EXHIBIT 4.2
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
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 ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISLAND PACIFIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, ISLAND PACIFIC, INC., a Delaware corporation (the
"BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore
Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church
Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or its
registered assigns or successors in interest, on order, the sum of Three Million
Two Hundred Thousand Dollars ($3,200,000), together with any accrued and unpaid
interest hereon, on to June 15, 2008 (the "MATURITY DATE");
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "PURCHASE AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1. Interest Rate. Subject to Sections 4.11 and 5.6 hereof, interest
payable on the principal amount outstanding under this Note shall accrue at a
rate per annum (the "Interest Rate") equal to the "prime rate" published in The
Wall Street Journal from time to time, plus one percent (1.0%). The Interest
Rate shall be increased or decreased as the case may be for each increase or
decrease in the prime rate in an amount equal to such increase or decrease in
the prime rate; each change to be effective as of the day of the change in such
rate. Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on July 1, 2005 and on the first
business day of each consecutive calendar month thereafter until the Maturity
Date (and on the Maturity Date), whether by acceleration or otherwise (each, a
"REPAYMENT DATE").
1.2. Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on October 3, 2005 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "AMORTIZATION DATE"). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $106,667, together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other amounts which are then owing under this Note, the Purchase Agreement
or any other Related Agreement but have not been paid (collectively, the
"MONTHLY Amount"). Any Principal Amount that remains outstanding on the Maturity
Date shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1. (a) Payment of Monthly Amount in Cash or Common Stock. Subject to
Sections 2.1, 2.2 and 3.2 hereof, the Borrower shall have the sole option to
determine whether to satisfy payment of the Monthly Amount on each Repayment
Date either in cash or in shares of Common Stock (as defined in the Purchase
Agreement), or a combination of both. Each month by the twentieth (20th) day
prior to a Repayment Date, the Borrower shall deliver to the Holder a written
irrevocable notice in the form of Exhibit B attached hereto electing to pay the
Monthly Amount payable on the next Repayment Date in either cash or Common
Stock, or a combination of both (each, a "REPAYMENT NOTICE") (the date by which
such notice is required to be given being hereinafter referred to as the "NOTICE
DATE"); provided, however, a Repayment Notice may provide that the Borrower's
election as set forth in such Repayment Notice will remain in effect in respect
of each Repayment Date occurring after the Repayment Date first subject of such
Repayment Notice unless otherwise revoked by the Borrower in writing in which
case the Borrower will not be required to deliver an additional Repayment Notice
during the period such election remains applicable; provided, further, however,
that the Borrower shall not be permitted to revoke a Repayment Notice in respect
of a Repayment Date after the applicable Notice Date for such Repayment Date has
occurred. If a Repayment Notice is not delivered to the Holder by the applicable
Notice Date for such Repayment Date, then the Monthly Amount due on such
Repayment Date shall be paid in cash. Any portion of the Monthly Amount paid in
cash on a Repayment Date, shall be paid to the Holder an amount equal to one
hundred two percent (102%) of the cash portion of the Monthly Amount then
payable in satisfaction of such obligation. If the Borrower repays all or a
portion of the Monthly Amount in shares of Common Stock, the number of such
shares to be issued for such Repayment Date shall be the number determined by
dividing (x) the portion of the Monthly Amount to be paid in shares of Common
Stock, by (y) the Fixed Conversion Price. For purposes hereof, the initial
"FIXED CONVERSION PRICE" means $0.20.
(b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1, 2.2
and 3.2 hereof, the Holder shall convert into shares of Common Stock all or a
portion of the Monthly Amount (together with accrued and unpaid interest and
applicable fees) due on each Repayment Date according to the following
guidelines (collectively, the "Conversion Criteria"): (i) the average closing
price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market
for the five (5) consecutive trading days immediately preceding such Notice Date
shall be greater than or equal to 110% of the Fixed Conversion Price and (ii)
the sum of the amount of such conversion plus the amount of the conversion into
shares of Common Stock of all or a portion of the applicable "Monthly Amount"
(if any) as defined in the July 2004 Agreement (the "2004 Monthly Amount"), does
not in the aggregate exceed twenty percent (20%) of the aggregate dollar trading
volume of the Common Stock for the twenty two (22) trading days immediately
preceding the applicable Repayment Date. If the Conversion Criteria are not met,
the Holder shall convert only such part of the Monthly Amount (if any) which,
when added to amount of the 2004 Monthly Amount to be converted into shares of
Common Stock, meets the Conversion Criteria. Any part of the Monthly Amount due
on a Repayment Date that the Holder has not been able to convert into shares of
Common Stock due to failure to meet the Conversion Criteria, shall be paid by
the Borrower in cash at the rate of 102% of the Monthly Amount otherwise due on
such Repayment Date, within three (3) business days of the applicable Repayment
Date.
