EXHIBIT 10.1
ISLAND PACIFIC, INC. AND CERTAIN OF ITS SUBSIDIARIES
MASTER SECURITY AGREEMENT
To: Midsummer Investments, Ltd.
Date: June 15, 2005
To Whom It May Concern:
1. To secure the payment of all Obligations (as hereafter defined), Island
Pacific, Inc., a Delaware corporation (the "Company"), each of the other
undersigned parties (other than Midsummer Investments Ltd., "Midsummer")) and
each other entity that is required to enter into this Master Security Agreement
(each an "Assignor" and, collectively, the "Assignors") hereby assigns and
grants to Midsummer a continuing security interest in all of the following
property now owned or at any time hereafter acquired by any Assignor, or in
which any Assignor now have or at any time in the future may acquire any right,
title or interest (the "Collateral"): all cash, cash equivalents, accounts,
deposit accounts (including, without limitation, the Restricted Accounts (the
"Restricted Accounts") maintained at each of Silicon Valley Bank (Account Name:
Cash Collateral Account, Account Number: 3300397264; Account Name: Payroll
Account, Account Number: 3300397279; Account Name: Operating Accounting, Account
Number: 3300400459) referred to in the Silicon Valley Bank Restricted Account
Agreement) and California Bank and Trust (Account Name: Checking, Account
Number: 00-000000-00; Account Name: Payroll, Account Number: 00-000000-00;
Account Name: Administrative Division, Account Number: 00-000000-00; Account
Name: Money Market, Account Number: 00-000000-00; Account Name: Store Solutions
Division, Account Number: 00-000000-00; Account Name: IPI Acquisition, Inc.
d/b/a Page Digital, Account Number: 21-400231-01) referred to in the California
Bank and Trust Restricted Account Agreement, inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes),
contract rights, general intangibles (including, without limitation, payment
intangibles and an absolute right to license on terms no less favorable than
those current in effect among our affiliates), chattel paper, supporting
obligations, investment property (including, without limitation, all equity
interests owned by any Assignor), letter-of-credit rights, trademarks, trademark
applications, tradestyles, patents, patent applications, copyrights, copyright
applications and other intellectual property in which any Assignor now have or
hereafter may acquire any right, title or interest, all proceeds and products
thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefore. In the event any
Assignor wishes to finance the acquisition in the ordinary course of business of
any hereafter acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Midsummer agrees
to release its security interest on such hereafter acquired equipment so
financed by such third party financing source. Except as otherwise defined
herein, all capitalized terms used herein shall have the meaning provided such
terms in the Securities Purchase Agreement referred to below.
2. The term "Obligations" as used herein shall mean and include all debts,
liabilities and obligations owing by each Assignor to Midsummer arising under,
out of, or in connection with: (i) that certain Securities Purchase Agreement
dated as of the date hereof by and between the Company and Midsummer (the
"Securities Purchase Agreement"), (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each
Related Agreement, as each may be amended, modified, restated or supplemented
from time to time, are collectively referred to herein as the "Documents"), and
in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents or any documents, instruments or
agreements referred to therein or otherwise, and in connection with any other
indebtedness, obligations or liabilities of any Assignor to Midsummer, hereafter
arising, direct or indirect, liquidated or unliquidated, absolute or contingent,
due or not due and whether under, pursuant to or evidenced by a note, agreement,
guaranty, instrument or otherwise, in each case, irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral therefor
or of the existence or extent of such collateral, and irrespective of the
allowability, allowance or disallowance of any or all of the Obligations in any
case commenced by or against any Assignor under Xxxxx 00, Xxxxxx Xxxxxx Code,
including, without limitation, obligations or indebtedness of each Assignor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case. Notwithstanding
anything set forth herein to the contrary, the definition of "Obligations" shall
not include any present and future obligations or liabilities of any and all
kinds of Debtor to Midsummer to the extent arising under, out of, or in
connection with (i) that certain Securities Purchase Agreement dated as of March
15, 2004 by and between the Debtor and Midsummer (the "March 2004 Purchase
Agreement") and (ii) each Related Agreement referred to in the March 2004
Purchase Agreement.
