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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 3, 1999
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SVI Holdings, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Nevada
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(State or Other Jurisdiction of Incorporation)
0-23049 84-1131608
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(Commission File Number) IRS Employer Identification No.)
7979 Ivanhoe Avenue, Suite 500, La Jolla, California 92037
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(Address of Principal Executive Offices) (Zip Code)
(619) 551-2365
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 3, 1999, SVI Holdings, Inc. ("SVI" or the "Company") completed the
acquisition of the stock of Island Pacific Systems Corporation ("Island
Pacific"), a California corporation. Island Pacific develops and markets retail
industry merchandising and management software systems. Island Pacific's
software products automate the full scope of a retailer's operations from
inventory planning and purchasing through distribution and final sale of goods.
Island Pacific's products are further described in the attached press release
dated June 7, 1999. With a home office in Irvine, California and a branch office
in the United Kingdom, Island Pacific employs 130 people.
SVI purchased all of the outstanding capital stock of Island Pacific from The
Mickelsen Family Trust, Todd T. Hammett, Mark T. Wulff, Philip J. Friesen and
Clayton Harless (collectively, the "Selling Shareholders")for $35 million in
cash.
As part of the acquisition, Island Pacific entered into three year employment
agreements with two of the Selling Shareholders, Mark T. Wulff and Todd T.
Hammett. Mr. Wulff and Mr. Hammett will be paid salaries of $300,000 and
$150,000 per year, respectively, during the term of the agreements. Each
agreement may be terminated at will by either party upon six months' prior
written notice, and Island Pacific can terminate each agreement for cause. Mr.
Wulff and Mr. Hammett also entered into agreements with SVI and Island Pacific
not to compete with Island Pacific's business in the United States during the
term of the employment agreements and for a period of three years after the
termination of employment.
The Mickelsen Family Trust also entered into an agreement not to compete with
Island Pacific's business in the United States for a period of two years
following the closing.
The consideration for the acquisition and the terms of the employment and
non-compete agreements were negotiated at arms' length. In determining those
terms, SVI considered, among other factors: (i) the technology of Island
Pacific; (ii) Island Pacific's client base; (iii) the synergies between Island
Pacific and SVI's own retail software systems operations; (iv) the historical
revenues and operations of Island Pacific; and (v) the potential contributions
of Mr. Wulff and Mr. Hammett to SVI's retail software systems business.
The sources of funds for the acquisition were as follows:
o $7.95 million cash on hand
o $2.25 million cash received upon the sale of the Company's IBIS Systems
Pty. Ltd. subsidiary
o $4 million cash received upon the exercise of outstanding options by
Softline Limited. Softline Limited owns approximately 58% of the
outstanding common shares of the Company, giving effect to such
exercise. Barry M. Schechter, SVI's Chairman and Chief Executive
Officer, and three other directors of SVI (Ivan Epstein, Marcel Golding
and Gerald Rubenstein) are also directors of Softline Limited.
o A $2.3 million loan from Claudav Holdings Ltd., B.V. ("Claudav"), which
owns 16.9% of the outstanding common shares of the Company. Barry M.
Schechter holds a proxy to vote the shares of SVI common stock held by
Claudav. The Company has agreed to pay interest on this loan at the
prime rate, due upon maturity, with no stated maturity.
o A total of $18.5 million in loans from Union Bank of California. There
are two loans in the amounts of $15 million and $3.5 million,
respectively. The $15 million loan requires interest only payments for
the first six months (at 0.25% above prime) and is convertible
thereafter to a two year fully amortizing term loan. The $3.5 million
loan is a two year fully amortizing term loan bearing interest at 0.5%
above prime. The bank loans are secured by substantially all of the
assets of SVI and of all of the stock and substantially all of the
assets of SVI's Applied Retail Solutions, Inc. and Island Pacific
subsidiaries, as well as 65% of SVI's stock in its Divergent
Technologies Pty. Ltd. subsidiary. Each loan may be prepaid at any time
without penalty.
SVI expects to apply approximately $13,608,000 plus interest due on the
promissory note received in connection with the Company's sale of its IBIS
Systems Pty. Ltd. subsidiary to partial prepayment of the bank loans. The IBIS
note is due October 1, 1999.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
To be filed by amendment on or before August 17, 1999.
(b) Pro Forma Financial Information
To be filed by amendment on or before August 17, 1999.
(c) Exhibits
Exhibit
Number Description
2.1 Stock Purchase Agreement
2.2 Employment Agreement of Todd T. Hammett
2.3 Employment Agreement of Mark T. Wulff
2.4 Covenant Not to Compete Agreement of The
Mickelsen Family Trust
10.1 Term Loan Agreement
10.2 Term Loan A Note
10.3 Term Loan B Note
10.4 Pledge Agreement
10.5 Security Agreement by SVI Holdings, Inc.
10.6 Security Agreement by Applied Retail
Solutions, Inc.
10.7 Security Agreement by Island Pacific Systems
Corporation
99.1 Press Release dated June 7, 1999
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Date: June 18, 1999
SVI Holdings, Inc.
(Registrant)
By: /s/ Barry M. Schechter
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Barry M. Schechter, Chief Executive Officer
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of June
1, 1999, among SVI Holdings, a Nevada corporation ("Buyer"), Island Pacific
Systems Corporation, a California corporation (the "Company"), The Mickelsen
Family Trust (the "Trust"), solely for the purposes of Sections 3.2.1, 3.3,
3.22.1 and 3.23, Todd T. Hammett, an individual ("Hammett"), Mark Wulff, an
individual ("Wulff"), Phil Friesen, an individual ("Friesen") and Clayton
Harless, an individual ("Harless") and solely for the purposes of Sections
2.5.1.2, 2.5.1.4, 2.5.2.4, the last sentence of Section of 3.2.1, and Section
3.20.3.2, Paul Mickelsen, an individual ("Mickelsen"). (The Trust, Hammett,
Wulff, Friesen and Harless are collectively referred to as "Sellers").
RECITALS
WHEREAS, Sellers own, or as of the Closing will own, 855 shares of
common stock, no par value, of the Company which Sellers represent will
constitute all of the issued and outstanding capital stock of the Company (the
"Shares");
WHEREAS, on March 26, 1999 Buyer and the Company entered into a
non-binding Letter of Intent for Sellers to sell, and Buyer to purchase, the
Shares from Sellers to be effective for accounting purposes as of January 1,
1999;
WHEREAS, Buyer and Sellers wish to memorialize an agreement for the
consideration and on the terms set forth in this Agreement; and
WHEREAS, the parties desire to enter into this Agreement pursuant to
which the Buyer will purchase from the Sellers, and the Sellers will sell to the
Buyer, all of the Shares upon the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained in this Agreement, the parties hereto agree
as follows:
AGREEMENT
1. ADDITIONAL DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings specified or referred to in this Section 1:
1.1. "Affiliate"--any Person controlled by, controlling, or
under common control with, directly or indirectly, the referenced Person.