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(c) Subject to Sections 2.1, 2.2 and 3.2 hereof, if the average
closing price of the Common Stock on the Principal Market is less than one
hundred ten percent (110%) of the Fixed Conversion Price for the five (5)
trading days immediately preceding a Repayment Date, then the Holder shall
convert into shares of Common Stock all or a portion of the Monthly Amount
(together with accrued and unpaid interest and applicable fees) at a conversion
price equal to ninety percent (90%) of the volume weighted average price of the
Common Stock during the twenty (20) trading days immediately prior to the
respective Repayment Date, provided, however, that such conversion of the
Monthly Amount due on each Repayment Date does not exceed twenty percent (20%)
of the aggregate dollar trading volume of the Common Stock for the twenty (20)
trading days immediately preceding the Repayment Date. Any part of the Monthly
Amount due on such Repayment Date that the Holder has not been able to convert
into shares of Common Stock as set forth in this Section 2.1(c) shall be paid in
cash at the rate of 102% of the Monthly Amount otherwise due on such Repayment
Date, within three (3) business days of the applicable Repayment Date. In no
event shall the conversion price for the purposes of this Section 2.1(c) be less
than $0.10.
(d) Any amounts converted by the Holder pursuant to this Section 2.1
shall be deemed to constitute payments of outstanding fees, interest and
principal arising in connection with Monthly Amounts for the remaining Repayment
Dates, in chronological order.
2.2. Other Monthly Conversion Guidelines. Notwithstanding anything to the
contrary herein, none of the Borrower's obligations to the Holder shall be
converted into Common Stock unless (i) either (x) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists or (y) an exemption from registration of the Common
Stock is available to pursuant to Rule 144 of the Securities Act, (ii) no Event
of Default hereunder exists and is continuing, unless such Event of Default is
cured within any applicable cure period or is otherwise waived in writing by the
Holder in whole or in part at the Holder's option, (iii) the Common Stock is
listed for trading on the Principal market and no suspension of trading of
Common Stock on the Principal Market is pending or threatened and (iv) at each
such time a sufficient number of (A) Note Shares, Warrant Shares and Option
Shares, (B) "Note Shares" and "Warrant Shares", each as defined in the
Securities Purchase Agreement, dated as of July 12, 2004 between the Company and
the Holder, (C) "Note Shares", "Warrant Shares" and "Option Shares", each as
defined in the Securities Purchase Agreement to be dated on or about June 10,
2005 between the Company and Midsummer Investments, Ltd. ("Midsummer")
(including any shares underlying previously issued securities of Midsummer),
have been duly and validly reserved for issuance to the Holder and Midsummer, as
applicable.
2.3. Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to one hundred twenty five percent (125%) of the principal amount of
this Note together with accrued but unpaid interest thereon and any and all
other sums due, accrued or payable to the Holder arising under this Note, the
Purchase Agreement, or any Related Agreement (the "REDEMPTION AMOUNT")
outstanding on the day written notice of redemption (the "NOTICE OF REDEMPTION")
is given to the Holder; provided that, at the time of delivery of such Notice of
Redemption and during such Redemption Period the Borrower's obligations to the
Holder shall be convertible into Common Stock and such conversion shall not
otherwise be prohibited by the terms of this Note. The Notice of Redemption
shall specify the date for such Optional Redemption (the "REDEMPTION PAYMENT
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DATE") which date shall be ten (10) business days after the date of the Notice
of Redemption (the "REDEMPTION PERIOD"). A Notice of Redemption shall not be
effective with respect to any portion of this Note for which the Holder has a
pending election to convert pursuant to Section 3.1, or for conversions
initiated or made by the Holder pursuant to Section 3.1 during the Redemption
Period. The Redemption Amount shall be determined as if such Xxxxxx's conversion
elections had been completed immediately prior to the date of the Notice of
Redemption. On the Redemption Payment Date, the Redemption Amount must be paid
in good funds to the Holder. In the event the Borrower fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then such
Redemption Notice will be null and void. Notwithstanding anything to the
contrary herein, an Optional Redemption shall not be permitted unless from the
date of the Notice of Redemption to the date the Optional Redemption is paid in
full (i) either (x) an effective current Registration Statement (as defined in
the Registration Rights Agreement) covering the shares of Common Stock to be
issued in connection with satisfaction of such obligations exists or (y) an
exemption from registration of the Common Stock is available to pursuant to Rule
144 of the Securities Act, (ii) no Event of Default hereunder exists and is
continuing, unless such Event of Default is cured within any applicable cure
period or is otherwise waived in writing by the Holder in whole or in part at
the Holder's option, (iii) the Common Stock is listed for trading on the
