EXHIBIT 4.1
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 ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ISLAND PACIFIC, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECURED TERM NOTE
FOR VALUE RECEIVED, ISLAND PACIFIC, INC., a Delaware corporation (the
"BORROWER"), hereby promises to pay to Multi-Channel Holdings, Inc., c/o Golden
Gate Private Equity, Inc., Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, XX
00000, Facsimile: (000) 000-0000 (the "HOLDER") or its registered assigns or
successors in interest, on order, the sum of Two Million Dollars ($2,000,000),
together with any accrued and unpaid interest hereon, on October 18, 2005 (the
"Maturity Date");
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Note 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:
1.
INTEREST & AMORTIZATION
(a) INTEREST RATE. Subject to Sections 3(k) and 4(f) 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 three percent
(3.0%). 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.
(b) AMORTIZATION. Principal and interest shall be due and payable
on demand on the earlier of (i) the Maturity Date or (ii) any
acceleration of this Note.
2.
OPTIONAL PREPAYMENT; PREPAYMENT FEE
(a) The Borrower will have the option of prepaying this Note (such
prepayment, an "Optional Prepayment") at any time by paying to
the Holder a sum of money equal to one hundred percent (100%)
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 (collectively,
the "Prepayment Amount") outstanding on the day written notice
of prepayment (the "Notice of Prepayment") is given to the
Holder. The Prepayment Amount shall include the Prepayment Fee
(as defined below). The Notice of Prepayment shall specify the
date for such Optional Prepayment (the "Prepayment Date")
which date shall be seven (7) business days after the date of
the Notice of Prepayment. On the Prepayment Date, the
Prepayment Amount must be paid in good funds to the Holder. In
the event the Borrower fails to pay the Prepayment Amount on
the Prepayment Date as set forth herein, then this Note shall
remain in full force and effect.
(b) In the event of any Optional Prepayment made pursuant to
Section 2(a) above, or an acceleration under Section 3 below,
the Borrower shall pay the Prepayment Fee (as defined below).
The Prepayment Fee shall be (a) in the case of an Optional
Prepayment where no Transaction (as such term is defined in
the Purchase Agreement) is consummated, $500,000 and (b) in
the case of an Event of Default or in the case of a prepayment
in conjunction with a Transaction consummated by a person
other than the Holder or an affiliate of the Holder,
$1,000,000. There shall be no Prepayment Fee if, in
conjunction with any prepayment, a Transaction is consummated
with the Holder or one or more affiliates of the Holder.
3.
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 100% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any) plus the Prepayment Fee (collectively, 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, the Purchase Agreement or the Related
Agreements (including, without limitation, the Prepayment Fee), 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 3.1(a)
through (j), inclusive, is an "EVENT OF DEFAULT:"
(a) 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 other Note
Parties fail to pay any amounts due under the Subsidiary
Guaranty upon demand in accordance with the terms thereof, or
the Borrower fails to pay when due any amount due under any
other promissory note issued by Borrower, other than the
interest due on the Xxxxxxx Note and the Xxxxx Note, and in
any such case, such failure shall continue for a period of
three (3) days following written notice thereof.
2
(b) 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, any Subsidiary breaches any covenant
or any other term or condition of the Purchase Agreement 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, in any such case (other than a breach of
Section 9 of the Purchase Agreement, with respect to which no
cure period is available), 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 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. If the breach is
not subject to cure, such Event of Default will be immediate.
(c) 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.
(d) 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.
(e) JUDGMENTS. Any money judgment, writ or similar final process
shall be entered or filed against the Borrower or any of its
Subsidiaries or any of its or their respective property or
other assets for more than $250,000, and shall remain
unvacated, unbonded or unstayed for a period of thirty (30)
days.
(f) 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.
(g) 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 of the Borrower or any of its Subsidiaries.
(h) CHANGE IN CONTROL. The occurrence of a change in the
controlling ownership of the Borrower or any of the
Subsidiaries.
3
(i) FAILURE OF EXCLUSIVITY. Any failure to comply with Section 9
of the Purchase Agreement.
(j) MIDSUMMER NOTICE OF DEFAULT. Midsummer declares a default or
an event of default under Section 3(a)(ii) of the Midsummer
Debenture due to the entering into of the transactions
contemplated hereunder, under the Note Purchase Agreement and
the Related Agreements and such event of default is not cured
within the time periods allocated therein.
DEFAULT RELATED PROVISIONS
(k) 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 eight percent (8%) per annum on all amounts
due and owing under the Note, which default interest shall be
payable upon demand.
(l) CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.
4.
MISCELLANEOUS
(a) 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.
(b) 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 Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx, c/x Xxxxxxxx
& Xxxxx LLP, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx,
XX 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.
(c) 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.
4
(d) 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.
(e) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California, 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 California or in the federal courts located in
the state of California. 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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.]
5
IN WITNESS WHEREOF, the Borrower has caused this Secured Term Note to be signed
in its name effective as of this 18th day of April, 2005.
ISLAND PACIFIC, INC.
By: /s/ X. Xxxxxxx
Name: Xxxx Xxxxxxx
Title: President
WITNESS:
/s/ Xxxxxxx Xxxxxxxx
----------------------------
6