1.2. "Accounts Receivable"--as defined in Section 3.7.
1.3. "Assets"--as defined in Section 3.6.
1.4. "Audited Financials"--as defined in Section 3.4.
1.5. "Balance Sheet"--as defined in Section 3.7.
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1.6. "Breach"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any inaccuracy in, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, that has not
been consented to or waived in writing by the other party.
1.7. "Closing"--as defined in Section 2.4.
1.8. "Competing Business"--as defined in Section 3.23.
1.9. "Consent"--any approval, consent, ratification, waiver,
or other authorization (including any Governmental Authorization).
1.10. "Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
1.10.1. the sale of the Shares by Sellers to Buyer;
1.10.2. the execution, delivery, and performance of
the Employment Agreements, the Noncompetition Agreements, and the Sellers'
Release;
1.10.3. the performance by Buyer and Sellers of their
respective covenants and obligations under this Agreement; and
1.10.4. Buyer's acquisition and ownership of the
Shares and exercise of control over the Company.
1.11. "Contract"--any agreement, contract, obligation,
promise, or undertaking that is legally binding and currently in effect.
1.12. "Damages"--as defined in Section 10.2.
1.13. "Earnest Money"--as defined in Section 2.2.
1.14. "Employment Agreements"--as defined in Section 2.5.1.3.
1.15. "Encumbrance"--any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
1.16. "ERISA"--the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
1.17. "Facilities"--any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles) currently
or formerly owned or operated by the Company. The term "Facilities" does not
include the residence located at The North House, Shortgrove, Newport, CB 113TX,
Essex, United Kingdom, which will be transferred to Mickelsen prior to Closing.
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1.18. "GAAP"--United States generally accepted accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4(b) were
prepared.
1.19. "Governmental Authorization"--any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
1.20. "Governmental Body"--any
1.20.1. nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
1.20.2. United States federal, California state,
local or municipal government or the government of the United Kingdom;
1.21. "Intellectual Property Assets" --as defined in Section
3.20.
1.22. "Interim Balance Sheet"--as defined in Section 3.4.
1.23. "IRC"--the Internal Revenue Code of 1986, as amended, or
any successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
1.24. "IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.25. "Knowledge"--unless otherwise stated, an individual will
be deemed to have "Knowledge" of a particular fact or other matter (a) if such
Person conducts a reasonable investigation of such fact or other matter then
only if such individual is actually aware of such fact or other matter after
diligent investigation or (b) if such Person does not conduct such reasonable
investigation then such Knowledge as a prudent individual could be expected to
discover or otherwise become aware of in the course of conducting a reasonable
investigation concerning such fact or investigation. The requirement for a
reasonable investigation shall be satisfied if a Person makes a reasonable
inquiry of the applicable fact or other matter to the Company's officer,
employee or agent who may reasonably be expected to be the most knowledgeable as
to such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter. The Trust will be deemed to have "Knowledge" of a
particular fact or other matter if Mickelsen has, or at any time had Knowledge
of such fact or other matter.
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1.26. "Legal Requirement"--any United States federal,
California state, local or municipal or United Kingdom order, law, ordinance,
principle of common law, regulation, statute, or treaty.
1.27. "Material Adverse Effect" --as defined in Section 3.1.1.
1.28. "Noncompetition Agreements"--as defined in Section
2.5.1.4.
1.29. "Occupational Safety and Health Law"--any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
1.30. "Order"--any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
1.31. "Ordinary course of business"--an action taken by a
Person will be deemed to have been taken in the "ordinary course of business"
only if:
1.31.1. such action is consistent with the past
practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
1.31.2. such action is not required to be authorized
by the board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person; and
1.31.3. such action is similar in nature and
magnitude to actions customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
1.32. "Organizational Documents"--(a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) the Agreement
of Trust or other charter document of the Trust; (c) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (d) any amendment to any of the foregoing.
1.33. "Person"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
1.34. "Plan"--as defined in Section 3.12.
1.35. "Prevailing Party"--as defined in Section 11.8.
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1.36. "Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.37. "Proprietary Rights Agreement"--as defined in Section
3.18.2.
1.38. "Purchase Price"--as defined in Section 2.3.
1.39. "Related Person" --
1.39.1. With respect to a particular individual
includes each other member of such individual's Family and any Person that is
directly or indirectly controlled by such individual or one or more members of
such individual's Family.
1.39.2. With respect to a specified Person other than
an individual, any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person.
For purposes of this definition, the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual.
1.40. "Representative"--with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
1.41. "Schedule of Exceptions"--the schedule of exceptions
delivered by Sellers to Buyer and vice versa concurrently with the execution and
delivery of this Agreement.
1.42. "Securities Act"--the Securities Act of 1933, as
amended, or any successor law, and regulations and rules issued pursuant to that
act or any successor law.
1.43. "Sellers"--as defined in the first paragraph of this
Agreement.
1.44. "Sellers' Release"--as defined in Section 2.5.1.2.
1.45. "Subsidiary"-- any Person in which more than fifty
percent (50%) of the voting power is owned by the Company.
1.46. "Tax"-- any tax (including any income tax, capital gains
tax, value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
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1.47. "Tax Return"--any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
1.48. "Threatened"--a claim, Proceeding, dispute, action, or
other matter will be deemed to have been "Threatened" if any demand or statement
has been made (orally or in writing) or any notice has been given (orally or in
writing).
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1. AGREEMENT TO SELL AND PURCHASE STOCK. For the
consideration hereinafter provided and subject to the terms and conditions of
this Agreement, at the Closing Sellers shall sell, assign, transfer, convey and
deliver to Buyer, free and clear of all liens, charges, claims or Encumbrances,
and Buyer shall purchase and acquire from Sellers, the Shares. At the Closing,
Sellers shall cause to be delivered to Buyer certificates representing the
Shares, together with accompanying stock powers or instruments of assignment,
duly endorsed in blank for the transfer of the Shares to Buyer.