3. Each Assignor hereby jointly and severally represents, warrants and
covenants to Midsummer that:
(a) it is a corporation, partnership or limited liability company, as
the case may be, validly existing, in good standing and organized under the
respective laws of its jurisdiction of organization set forth on Schedule
A, and each Assignor will provide Midsummer thirty (30) days' prior written
notice of any change in any of its respective jurisdiction of organization;
(b) its legal name is as set forth in its respective Certificate of
Incorporation or other organizational document (as applicable) as amended
through the date hereof and as set forth on Schedule A, and it will provide
Midsummer thirty (30) days' prior written notice of any change in its legal
name;
(c) its organizational identification number (if applicable) is as set
forth on Schedule A hereto, and it will provide Midsummer thirty (30) days'
prior written notice of any change in any of its organizational
identification number;
(d) it is the lawful owner of the respective Collateral and it has the
sole right to grant a security interest therein and will defend the
Collateral against all claims and demands of all persons and entities;
(e) it will keep its respective Collateral free and clear of all
attachments, levies, taxes, liens, security interests and encumbrances of
every kind and nature ("Encumbrances"), except (i) Encumbrances securing
the Obligations; (ii) Encumbrances permitted under Section 6.12(e) of the
Securities Purchase Agreement ; and (iii) Encumbrance that do not secure
indebtedness in excess of $50,000 and are removed or otherwise released
within ten (10) days of the creation thereof;
(f) it will, at its and the other Assignors joint and several cost and
expense keep the Collateral in good state of repair (ordinary wear and tear
excepted) and will not waste or destroy the same or any part thereof other
than ordinary course discarding of items no longer used or useful in its or
such other Assignors' business;
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(g) it will not without Midsummer' prior written consent, sell,
exchange, lease or otherwise dispose of the Collateral, whether by sale,
lease or otherwise, except for the sale of inventory in the ordinary course
of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out equipment or
equipment no longer necessary for its ongoing needs, having an aggregate
fair market value of not more than $50,000 and only to the extent that:
(i) the proceeds of any such disposition are used to acquire
replacement Collateral which is subject to Midsummer' perfected
security interest, or are used to repay Obligations or to pay general
corporate expenses; and
(ii) following the occurrence of an Event of Default which
continues to exist the proceeds of which are remitted to Midsummer to
be held as cash collateral for the Obligations;
(h) it will insure or cause the Collateral to be insured in Midsummer'
name against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards as Midsummer shall specify in amounts and
under policies by insurers acceptable to Midsummer and all premiums thereon
shall be paid by such Assignor and the policies delivered to Midsummer. If
any such Assignor fails to do so, Midsummer may procure such insurance and
the cost thereof shall be promptly reimbursed by the Assignors, jointly and
severally, and shall constitute Obligations;
(i) it will at all reasonable times allow Midsummer or Midsummer'
representatives free access to and the right of inspection of the
Collateral;
(j) such Assignor (jointly and severally with each other Assignor)
hereby indemnifies and saves Midsummer harmless from all loss, costs,
damage, liability and/or expense, including reasonable attorneys' fees,
that Midsummer may sustain or incur to enforce payment, performance or
fulfillment of any of the Obligations and/or in the enforcement of this
Master Security Agreement or in the prosecution or defense of any action or
proceeding either against Midsummer or any Assignor concerning any matter
growing out of or in connection with this Master Security Agreement, and/or
any of the Obligations and/or any of the Collateral except to the extent
caused by Midsummer' own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and
nonappealable decision).
4. The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Master Security Agreement:
(a) Breach of any covenant, warranty, representation or statement made
or furnished to Midsummer by any Assignor or on any Assignor's benefit was
false or misleading in any material respect when made or furnished, and if
subject to cure, shall not be cured for a period of fifteen (15) days;
provided that, if such breach is of a nature that it can not be cured
within fifteen (15) days and Assignor has taken reasonable steps to cure
such default within fifteen (15) days, upon written notice to and the
consent of Midsummer, the Assignor will have a commercially reasonable
amount of time to cure such breach before such breach shall be deemed an
Event of Default;
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(b) the loss, theft, substantial damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy,
seizure or attachment thereof or thereon except to the extent:
(i) such loss is covered by insurance proceeds which are used to
replace the item or repay Midsummer; or
(ii) said levy, seizure or attachment does not secure
indebtedness in excess of $100,000 and such levy, seizure or
attachment has not been removed or otherwise released within ten (10)
days of the creation or the assertion thereof;
(c) any Assignor shall become insolvent, cease operations, dissolve,
terminate our business existence, make a general assignment for the benefit
of creditors, suffer the appointment of a receiver, trustee, liquidator or
custodian of all or any part of Assignors' property;
(d) any proceedings under any bankruptcy or insolvency law shall be
commenced by or against any Assignor and if commenced against any Assignor
shall not be dismissed within thirty (30) days;
(e) the Company shall repudiate, purport to revoke or fail to perform
any or all of its obligations under the Note (after passage of applicable
cure period, if any); or
(f) an Event of Default shall have occurred and be continuing beyond
any applicable grace period under and as defined in any Document.