Principal Market and no suspension of trading of Common Stock on the Principal
Market is pending or threatened and (iv) at each such time a sufficient number
of (A) Note Shares, Warrant Shares and Option Shares, (B) "Note Shares" and
"Warrant Shares", each as defined in the Securities Purchase Agreement, dated as
of July 12, 2004 between the Borrower and the Holder and (C) "Note Shares",
"Warrant Shares" and "Option Shares", each as defined in the Securities Purchase
Agreement to be dated on or about June 10, 2005 between the Borrower and
Midsummer Investments, Ltd. ("Midsummer") (including any shares underlying
previously issued securities of Midsummer), have been duly and validly reserved
for issuance to the Holder and Midsummer, as applicable.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. The Holder shall have the right, but not
the obligation, to convert all or any portion of the then aggregate outstanding
principal amount of this Note, together with interest and fees due hereon, into
shares of Common Stock subject to the terms and conditions set forth in this
Article III. The Holder may exercise such right by delivery to the Borrower of a
written notice of conversion not less than one (1) business day prior to the
date upon which such conversion shall occur.
3.2. Conversion Limitation.
Notwithstanding anything contained herein to the contrary, the Holder shall
not be entitled to convert pursuant to the terms of the Note an amount that
would (a) be convertible into that number of shares of Common Stock which, when
added to the number of shares of Common Stock otherwise beneficially owned by
such Holder including those issuable upon exercise of warrants held by such
Holder would exceed 4.99% of the outstanding shares of Common Stock of the
Borrower at the time of conversion or (b) exceed twenty five percent (25%) of
the aggregate dollar trading volume of the Common Stock for the five (5) day
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trading period immediately preceding delivery of a Notice of Conversion to the
Borrower. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The conversion limitation described in this
Section 3.2 shall automatically become null and void without any notice to
Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 61 days prior notice to the
Borrower.
3.3. Mechanics of Xxxxxx's Conversion.
(a) In the event that the Holder elects to convert this Note into
Common Stock, the Holder shall give notice of such election by delivering an
executed and completed notice of conversion ("NOTICE OF CONVERSION") to the
Borrower and such Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Borrower within two (2) business days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Borrower in accordance with the provisions hereof shall be
deemed a Conversion Date (the "CONVERSION DATE"). A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion, the Borrower
will issue instructions to the transfer agent accompanied by an opinion of
counsel within one (1) business day of the date of the delivery to Borrower of
the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "DELIVERY DATE"). The Borrower agrees that it will become
eligible to use the DWAC system by the Effectiveness Date (as defined in the
Registration Rights Agreement). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such Common Stock, unless the Holder provides the Borrower written
instructions to the contrary. Conversions will have the effect of lowering the
outstanding principal balance of the Note plus all accrued but unpaid interest
thereon. The Holder and any assignee, by acceptance of this Note, hereby
acknowledge and agree that due to the provisions of this paragraph, following
any conversion of the Note the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face of the Note.
3.4. Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing that portion of the
principal and interest and fees to be converted, if any, by the then applicable
Fixed Conversion Price. Conversions of amounts outstanding under this Note shall
be applied as follows: first to (i) accrued and unpaid fees arising under this
Note or the Related Agreements, as applicable; (ii) then, to accrued and unpaid
interest on this Note and (iii) then to outstanding principal amount applying to
Monthly Amounts for the remaining Repayment Dates in chronological order.
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(b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(i) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Fixed Conversion Price or the Conversion Price, as the case
may be, shall be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
(ii) At all times while conversion rights exist, the Borrower
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full conversion
of this Note. The Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. The Borrower agrees that
its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the conversion of this Note.
(iii) Share Issuances. 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 (A)
pursuant to Subsections i or ii above; (B) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; or (C) 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 to 102% of such lower Offer Price at
the time of issuance of such securities. For purposes hereof, the issuance of
any security of the Borrower convertible into or exercisable or exchangeable for
Common Stock shall result in an adjustment to the Fixed Conversion Price at the
time of issuance of such securities.