2.2. EARNEST MONEY. On or prior to execution of this
Agreement, Buyer shall pay $50,000 (the "Earnest Money") to the Company. If the
transactions contemplated herein close pursuant to the terms of this Agreement,
the Buyer and the Sellers agree that the Earnest Money shall be credited against
the Purchase Price (defined below) payable to the Trust in the amount of the
Earnest Money. If the transactions contemplated under this Agreement do not
close pursuant to the terms of this Agreement, then the Earnest Money shall be
paid out in accordance with the terms of Section 9.2 hereof.
2.3. PURCHASE PRICE. The purchase price for the Shares will be
Thirty-Five Million Dollars ($35,000,000) (the "Purchase Price") payable in
immediately available funds by certified check or federal wire at Closing.
2.4. CLOSING. The purchase and sale (the "Closing") provided
for in this Agreement will take place at the offices of Buyer's counsel or such
other place mutually agreeable to the parties, on or before June 4, 1999. Unless
otherwise agreed to between the parties, failure to consummate the purchase and
sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.4 will result in the termination of this
Agreement.
2.5. CLOSING OBLIGATIONS. At the Closing:
2.5.1. SELLER'S OBLIGATIONS. Sellers will deliver to
Buyer:
2.5.1.1. certificates representing the
Shares, duly endorsed (or accompanied by duly executed stock powers) for
transfer to Buyer;
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2.5.1.2. a release substantially in the form
of EXHIBIT A executed by each Seller and Mickelsen (collectively, "Sellers'
Release");
2.5.1.3. employment agreements substantially
in the form of EXHIBIT B, executed by the Company, Buyer and Hammett, Wulff and
Friesen (collectively, "Employment Agreements");
2.5.1.4. noncompetition agreements
substantially in the form of EXHIBIT C, executed by Mickelsen and each Seller
except Harless (collectively, the "Noncompetition Agreements"); and
2.5.1.5. a certificate executed by each
Seller to the effect that, except as otherwise stated in such certificate, such
Seller's representations and warranties in this Agreement were accurate in all
respects as of the date of this Agreement and are accurate in all material
respects as of the Closing as if made on the Closing (giving full effect to any
supplements to the Schedule of Exceptions delivered by Sellers to Buyer prior to
the Closing in accordance with Section 1.41).
2.5.2. BUYER'S OBLIGATIONS. Buyer will deliver to
Sellers:
2.5.2.1. the sum of Thirty Five Million
Dollars ($35,000,000.00), with due credit to the Trust for the Earnest Money, if
paid pursuant to Section 2.2., by cash, wire transfer, bank cashier's or
certified checks payable to the order of each Seller as follows:
The Mickelsen Family Trust $ 31,111,110
Todd T. Hammett $ 350,000
Mark Wulff $ 2,450,000*
Phil Friesen $ 700,000
Clayton Harless $ 388,890
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Total: $ 35,000,000
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*Sellers acknowledge that $1,750,000 of the Purchase Price will be paid to Wulff
pursuant to the Phantom Stock Agreement of August 1998;
2.5.2.2. a certificate executed by Buyer to
the effect that, except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in all respects as
of the date of this Agreement and is accurate in all respects as of the Closing
as if made on the Closing;
2.5.2.3. the Employment Agreements, executed
by Buyer;
2.5.2.4. a check or wire transfer payable to
the order of Paul Mickelsen in the amount of Six Hundred Seventy Five Thousand
Three Hundred Eighty Dollars ($675,380) as a distribution of retained earnings;
and
2.5.2.5. Any other documents required to be
delivered by Buyer pursuant to Sections 7 or 8.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Except as disclosed in
this Agreement or on the Schedule of Exceptions attached hereto as Schedule I,
(a) the Trust, (b) for purposes of Sections 3.2.1, 3.3, 3.22.1 and 3.23 only,
Hammett, Wulff, and Friesen, and (c) for the purpose of Section 3.20.3.2 and the
last sentence of Section 3.2.1 only, Mickelsen, severally represent and warrant
to Buyer as follows:
3.1. ORGANIZATION AND GOOD STANDING.
3.1.1. Schedule 3.1 to the Schedule of Exceptions
contains a complete and accurate list of the Company's capitalization (including
the identity of each shareholder and the number of shares held by each). The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of California, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under the Contracts. The Company is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification, except for those jurisdictions where the failure to be so
qualified would not, individually, or in the aggregate, have a material adverse
effect on the financial condition, business, assets, prospects, operations,
results of operations or properties of the Company (a "Material Adverse
Effect"). The Company has delivered to Buyer true and accurate copies of its
Organizational Documents, as currently in effect. The Company has no
Subsidiaries.
3.2. AUTHORITY; NO CONFLICT.
3.2.1. POWER AND AUTHORITY. This Agreement
constitutes the legal, valid, and binding obligation of Sellers, enforceable
against Sellers in accordance with its terms. Upon the execution and delivery by
the applicable Seller of the Employment Agreements, the Sellers' Release, and
the Noncompetition Agreements (collectively, the "Sellers' Closing Documents"),
the Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of the applicable Seller, enforceable against such Seller in
accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the applicable Sellers' Closing Documents and to perform their
obligations under this Agreement and the Sellers' Closing Documents. Upon
execution and delivery by Mickelsen of the Sellers' Release and the
Noncompetition Agreement, such documents will constitute the legal, valid and
binding obligations of Mickelsen, enforceable against Mickelsen in accordance
with their respective terms.