5. Upon the occurrence of any Event of Default and at any time thereafter,
Midsummer may declare all Obligations immediately due and payable and Midsummer
shall have the remedies of a secured party provided in the Uniform Commercial
Code as in effect in the State of New York , this Agreement and other applicable
law. Upon the occurrence of any Event of Default and at any time thereafter
following the expiration of the applicable cure period, Midsummer will have the
right to take possession of the Collateral and to maintain such possession on
our premises or to remove the Collateral or any part thereof to such other
premises as Midsummer may desire. Upon Midsummer' request, each of the Assignors
shall assemble or cause the Collateral to be assembled and make it available to
Midsummer at a place designated by Midsummer. If any notification of intended
disposition of any Collateral is required by law, such notification, if mailed,
shall be deemed properly and reasonably given if mailed at least ten (10) days
before such disposition, postage prepaid, addressed to any Assignor either at
such Assignor's address shown herein or at any address appearing on Midsummer'
records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Midsummer to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other legal expenses and disbursements and the reasonable expense of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Midsummer toward the payment of the Obligations
in such order of application as Midsummer may elect, and each Assignor shall be
liable for any deficiency. For the avoidance of doubt, following the occurrence
and during the continuance of an Event of Default which has not been cured,
Midsummer shall have the immediate right to withdraw any and all monies
contained in the Restricted Account and apply same to the repayment of the
Obligations (in such order of application as Midsummer may elect).
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6. If any Assignor defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Midsummer may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law, or, at Midsummer' option, debited
by Midsummer from the Restricted Accounts referred to in the respective
Restricted Account Agreements.
7. Each Assignor appoints Midsummer, any of Midsummer' officers, employees
or any other person or entity whom Midsummer may designate as our attorney, with
power to execute such documents in each of our behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor's behalf; to file financing statements against us covering
the Collateral (and, in connection with the filing of any such financing
statements, describe the Collateral as "all assets and all personal property,
whether now owned and/or hereafter acquired" (or any substantially similar
variation thereof)); to sign our name on public records; and to do all other
things Midsummer reasonably deems necessary to carry out this Master Security
Agreement. This power being coupled with an interest, is irrevocable so long as
any Obligations remains unpaid.
8. No delay or failure on Midsummer' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Midsummer and then only to the extent therein set forth,
and no waiver by Midsummer of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Midsummer' books and
records containing entries with respect to the Obligations shall be admissible
in evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Midsummer shall have the right to enforce any one or
more of the remedies available to Midsummer, successively, alternately or
concurrently. Each Assignor agrees to join with Midsummer in executing financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form satisfactory to Midsummer and in executing such other documents or
instruments as may be required or deemed necessary by Midsummer for purposes of
affecting or continuing Midsummer' security interest in the Collateral.
9. This Master Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York and cannot be terminated
orally. All of the rights, remedies, options, privileges and elections given to
Midsummer hereunder shall inure to the benefit of Midsummer' successors and
assigns. The term "Midsummer" as herein used shall include Midsummer, any parent
of Midsummer', any of Midsummer' subsidiaries and any co-subsidiaries of
Midsummer' parent, whether now existing or hereafter created or acquired, and
all of the terms, conditions, promises, covenants, provisions and warranties of
this Agreement shall inure to the benefit of each of the foregoing, and shall
bind the representatives, successors and assigns of each Assignor. Midsummer and
each Assignor hereby (a) waive any and all right to trial by jury in litigation
relating to this Agreement and the transactions contemplated hereby and each
Assignor agrees not to assert any counterclaim in such litigation, (b) submit to
the nonexclusive jurisdiction of any New York State court sitting in the borough
of Manhattan, the city of New York and (c) waive any objection Midsummer or each
Assignor may have as to the bringing or maintaining of such action with any such
court.
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10. All notices from Midsummer to any Assignor shall be sufficiently given
if mailed or delivered to such Assignor's address set forth below.
Very truly yours,
ISLAND PACIFIC, INC.
By: ____________________
Name:
Title:
Address:
PAGE DIGITAL INCORPORATED
By: ____________________
Name:
Title:
Address:
IP RETAIL TECHNOLOGIES INTERNATIONAL, INC.
By: ____________________
Name:
Title:
Address:
SABICA VENTURES, INC.
By: ____________________
Name:
Title:
Address:
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ACKNOWLEDGED:
MIDSUMMER INVESTMENTS LTD.
By:______________________
Name:
Title
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