(iv) Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.
3.5. Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. The
Borrower will pay no costs, fees or any other consideration to the Holder for
the production and issuance of a new Note.
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ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, within five
(5) days after written notice from Holder to Borrower (each occurrence being a
"Default Notice Period") the amount due and owing to the Holder shall be equal
to the the sum of (i) the greater of: (A) 125% of the outstanding principal
amount of the Note (plus accrued and unpaid interest and fees, if any), and (B)
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any, divided by the applicable Fixed Conversion Price on (x) the
date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is
demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is
paid in full, whichever is greater, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of this Note (the "Default Payment"). For
purposes hereof, "VWAP" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Principal Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Principal
Market (or OTC Bulletin Board) on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30
a.m. ET to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Common
Stock is not then listed or quoted on a Principal Market and if prices for the
Common Stock are then reported in the "pink sheets" published by the National
Quotation Bureau Incorporated (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) in all other cases, the fair market value of a
share of Common Stock as determined by a nationally recognized independent
appraiser selected in good faith by Purchasers holding a majority of the
outstanding principal amount of Notes. If, with respect to any Event of Default,
the Borrower cures the Event of Default, the Event of Default will be deemed to
no longer exist and any rights and remedies of Holder pertaining to such Event
of Default will be of no further force or effect. The Default Payment shall be
applied first to any fees due and payable to Holder pursuant to the Note or the
Related Agreements, then to accrued and unpaid interest due on the Note and then
to outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "EVENT OF DEFAULT:"
4.1. Failure to Pay Principal, Interest or other Fees. The Borrower fails
to pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower, and in any such case, such failure
shall continue for a period of three (3) days following the date upon which any
such payment was due.
4.2. Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and,
any such case, such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof; provided that, if such breach is
of a nature that it can not be cured within fifteen (15) days and Borrower has
taken reasonable steps to cure such default within fifteen (15) days, upon
written notice to and the consent of the Holder, the Borrower will have a
commercially reasonable amount of time to cure such breach before such breach
shall be deemed an Event of Default.
4.3. Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the Closing Date or the
date that such representation or warranty is deemed made, if such representation
or warranty expressly states that it is made as of a specific date.
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4.4. Receiver or Trustee. The Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
4.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its property or other assets for
more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of thirty (30) days.
4.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries.
4.7. Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded.
4.8. Failure to Deliver Common Stock or Replacement Note. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
4.9. Default Under Related Agreements or Other Agreements. The occurrence
and continuance of any Event of Default (as defined in the Purchase Agreement or
any Related Agreement) or any event of default (or similar term) under any other
indebtedness (including, without limitation, the Amended and Restated Secured
Convertible Term Note, dated as of July 12, 2004 and issued by the Borrower to
the Holder).
4.10. Change in Control. The occurrence of a change in the controlling
ownership of the Borrower that has, or could reasonably be expected to have a
Material Adverse effect on the practical realization of the security interests
granted to Holder under the applicable Related Agreements.
DEFAULT RELATED PROVISIONS
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4.11. Payment Grace Period. Following the occurrence and continuance of an
Event of Default beyond any applicable cure period hereunder, the Borrower shall
pay the Holder a default interest rate of two percent (2%) per month on all
amounts due and owing under the Note,, which default interest shall be payable
upon demand.
4.12. Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
4.13. Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1. Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2. Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.
5.3. Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
5.4. Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.
5.5. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
9
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note 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 unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
5.6. Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
5.7. Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated
as of the date hereof.
5.8. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note 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 Note to favor any party
against the other.
5.9. Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note to
be signed in its name effective as of this 15th day of June 2005.
ISLAND PACIFIC, INC.
By:________________________________
Name:______________________________
Title:_____________________________
WITNESS:
_____________________________
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ISLAND
PACIFIC, INC. dated [Month] __, 2005 by delivery of Shares of Common Stock of
ISLAND PACIFIC, INC. on and subject to the conditions set forth in Article III
of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT B
CONVERSION NOTICE
(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)
[Name and Address of Holder]
Holder hereby converts $_________ of the Monthly Amount due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ISLAND
PACIFIC, INC. dated _______, 200__ by delivery of Shares of Common Stock of
ISLAND PACIFIC, INC. on and subject to the conditions set forth in Article III
of such Note.
1. Fixed Conversion Price: $_______________________
2. Amount to be paid: $_______________________
3. Shares To Be Delivered (2 divided by 1): ______________________
4. Cash payment to be made by Borrower: $_____________________
Date: ____________ LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
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