3.2.2. NO CONFLICTS. Except as set forth on Schedule
3.2 to the Schedule of Exceptions, neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
3.2.2.1. contravene, conflict with, or
result in a violation of (a) any provision of the Organizational Documents of
the Company, or (b) any resolution adopted by the board of directors or the
shareholders of the Company;
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3.2.2.2. contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company or either Seller, or any of the assets owned or used by the Company,
may be subject, except conflicts or violations which would not have a Material
Adverse Effect;
3.2.2.3. contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or used by the
Company, except conflicts or violations which would not have a Material Adverse
Effect;
3.2.2.4. contravene, conflict with, or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Contract,
except conflicts, violations or breaches which would not have a Material Adverse
Effect; or
3.2.2.5. result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Schedule 3.2 of the Schedule of Exceptions, the Company
and Sellers will not be required to give any notice to or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
3.3. CAPITALIZATION. The authorized equity securities of the
Company consist of ten thousand (10,000) shares of common stock, no par value,
of which eight hundred fifty-five (855) shares will be issued and outstanding at
the Closing and constitute the Shares. Sellers are, or will be, on the Closing
the record and beneficial owners and holders of the Shares, free and clear of
all Encumbrances. Each of Sellers owns the following number of the Shares:
The Mickelsen Family Trust 800
Todd T. Hammett 9
Mark Wulff 18
Phil Friesen 18
Clayton Harless 10
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Total: 855
===
Other than as set forth on Schedule 3.3 to the Schedule of
Exceptions, no legend or other reference to any purported Encumbrance appears
upon any certificate representing the Shares. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts (including without
limitation options or warrants) relating to the issuance, sale, or transfer of
any equity securities or other securities of the Company. None of the
outstanding equity securities or other securities of the Company were issued in
violation of the Securities Act or any other Legal Requirement. The Company does
not own, or have any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
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3.4. FINANCIAL STATEMENTS. Sellers have previously delivered
to Buyer: (a) audited balance sheets of the Company as at December 31 in each of
the years ended December 31, 1996, 1997 and 1998, and the related statements of
operations and cash flows for each of the fiscal years then ended, together with
the report thereon of KPMG Peat Marwick LLP, independent certified public
accountants (the "Audited Financials"), and (b) an unaudited balance sheet of
the Company as at March 31, 1999 (the "Interim Balance Sheet"), and the related
unaudited statements of operations, and cash flows for the three (3) months then
ended, including in each case the notes thereto. Such financial statements and
notes fairly present the financial condition and the results of operations and
cash flows of the Company as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the Audited Financials); the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved.
3.5. BOOKS AND RECORDS. The books of account, minute books,
stock record books, and other records of the Company, all of which have been
made available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute book of the Company
contains accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Board of Directors, and committees of the
Board of Directors of the Company, and no meeting of any such shareholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.6. TITLE TO ASSETS; ENCUMBRANCES. Schedule 3.6 to the
Schedule of Exceptions contains a complete and accurate list of all tangible
assets, interests and other properties owned or leased by the Company. The
Company has good and marketable title to all tangible assets, rights, interests
and other properties owned or leased by it (collectively, the "Assets"), free
and clear of all Encumbrances, except those set forth on Schedule 3.6 on the
Schedule of Exceptions, liens for taxes not yet due and payable and those that
individually would not have a Material Adverse Effect. The Company does not own
any real property.
3.7. ACCOUNTS RECEIVABLE. All accounts receivable of the
Company that are reflected on the balance sheet as at December 31, 1998 (the
"Balance Sheet") or the Interim Balance Sheet or on the accounting records of
the Company as of the Closing (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing, the Accounts Receivable are or will be as of the Closing
current and collectible net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing, will not
represent a greater percentage of the Accounts Receivable as of the Closing than
the reserve reflected in the Interim Balance Sheet represented of the Accounts
Receivable reflected therein and will not represent a material adverse change in
the composition of such Accounts Receivable in terms of aging). There is no
contest, claim, or right of set-off, other than returns in the ordinary course
of business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Schedule 3.7 of
the Schedule of Exceptions contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
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3.8. INVENTORY. The Company maintains no material amounts of
inventory for sale in the ordinary course of business.
3.9. NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the ordinary course of
business since the respective dates thereof.
3.10. TAXES.
3.10.1. The Company has filed or caused to be filed
(on a timely basis since the year ended December 31, 1994) all Tax Returns that
are or were required to be filed by or with respect to it pursuant to applicable
Legal Requirements. Sellers have previously made available to Buyer copies of,
and Schedule 3.10 of the Schedule of Exceptions contains a complete and accurate
list of, all such Tax Returns filed since 1994. The Company has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Sellers or the Company, except such Taxes, if any, as are listed in
Schedule 3.10 of the Schedule of Exceptions and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
3.10.2. Except as set forth on Schedule 3.10 of the
Schedule of Exceptions, to the Trust's Knowledge, the United States federal and
state income Tax Returns of the Company subject to such Taxes have been audited
by the IRS or relevant state tax authorities or are closed by the applicable
statute of limitations for all taxable years through December 31, 1994. Schedule
3.10 of the Schedule of Exceptions contains a complete and accurate list of all
audits of all such Tax Returns, including a reasonably detailed description of
the nature and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against, settled, or, as described in
Schedule 3.10 of the Schedule of Exceptions, are being contested in good faith
by appropriate proceedings. Schedule 3.10 of the Schedule of Exceptions
describes all adjustments to the United States federal income Tax Returns filed
by the Company for all taxable years since January 1, 1994, and the resulting
deficiencies proposed by the IRS. Except as described in Schedule 3.10 of the
Schedule of Exceptions, the Company has not been given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of the Company or for which the Company may be liable.
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3.10.3. The charges, accruals, and reserves with
respect to Taxes on the books of the Company are adequate (determined in
accordance with GAAP) and are at least equal to the Company's liability for
Taxes. There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Schedule 3.10 of the Schedule of
Exceptions. No consent to the application of Section 341(f)(2) of the IRC has
been filed with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
3.10.4. All Tax Returns filed by the Company are
true, correct, and complete.
3.10.5. The Company has not, in the past ten years,
acquired assets from another person or entity in a transaction in which the
Company's tax basis of the acquired assets was determined, in whole or in part,
by reference to the tax basis of such acquired assets (or any other property) in
the hands of the transferor and is not and will not be liable for any built in
gains tax.
3.10.6. The Company shall remain an S corporation
through the Closing. Neither the Company nor Sellers will take or allow any
action (other than the sale of the Company stock pursuant to this Agreement)
that would result in the termination of the Company's status as a validly
electing S corporation.
3.10.7. At the Buyer's expense, Sellers shall
cooperate in the preparation and filing of all tax returns for the Company for
all periods ending on or prior to the Closing which are filed after the Closing.
Sellers shall permit Buyer to review and comment on each such tax return prior
to such filing.
3.11. NO MATERIAL ADVERSE CHANGE. Since the date of the
Balance Sheet, there has not been any material adverse change in the financial
condition, business, assets, prospects, operations, results of operations, or
properties of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
3.12. EMPLOYEE BENEFIT PLANS.
3.12.1. As used in this Section 3.12, the following
terms have the meanings set forth below.
"Company Plan" means all plans as given the meaning in ERISA ss. 3(3)
of which the Company is or was a Plan Sponsor, or to which the Company otherwise
contributes or has contributed, or in which the Company otherwise participates
or has participated.
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are plans as given the meaning in ERISA ss. 3(3) and which are
owned, adopted or followed by the Company. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of Code ss. 132.
