EXHIBIT 4.1
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.
AMENDED AND RESTATED 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: ▇▇▇-▇▇▇-▇▇▇▇ (the "HOLDER") or its
registered assigns or successors in interest, on order, the sum of Seven Million
Dollars ($7,000,000), together with any accrued and unpaid interest hereon, on
to July 12, 2007 (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 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 two percent (2.0%). The prime 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 365 day year, and (ii) payable monthly, in arrears,
commencing on August 1, 2004 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. INTEREST RATE ADJUSTMENT. The Interest Rate shall be calculated on
the last business day of each month hereafter until the Maturity Date (each a
"DETERMINATION DATE") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant issued to
Holder on a registration statement declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii) the market price (the "Market Price")
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2.0%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. If (i) the
Borrower shall not have registered the shares of the Borrower's common stock
underlying the conversion of the Note and that certain warrant issued to Holder
on a registration statement declared effective by the SEC and which remains
effective, and (ii) the Market Price of the Common Stock as reported by
Bloomberg, L.P. on the principal market for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for
the succeeding calendar month shall automatically be decreased by 100 basis
points (100 b.p.) (1.0%) for each incremental twenty five percent (25%) increase
in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the contrary
contained in herein), in no event shall the Interest Rate be less than zero
percent (0%).
1.3. MINIMUM MONTHLY PRINCIPAL PAYMENTS. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on March 1, 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 $212,121.21, 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. PAYMENT OF MONTHLY AMOUNT IN CASH OR COMMON STOCK. Each month by
the fifth (5th) business day prior to each Amortization Date (the "NOTICE
DATE"), the Holder shall deliver to Borrower a written notice in the form of
Exhibit B attached hereto converting the Monthly Amount payable on the next
Repayment Date in either cash or Common Stock, or a combination of both (each, a
"REPAYMENT NOTICE"). If a Repayment Notice is not delivered by the Holder on or
before the applicable Notice Date for such Repayment Date, then the Borrower
shall pay the Monthly Amount due on such Repayment Date in cash. Any portion of
the Monthly Amount paid in cash on a Repayment Date, shall be paid to the Holder
in an amount equal to 102% of the principal portion of the Monthly Amount due
and owing to Holder on the Repayment Date. If the Holder converts all or a
portion of the Monthly Amount in shares of Common Stock as provided herein, the
number of such shares to be issued by the Borrower to the Holder on 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 then applicable
Fixed Conversion Price. For purposes hereof, the initial "FIXED CONVERSION
PRICE" means 0.37 until the first Two Million Dollars ($2,000,000) of Principal
▇▇▇▇▇▇ is converted into Common Stock hereunder, and $0.56 for all remaining
amounts to be converted hereunder.
2.2. MONTHLY AMOUNT CONVERSION GUIDELINES. Subject to Sections 2.1(a),
2.2, and 3.2 hereof, the Holder shall convert all or a portion of the Monthly
Amount due on each Repayment Date in shares of Common Stock if the average
closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Repayment Date was greater than or equal to 110% of the Fixed Conversion Price,
provided, however, that such conversions shall not exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock for the five
(5) day trading period immediately preceding delivery of a Notice of Conversion
to the Borrower. Any part of the Monthly Amount due on a Repayment Date that the
Holder has not converted into shares of Common Stock shall be paid by the
Borrower in cash on such Repayment Date. Any part of the Monthly Amount due on
such Repayment Date which must be paid in cash (as a result of the closing price
of the Common Stock on one or more of the five (5) trading days preceding the
applicable Repayment Date being less than 110% of the Fixed Conversion Price)
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.
2.3. NO EFFECTIVE REGISTRATION. 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 and (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.
Any amounts converted by the Holder pursuant to this Section 2.2 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.
2.4. 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. The Notice of Redemption shall specify the date for such
Optional Redemption (the "REDEMPTION PAYMENT DATE") which date shall be seven
(7) 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 ▇▇▇▇▇▇'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.
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
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 75 days prior notice to the
Borrower, except that at no time shall the beneficial ownership exceed 19.99% of
the Common Stock. Notwithstanding anything contained herein to the contrary, the
number of shares of Common Stock issuable by the Borrower and acquirable by the
Holder at a price below $0.53 per share pursuant to the terms of this Note, the
Purchase Agreement or any Related Agreement, shall not exceed an aggregate of
10,794,906 shares of the Borrower's Common Stock (subject to appropriate
adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Common Stock) (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the
issuance of shares hereunder in excess of the Maximum Common Stock Issuance
shall first be approved by the Borrower's shareholders. If at any point in time
and from time to time the number of shares of Common Stock issued pursuant to
the terms of this Note, the Purchase Agreement or any Related Agreement,
together with the number of shares of Common Stock that would then be issuable
by the Borrower to the Holder in the event of a conversion or exercise pursuant
to the terms of this Note, the Purchase Agreement or any Related Agreement,
would exceed the Maximum Common Stock Issuance but for this Section 3.2, the
Borrower shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance.
3.3. MECHANICS OF HOLDER'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.
(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) As soon as practicable after the Borrower files
an amendment to its Certificate of Incorporation increasing the number of shares
of common stock it is authorized to issue (the "Charter Amendment") but in no
event later than August 23, 2004, and at all times thereafter 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 (i) pursuant to Subsections A or B above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as
disclosed to Holder in writing; or (iii) pursuant to options that may be issued
under any employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower) for a consideration per share (the "Offer Price") less
than the Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be immediately reset 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.
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 125% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any) (the "DEFAULT PAYMENT"). 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 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.
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.
4.10. CHANGE IN CONTROL. The occurrence of a change in the controlling
ownership of the Company 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
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 ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇,
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
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.]
IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note
to be signed in its name effective as of this 29th day of October, 2004.
ISLAND PACIFIC, INC.
By:________________________________
Name:______________________________
Title:_____________________________
WITNESS:
__________________________
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] __, 2004 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:___________________________
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:________________________