as if such Subsidiary were a Note Party on
the Closing Date.
(ix) move any assets (other than inventory sold or leased
in the ordinary course of business and Intellectual
Property licensed non-exclusively to third parties in
the ordinary course of business) to locations other
than those listed on Schedule 6(m)(ix).
(x) open any other depositary accounts other than those
currently existing and listed on Schedule 6(m)(ix).
(n) OPINION. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the
Company's external legal counsel.
(o) MARGIN STOCK. The Company will not permit any of the proceeds
of the Note to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.
19
(p) LOCK-BOX ACCOUNTS. Immediately upon repayment of the Laurus
Indebtedness, the Company will 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
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 an Event of
Default.
(q) NOTICES. Promptly upon receipt or delivery thereof, the
Company will deliver to the Purchaser copies of any notices of
default or any other notices given or received by any holder
of any indebtedness of the Company, including, without
limitation, the Laurus Indebtedness, the RTI Notes, the
Xxxxxxx Note and the Xxxxx Note.
(r) MODIFICATION OF INDEBTEDNESS. The Company will not amend,
modify or otherwise change (or permit the amendment,
modification or other change in any manner of) any of the
provisions of any indebtedness of the Company other than the
Laurus Indebtedness (including, without limitation, the
Midsummer Debenture, the RTI Notes, the Xxxxxxx Note and the
Xxxxx Note) without the Purchaser's prior written consent,
which consent shall not be unreasonably withheld.
(s) PAYMENTS ON OTHER INDEBTEDNESS. Until the Note has been
indefeasibly paid in full, the Company shall not make (i) any
prepayment on the principal of the Laurus Indebtedness in
violation of the terms of the Subordination Agreement dated as
of the date hereof between Laurus and the Purchaser (the
"Subordination Agreement"), the Midsummer Debenture, the RTI
Notes, the Xxxxxxx Note or the Xxxxx Note and (ii) any
interest payments on the Xxxxxxx Note or the Xxxxx Note.
(t) ANTI-LAYERING. Notwithstanding anything to the contrary
contained in this Agreement, and other than the indebtedness
arising under the Midsummer Debenture (the "Midsummer
Indebtedness"), no Note Party shall incur any indebtedness
that is subordinated to the Laurus Indebtedness structurally
or in right of payment, unless (a) such indebtedness is
subordinated to the Laurus Indebtedness structurally and in
right of payment at least to the same extent and on the same
terms as are the Obligations and (b) such indebtedness is
subordinated to the Obligations structurally and in right of
payment. No Note Party shall incur any indebtedness that is
senior in right of payment to the Obligations. For purposes of
this Section 6(t), unsecured indebtedness is not deemed to be
subordinate or junior to secured indebtedness merely because
it is unsecured, and indebtedness that is not guaranteed by a
particular Person is not deemed to be subordinated or junior
to indebtedness that is so guaranteed merely because it is not
so guaranteed.
20
(u) FURTHER ASSURANCES. The Company shall take such action and
execute, acknowledge and deliver, and cause each of its
Subsidiaries to take such action and execute, acknowledge and
deliver, at its sole cost and expense, such agreements,
instruments or other documents (including a post-closing
agreement detailing those actions required to be taken and
those documents and instruments required to be delivered after
the Closing Date) as Purchaser may reasonably require from
time to time to establish and maintain the validity and
effectiveness of any of this Agreement, the Note or any of the
Related Agreements or otherwise carry out the purposes of this
Agreement, the Note or any of the Related Agreements and the
transactions contemplated hereunder and thereunder.
7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
Company as follows:
(a) CONFIDENTIALITY. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the
name of the Company, unless expressly agreed to by the Company
or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such
requirement. The Purchaser acknowledges that all information
learned by the Purchaser or any of its affiliates, officers,
directors, employees, representatives or agents ("Agents")
through attendance of the Company's board meetings constitutes
confidential information of the Company and such confidential
will be kept confidential and will not be disclosed by
Purchase or its Agents without the prior written consent of
the Company or until such time as the Company publicly
discloses such information; provided, however, that such
obligations shall not apply to the extent disclosure is
required in response to an order by a court or governmental
authority or pursuant to any law or government regulation.
(b) NON-PUBLIC INFORMATION. The Purchaser agrees not to effect any
sales in the shares of the Company's Common Stock while in
possession of material, non-public information regarding the
Company if such sales would violate applicable securities law.
(c) POSITION OF MIDSUMMER INDEBTEDNESS. The Purchaser agrees that
the Obligations are subordinate in right of payment to the
Midsummer Indebtedness and that Midsummer will have a prior
right of payment in the event of bankruptcy filing,
liquidation or foreclosure.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees)
of any nature (each, an "Indemnified Liability" and
collectively, the "Indemnified Liabilities"), incurred by or
imposed upon the Purchaser which results, arises out of or is
based upon: (i) any misrepresentation by the Company or any of
its Subsidiaries or breach of any warranty by the Company or
any of its Subsidiaries in this Agreement, any other Related
Agreement or in any exhibits or schedules attached hereto or
thereto; or (ii) any breach or default in performance by
Company or any of its Subsidiaries of any covenant or
undertaking to be performed by Company or any of its
Subsidiaries hereunder, under any other Related Agreement or
any other agreement entered into by the Company and/or any of
its Subsidiaries and Purchaser relating hereto or thereto.
21
(b) Purchaser agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers,
directors, agents, affiliate, control persons and principal
shareholders against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees)
of any nature incurred or imposed upon the Company which
results, arises out of or is based upon the Purchaser or its
Agent's breach of the Confidentiality and Non-Public
Information Covenants set forth in Section 7 above.