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"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
"Qualified Plan" means any Company Plan that meets or purports to meet
the requirements of Code ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
3.12.2. Except for the Company's 401(k) plan, 125
Cafeteria Plan and the pension plan subsisting for the Company's United Kingdom
employees, the Company has no current or, to the Trust's Knowledge, prior
Company Plan, Multi Employer Plan, Other Benefit Obligations, PBGC, Pension
Plan, Plan Sponsor, Qualified Plan or Title IV Plans.
3.13. PERMITS, ETC. Schedule 3.13 of the Schedule of
Exceptions contains a true and correct list of all material (except for motor
vehicle licenses), permits, approvals, certificates of inspection and
registrations issued by any Governmental Body (collectively, the "Permits")
which are necessary for the Company to own and operate its business as presently
conducted. Except as set forth on Schedule 3.13 of the Schedule of Exceptions,
(a) all such Permits have been duly and lawfully secured or made by the Company,
(b) the Company has complied with and is not in material default under any such
Permits, and (c) all such Permits are in full force and effect. There is no
proceeding pending or, to the Knowledge of the Trust, threatened, to revoke or
limit any such Permit and the Company has not received any notice (whether oral
or written) thereof. Except as set forth on Schedule 3.13 of the Schedule of
Exceptions, to the Trust's Knowledge, none of the transactions contemplated by
this Agreement will terminate, violate, or limit the effectiveness of any such
Permit, except such terminations, violations or limits which would not have a
Material Adverse Effect.
3.14. LEGAL PROCEEDINGS; ORDERS. Except as set forth in
Schedule 3.14 of the Schedule of Exceptions, there are no (a) Proceedings
pending or, to the Knowledge of the Trust, investigations pending, or to the
Knowledge of the Trust, threatened or probable of assertion, by or against the
Company or relating to the assets, business, or operations of the Company, or
the Contemplated Transactions, (b) orders, writs, judgments, injunctions,
decrees, or similar commands of any court or any Governmental Body applicable to
the Company or its assets, business or operations or (c) to the Knowledge of the
Trust, no event has occurred or circumstance exists which may give to or serve
as a basis for the commencement of Proceedings.
3.15. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set
forth on Schedule 3.15 of the Schedule of Exceptions, since the date of the
Balance Sheet, the Company has conducted its business only in the ordinary
course of business and there has not been any:
3.15.1. change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
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3.15.2. amendment to the Organizational Documents of
the Company;
3.15.3. payment or increase by the Company of any
bonuses, salaries, or other compensation to any shareholder, director, officer,
or (except in the ordinary course of business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
3.15.4. adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
3.15.5. damage to or destruction or loss of any asset
or property of the Company, whether or not covered by insurance having a
Material Adverse Effect;
3.15.6. entry into, termination of, or receipt of
notice of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least Ten Thousand Dollars ($10,000);
3.15.7. sale (other than sales of inventory in the
ordinary course of business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any lien or other
Encumbrance on any material asset or property of the Company, including the
sale, lease, or other disposition of any of the Intellectual Property Assets;
3.15.8. cancellation or waiver of any claims or
rights with a value to the Company in excess of Ten Thousand Dollars ($10,000);
3.15.9. material change in the accounting methods
used by the Company; or
3.15.10. agreement, whether oral or written, by the
Company to do any of the foregoing.
3.16. CONTRACTS; NO DEFAULTS.
3.16.1. Description of Contracts. Schedule 3.16.1 of
the Schedule of Exceptions contains a complete and accurate list, and the
Company and Sellers have delivered or made available to Buyer true and complete
copies, or representative forms, of:
3.16.1.1. each Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of Ten Thousand Dollars ($10,000);
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3.16.1.2. each Contract that involves
performance of services or delivery of goods or materials to the Company of an
amount or value in excess of Ten Thousand Dollars ($10,000);
3.16.1.3. each Contract that was not entered
into in the ordinary course of business and that involves expenditures or
receipts of the Company in excess of Ten Thousand Dollars ($10,000);
3.16.1.4. each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than Ten Thousand Dollars ($10,000) and
with terms of less than one year);
3.16.1.5. each licensing agreement or other
Contract with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
3.16.1.6. each joint venture, partnership,
and other Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
3.16.1.7. each Contract containing covenants
that in any way purport to restrict the business activity of the Company or
limit the freedom of the Company to engage in any line of business or to compete
with any Person;
3.16.1.8. each power of attorney that is
currently effective and outstanding;
3.16.1.9. each Contract entered into other
than in the ordinary course of business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
3.16.1.10. each Contract for capital
expenditures in excess of Five Thousand ($5,000);
3.16.1.11. each written warranty, guaranty,
and or other similar undertaking with respect to contractual performance
extended by the Company other than in the ordinary course of business; and
3.16.1.12. each amendment, supplement, and
modification (whether oral or written) in respect of any of the foregoing.
Schedule 3.16 of the Schedule of Exceptions sets forth a brief
description of each such Contract.
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3.16.2. Except as set forth in Schedule 3.16.2 of the
Schedule of Exceptions, to the Knowledge of the Trust, no officer, director,
agent, employee, consultant, or contractor of the Company is bound by any
Contract that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (a) engage in or continue any conduct,
activity, or practice relating to the business of the Company, or (b) assign to
the Company or to any other Person any rights to any invention, improvement, or
discovery.
3.16.3. Except as set forth in Schedule 3.16.3 of the
Schedule of Exceptions, each Contract identified or required to be identified in
Schedule 3.16 of the Schedule of Exceptions is, as to the Company, in full force
and effect and is valid and enforceable in accordance with its terms.
3.16.4. Neither the Company nor, to the actual
Knowledge of the Trust, any other party to any Contract, is in default or
alleged to be in default in respect of any material obligation under any
Contract, and no event has occurred which through notice or the passage of time
could constitute such a default.
3.16.5. Except as set forth in Schedule 3.16.5 of the
Schedule of Exceptions:
3.16.5.1. to the Knowledge of the Trust, no
event has occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with, or result in a violation or breach of,
or give the Company or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
3.16.5.2. the Company has not given to or
received from any other Person at any time any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
3.16.6. There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation.
3.17. INSURANCE.
3.17.1. POLICIES. Set forth on the Schedule of
Exceptions is a true and correct list of all policies of liability, theft,
fidelity, life, fire, product liability, workers' compensation and other forms
of insurance maintained by the Company (specifying the insurer, type of
insurance, amount of coverage, policy number, premium and deductible or
retention levels thereunder). The coverage provided under such policies of
insurance is in full force and effect and all premiums due and payable with
respect thereto have been paid. Since January 1, 1996, the Company has not been
denied or had revoked or rescinded any policy of insurance.
3.17.2. CLAIMS. Set forth on the Schedule of
Exceptions is a summary of each claim in excess of $10,000 made since January 1,
1996 under any such insurance policy, all of which have been fully satisfied or
are being defended by the insurance carrier and involve no exposure (over and
above any applicable deductible amount ) to the Company, other than as set forth
on the Schedule of Exceptions.
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3.18. EMPLOYEES.
3.18.1. Schedule 3.18 of the Schedule of Exceptions
contains a complete and accurate list of the following information for each
employee of the Company, including each employee on leave of absence or layoff
status: name; job title; current compensation paid or payable and any change in
compensation since December 31, 1998; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
3.18.2. To the Trust's Knowledge, no employee of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee of the Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with the Company by any
such employee. To the Trust's Knowledge, no officer, or other key employee of
the Company intends to terminate his or her employment with the Company.
3.18.3. The Company has no retired employees.
3.19. LABOR RELATIONS; COMPLIANCE. Since January 1, 1996, the
Company has not been a party to any collective bargaining or other labor
contract. Since January 1, 1996, there has not been, there is not presently
pending or existing, and to the Trust's Knowledge there is not Threatened, (a)
any strike, slowdown, picketing, work stoppage, or employee grievance process,
(b) any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To the Trust's
Knowledge, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company. The
Company has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. The Company is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
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3.20. INTELLECTUAL PROPERTY.
3.20.1. INTELLECTUAL PROPERTY ASSETS. The term
"Intellectual Property Assets" includes:
3.20.1.1. the name "Island Pacific Systems
Corporation," all fictional business names, trade names, registered and
unregistered trademarks, service marks, logos, and applications (collectively,
"Marks");
3.20.1.2. all patents, patent applications,
and inventions and discoveries that may be patentable (collectively, "Patents");
3.20.1.3. all copyrights in both published
works and unpublished works (collectively, "Copyrights");
3.20.1.4. all rights in mask works
(collectively, "Rights in Mask Works"); and
3.20.1.5. all know-how, trade secrets,
confidential information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as licensee or licensor.
3.20.2. AGREEMENTS. Schedule 3.20 of the Schedule of
Exceptions contains a complete and accurate list and summary description,
including any royalties paid or received by the Company, of all Contracts
relating to the Intellectual Property Assets to which the Company is a party or
by which the Company is bound, except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software programs
under which the Company is the licensee. There are no outstanding and, to the
Trust's Knowledge, no Threatened disputes or disagreements with respect to any
such agreement except those disputes and disagreements which would not have a
Material Adverse Effect.
3.20.3. KNOW-HOW NECESSARY FOR THE BUSINESS.
3.20.3.1. The Company is the owner of all
right, title, and interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges, Encumbrances,
equities, and other adverse claims, and, except as described on Schedule 3.21 of
the Schedule of Exceptions, has the right to use without payment to a third
party all of the Intellectual Property Assets.
3.20.3.2. All Intellectual Property formerly
owned or held by Mickelsen shall have been irrevocably assigned, transferred and
otherwise conveyed to the Company prior to Closing free and clear of all liens,
security interests, charges, Encumbrances, equities, and other adverse claims.
3.20.3.3. Except as set forth in Schedule
3.20 of the Schedule of Exceptions, all former and current employees of the
Company have executed written Contracts with the Company that assigns to the
Company all rights to any inventions, improvements, discoveries, or information
relating to the business of the Company.
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3.20.4. PATENTS. The Company has no Patents.
3.20.5. TRADEMARKS.
3.20.5.1. Schedule 3.20 of Schedule of
Exceptions contains a complete and accurate list and summary description of all
Marks. The Company is the owner of all right, title, and interest in and to each
of the Marks, free and clear of all liens, security interests, charges,
Encumbrances, equities, and other adverse claims.
3.20.5.2. All Marks that have been
registered with the United States Patent and Trademark Office are currently in
compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the Closing.
3.20.5.3. No Mark has been or is now
involved in any opposition, invalidation, or cancellation and, to the Trust's
Knowledge, no such action is Threatened with the respect to any of the Marks.
3.20.5.4. To the Trust's Knowledge, there is
no potentially interfering trademark or trademark application of any third
party.
3.20.5.5. To the Trust's Knowledge, no Mark
has been challenged or threatened in any way. None of the Marks used by the
Company infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
3.20.5.6. All products and materials
containing a Mark bear the proper federal registration notice where required by
law.
3.20.6. COPYRIGHTS.
3.20.6.1. Schedule 3.20 of the Schedule of
Exceptions contains a complete and accurate list and summary description of all
Copyrights. The Company is the owner of all right, title, and interest in and to
each of the Copyrights, free and clear of all liens, security interests,
charges, Encumbrances, equities, and other adverse claims.
3.20.6.2. Except as set forth on Schedule
3.20 of the Schedule of Exceptions, all the Copyrights have been registered,
where permitted or required, and are currently in compliance with formal legal
requirements, are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the date of
Closing.
3.20.6.3. To the Trust's Knowledge, no
Copyright has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
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3.20.6.4. All works encompassed by the
Copyrights have, if required, been marked with the proper copyright notice.
3.20.7. TRADE SECRETS.
3.20.7.1. With respect to each Trade Secret,
the documentation relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of any
individual.
3.20.7.2. The Company has taken reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
3.20.7.3. The Trade Secrets are not part of
the public knowledge or literature, and, to the Trust's Knowledge, have not been
used, divulged, or appropriated either for the benefit of any Person or to the
detriment of the Company. No Trade Secret is subject to any adverse claim or has
been challenged or threatened in any way.
3.21. CERTAIN PAYMENTS. Since January 1, 1996, neither the
Company nor any director, officer, agent, or employee of the Company, or to the
Trust's Knowledge any other Person associated with or acting for or on behalf of
the Company, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company, or
(iv) in violation of any Legal Requirement, (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.22. DISCLOSURE.
3.22.1. No representation or warranty of Sellers in
this Agreement and no statement in the Schedule of Exceptions omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
3.22.2. There is no fact known to the Trust that has
specific application to the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as any Seller can
reasonably foresee, materially threatens, the assets, business, financial
condition, or operations of the Company (on a consolidated basis) that has not
been set forth in this Agreement or the Schedule of Exceptions.