9. EXCLUSIVITY PERIOD. For a period of 30 days after the date hereof (the
"Exclusivity Termination Date"), the Company and the other Note Parties
hereby agree that they will not, and will cause their respective
affiliates, directors, officers, employees, representatives and agents
not to, directly or indirectly, solicit or initiate or enter into
discussions or transactions with, or announce or enter into
documentation relating to, or encourage, or provide any information to,
any Person (other than the Purchaser or its designated affiliates)
concerning any sale of ownership interests or assets, or any
recapitalization, reorganization or similar transaction involving the
Company and/or its assets (each, a "Transaction"). The Company and the
other Note Parties represent that neither they nor any other affiliated
entities are bound by any other agreement with respect to any such
Transaction. The Company shall notify the Purchaser immediately upon
receipt of any inquiries from any Person with respect to a potential
Transaction. The Exclusivity Termination Date shall automatically
extend for a period of 10 business days if the Purchaser informs the
Company in writing that the Purchaser is prepared to execute a
definitive agreement without a due diligence condition.
10. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS, WITH THE EXCEPTION OF THE EXCLUSIVITY
PROVISION SET FORTH IN SECTION 9 WHICH SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND
EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF CALIFORNIA OR IN THE FEDERAL COURTS LOCATED IN THE
STATE OF CALIFORNIA. BOTH PARTIES AND THE INDIVIDUALS
22
EXECUTING THIS AGREEMENT AND THE RELATED AGREEMENTS ON BEHALF
OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH
COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY RELATED AGREEMENT DELIVERED
IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY
APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL
BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH
STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE
INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
AGREEMENT OR ANY RELATED AGREEMENT.
(b) DEFINED TERMS. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Note, the
Master Security Agreement or the Subsidiary Guaranty, as the
case may be.
(c) KNOWLEDGE OF THE COMPANY. For the purposes of this Agreement,
the Company shall only be deemed to have "knowledge" of a
particular fact or other matter, if an executive officer of
the Company is actually aware of such fact or matter, or a
reasonably prudent individual operating in the capacity of an
executive officer of the Company could be expected to discover
or otherwise become aware of such fact or matter in the
ordinary course of fulfilling the responsibilities of an
executive officer.
(d) SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by
the Purchaser and the closing of the transactions contemplated
hereby to the extent provided therein. All statements as to
factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant
hereto in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or
instrument.
(e) SUCCESSORS. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be
binding upon, the successors, heirs, executors and
administrators of the parties hereto and shall inure to the
benefit of and be enforceable by each person who shall be a
holder of this Note from time to time. Purchaser may not
assign its rights hereunder to a competitor of the Company.
(f) ENTIRE AGREEMENT. This Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with
regard to the subjects hereof and no party shall be liable or
bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically
set forth herein and therein.
23
(g) SEVERABILITY. In case any provision of the 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.
(h) AMENDMENT AND WAIVER.
(i) This Agreement may be amended or modified only upon
the written consent of the Company and the Purchaser.
(ii) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only
with the written consent of the Purchaser.
(iii) The obligations of the Purchaser and the rights of
the Company under this Agreement may be waived only
with the written consent of the Company.
(i) DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party,
upon any breach, default or noncompliance by another party
under this Agreement or the Related Agreements, shall impair
any such right, power or remedy, nor shall it be construed to
be a waiver of any such breach, default or noncompliance, or
any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies,
either under this Agreement or the Related Agreements, by law
or otherwise afforded to any party, shall be cumulative and
not alternative.
(j) NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified;
(ii) when sent by confirmed facsimile if sent during
normal business hours of the recipient, if not, then
on the next business day;
(iii) three (3) business days after having been sent by
registered or certified mail, return receipt
requested, postage prepaid; or
(iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day
delivery, with written verification of receipt.
All communications shall be sent as follows:
IF TO THE COMPANY, TO: Island Pacific, Inc.
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
24
WITH A COPY NOT CONSTITUTING NOTICE TO:
Xxxxxxx Xxxx Seidenwurm & Xxxxx, LLP
000 "X" Xxxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
IF TO THE PURCHASER, TO: Multi-Channel Holdings, Inc.
c/o Golden Gate Private Equity, Inc.
Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxx and Xxxxxx
Xxxxx
Facsimile: (000) 000-0000
WITH A COPY NOT CONSTITUTING NOTICE TO:
Xxxxxxx Xxxxxx, Esq.
c/o Kirkland & Xxxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
(k) ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and
expenses of appeals.
(l) TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this
Agreement.
(m) FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be
executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
25
(n) BROKER'S FEES. Except as set forth on Schedule 11(n) hereof,
each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of
or under the authority of such party hereto is or will be
entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the
transactions contemplated herein. Each party hereto further
agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the
representation in this Section 11(n) being untrue.
(o) CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the
Related Agreements and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of
this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the parties hereto have executed this NOTE PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
ISLAND PACIFIC, INC. MULTI-CHANNEL HOLDINGS, INC.
By: /s/ X. Xxxxxxx By: /s/ Xxxxxxxx Xxxx
------------------------------- -----------------------------------
Name: Xxxx Xxxxxxx Name: Xxxxxxxx Xxxx
Title: President Title: Managing Director
ADDITIONAL NOTE PARTIES:
PAGE DIGITAL INCORPORATED IP RETAIL TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ X. Xxxxxxx By: /s/ X. Xxxxxxx
------------------------------- -----------------------------------
Name: Xxxx Xxxxxxx Name: Xxxx Xxxxxxx
Title: President Title: President
SABICA VENTURES, INC.
By: /s/ X. Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
Title: President
27
EXHIBIT A
FORM OF SECURED TERM NOTE
-------------------------