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3.23. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth
on Schedule 3.23 to the Schedule of Exceptions, neither the Trust nor any
Related Person of the Trust or of the Company has, or since January 1, 1997 has
had, any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's business. No
Seller or any Related Person of Sellers, of the Trust or of the Company is, or
since January 1, 1997 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Company other than business dealings or transactions conducted in the ordinary
course of business with the Company at substantially prevailing market prices
and on substantially prevailing market terms, or (ii) engaged in competition
with the Company with respect to any line of the products or services of the
Company (a "Competing Business") in any market presently served by the Company
except for less than one percent of the outstanding capital stock of any
Competing Business. No Seller or any Related Person of Sellers or of the Company
is a party to any Contract with, or has any claim or right against, the Company.
3.24. BROKERS OR FINDERS. Sellers, the Company and their
respective agents have not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
3.25. YEAR 2000 COMPLIANCE. The Company is Year 2000 Compliant
and to the Trust's Knowledge, all vendors of the Company that are material to
the business of the Company and whose ability to perform their obligations to
the Company may be materially affected by their not being Year 2000 Compliant
are Year 2000 Compliant. The term "Year 2000 Compliant" means, for purposes of
the foregoing, that all hardware, software, firmware, equipment, goods and
systems used by a Person, or which are material to the business operations or
financial condition of a Person, will properly perform date-sensitive functions
on and after January 1, 2000.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Sellers as follows:
4.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Nevada, with full corporate power and authority to conduct its business
as it is now being conducted and to perform its obligations under this Agreement
and in connection with the Contemplated Transactions.
4.2. AUTHORITY; NO CONFLICT.
4.2.1. ENFORCEABILITY. This Agreement constitutes the
legal, valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms. Upon the execution and delivery by Buyer of the
Employment Agreements (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
4.2.2. NO CONFLICTS. Except as set forth in Schedule
4.2 to the Schedule of Exceptions, neither the execution
and delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will directly or indirectly (with
or without notice or lapse of time):
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4.2.2.1. contravene, conflict with, or
result in a violation of (a) any provision of the Organizational Documents of
Buyer, or (b) any resolution adopted by the board of directors or the
stockholders of Buyer;
4.2.2.2. contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
Buyer, or any of the assets owned or used by Buyer, may be subject, except
conflicts or violations which would not have a Material Adverse Effect; or
4.2.2.3. contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by Buyer or that otherwise
relates to the business of, or any of the assets owned or used by the Company,
except conflicts or violations which would not have a Material Adverse Effect.
4.2.2.4. contravene, conflict with, or
result in a violation or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any contract to
which Buyer is a party, except conflicts, violations or breaches which would not
have a Material Adverse Effect; or
4.2.2.5. result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Buyer.
Except as set forth in Schedule 4.2 of the Schedule of Exceptions,
Buyer is not and will not be required to give notice to or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
4.3. INVESTMENT INTENT. Buyer is acquiring the Shares for its
own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
4.4. CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.5. BROKERS OR FINDERS. Buyer and its directors, officers,
employees and agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payments in connection with this Agreement and will indemnify and hold
Sellers harmless from any such payment alleged to be due by or through Buyer as
a result of the action of Buyer or its officers or agents.
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5. COVENANTS OF SELLERS PRIOR TO CLOSING.
5.1. ACCESS AND INVESTIGATION. Between the date of this
Agreement and the Closing, the Company and Sellers will (a) afford Buyer and its
Representatives (collectively, "Buyer's Advisors") reasonable access to the
Company's personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
5.2. OPERATION OF THE BUSINESSES OF THE COMPANY. Between the
date of this Agreement and the Closing, Sellers will cause the Company to:
5.2.1. conduct its business only in the ordinary
course of business consistent with past practice;
5.2.2. use reasonable efforts to preserve intact the
current business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, employees, agents,
and others having business relationships with the Company;
5.2.3. confer with Buyer concerning operational
matters of a material nature; and
5.2.4. if requested, confer with Buyer concerning the
status of the business, operations, and finances of the Company.
5.3. NEGATIVE COVENANT. Except as otherwise expressly
permitted by this Agreement or as occurs in the ordinary course of business,
between the date of this Agreement and the Closing, the Company will not,
without the prior consent of Buyer, take any affirmative action, or fail to take
any reasonable action within its control, as a result of which any of the
changes or events listed in Section 3.15 is likely to occur.
5.4. REQUIRED APPROVALS. As promptly as practicable after the
date of this Agreement, the Company will make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing, the Company
will (a) reasonably cooperate with Buyer with respect to all filings that Buyer
is required by Legal Requirements to make in connection with the Contemplated
Transactions, and (b) reasonably cooperate with Buyer in obtaining all consents
identified in Schedule 4.2 of the Schedule of Exceptions.
5.5. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as
expressly provided in this Agreement, Sellers shall pay and the Company will
cause all indebtedness owed to it by any Seller or any Related Person of any
Seller to be paid in full prior to Closing.
5.6. NO NEGOTIATION. Until such time, if any, as this
Agreement is terminated pursuant to Section 9, the Company will not directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from, or
negotiate with, provide any non-public information to, any Person (other than
Buyer) relating to any transaction involving the sale of the business or assets
(other than in the ordinary course of business) of the Company, or any of the
capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company.
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5.7. BEST EFFORTS. Between the date of this Agreement and the
Closing, Sellers will use their best efforts to cause the conditions in Sections
7 and 8 to be satisfied.
5.8. COOPERATION. Buyer, the Company and Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of the Company's tax returns and any audit,
litigation or other proceeding with respect to taxes.
6. COVENANTS OF BUYER PRIOR TO CLOSING.
6.1. APPROVALS OF GOVERNMENTAL BODIES. As promptly as
practicable after the date of this Agreement, Buyer will, and will cause each of
its Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing, Buyer will, and will cause each Related Person
to, reasonably cooperate with Sellers with respect to all filings that Sellers
are required by Legal Requirements to make in connection with the Contemplated
Transactions, and (ii) reasonably cooperate with Sellers in obtaining all
consents identified in Schedule 3.2 of the Schedule of Exceptions; provided that
this Agreement will not require Buyer to dispose of or make any change in any
portion of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2. BEST EFFORTS. Except as set forth in the proviso to
Section 6.1, between the date of this Agreement and the Closing, Buyer will use
its best efforts to cause the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to purchase the Shares and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS. Each Seller's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing as if made on
the Closing, after giving effect to the Schedule of Exceptions.
7.2. SELLERS' PERFORMANCE.
7.2.1. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects.
7.2.2. Each document required to be delivered by
Sellers pursuant to Section 2.5 must have been delivered, and each of the other
covenants and obligations in Section 5 must have been performed and complied
with in all material respects.
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7.3. CONSENTS. Each of the Consents identified in Schedule 3.2
of Sellers' Schedule of Exceptions, and each Consent identified in Schedule 4.2
of Buyer's Schedule of Exceptions, must have been obtained and must be in full
force and effect.
7.4. ADDITIONAL DOCUMENTS. Each of the following documents
must have been delivered to Buyer:
7.4.1. an opinion of the Sellers' counsel, dated the
Closing, in the form of Exhibit D; and
7.4.2. such other documents as Buyer may reasonably
request for the purpose of (i) evidencing the accuracy of any of Sellers'
representations and warranties, (ii) evidencing the performance by each Seller
of, or the compliance by each Seller with, any covenant or obligation required
to be performed or complied with by such Seller, (iii) evidencing the
satisfaction of any condition referred to in this Section 7, or (iv) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.5. NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS.
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to all
or any portion of the Purchase Price payable for the Shares.
7.7. NO PROHIBITION. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause Buyer or any Person
affiliated with Buyer to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise proposed by or before any
Governmental Body.
7.8. NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition, business, assets, prospects,
operations, results of operations or properties of the Company since the date of
this Agreement.
7.9. FUNDING. Buyer's loan from Union Bank shall have funded
by no later than June 4, 1999.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. Sellers'
obligation to sell the Shares and to take the other actions required to be taken
by Sellers at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Sellers, in whole or in part):
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8.1. ACCURACY OF REPRESENTATIONS. All of Buyer's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing as if made on the
Closing.
8.2. BUYER'S PERFORMANCE.
8.2.1. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
8.2.2. Buyer must have delivered each of the
documents required to be delivered by Buyer pursuant to Section 2.5 and must
have made the cash payments required to be made by Buyer pursuant to Sections
2.5.2.1.
8.3. CONSENTS. Each of the Consents identified in Schedule 4.2
of Buyer's Schedule of Exceptions, and each Consent identified in Schedule 3.2
of Sellers' Schedule of Exceptions, must have been obtained and must be in full
force and effect.
8.4. ADDITIONAL DOCUMENTS. Buyer must have caused to be
delivered to Sellers such documents as Sellers may reasonably request for the
purpose of (a) enabling their counsel to provide the opinion referred to in
Section 7.4.1, (b) evidencing the accuracy of any representation or warranty of
Buyer, (c) evidencing the performance by Buyer of, or the compliance by Buyer
with, any covenant or obligation required to be performed or complied with by
Buyer, (d) evidencing the satisfaction of any condition referred to in this
Section 8, or (e) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5. NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced or Threatened against Sellers any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
8.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS.
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, the Company, or (b) is entitled to all
or any portion of the Purchase Price payable for the Shares.
8.7. NO PROHIBITION. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause Sellers to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
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8.8. POST-CLOSING MATTERS. Buyer and the Trust shall have
entered into the letter attached hereto as EXHIBIT E with respect to certain
Closing and post-Closing matters.
8.9. FUNDING. Buyer's loan from Union Bank shall have funded
by no later than June 4, 1999.
9. TERMINATION.
9.1. TERMINATION EVENTS. This Agreement may, by notice given
prior to or at the Closing, be terminated:
9.1.1. by either Buyer or Sellers if a material
Breach of any provision of this Agreement has been committed by
the other party and such Breach has not been waived;
9.1.2. (a) by Buyer if any of the conditions in
Section 7 have not been satisfied as of the Closing or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement or to
obtain the required funding to consummate this transaction) and Buyer has not
waived such condition on or before the Closing; or (b) by Sellers, if any of the
conditions in Section 8 have not been satisfied as of the Closing or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement)
and Sellers have not waived such condition on or before the Closing;
9.1.3. by mutual consent of Buyer and Sellers; or
9.1.4. by either Buyer or Sellers if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before June 4, 1999, or such later date as the parties may agree upon.
9.2. EFFECT OF TERMINATION. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will terminate,
except that the obligations in Sections 11.1 and 11.3 will survive. If this
Agreement is terminated by a party (the "Terminating Party") because of the
Breach of the Agreement by the other party or because one or more of the
conditions to the Terminating Party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the Terminating Party's right to pursue all
legal remedies will survive such termination unimpaired. In addition and without
prejudice to other available remedies (a) if the Terminating Party is Sellers or
if Buyer fails to obtain the required funding by the Closing, the Company may
retain the deposit of $50,000 payable to Seller, and (b) if the Terminating
Party is Buyer, Sellers shall immediately repay the deposit of $50,000 to Buyer.
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10. INDEMNIFICATION; REMEDIES.
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement, the Schedule of Exceptions, the certificates delivered pursuant to
Sections 2.5.1.5 and 2.5.2.2, and any other certificate or document delivered
pursuant to this Agreement will survive the Closing for the period set forth
herein. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations for the period
specified in this Section 10 will not be affected by any investigation conducted
with respect to, or any Knowledge acquired at any time by the party claiming
indemnification, whether before or after the execution and delivery of this
Agreement or the Closing, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants, and obligations.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.
Sellers, severally, will indemnify and hold harmless Buyer for, and will pay to
the indemnified party the amount of, any loss, liability, claim, damage, expense
(including reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
10.2.1. any Breach of any representation or warranty
made by such Seller in this Agreement, the Schedule of Exceptions, or any other
certificate or document delivered by Sellers pursuant to this Agreement;
10.2.2. any Breach by any Seller of any covenant or
obligation of such Seller in this Agreement;
10.2.3. any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with any Seller or
the Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; or
10.2.4. the Proceeding currently pending or any
subsequent Proceeding initiated by or involving ALT Inc. or its Affiliates
arising from facts occurring prior to the Closing (the "ALT Litigation").
Sellers shall bear all of the Damages, including without limitation, attorneys
fees, costs and other expenses of and incidental to the ALT Litigation
(collectively the "ALT Litigation Damages"). Buyer shall provide Sellers with
all reasonable assistance and authority to defend and prosecute the ALT
Litigation. Buyer shall contribute a maximum of $200,000 to the ALT Litigation
Damages as follows: (a) Buyer and Sellers (jointly and severally) shall
contribute to the ALT Litigation Damages in increments of $50,000 with Buyer
paying the first increment of $50,000, Sellers paying the second increment of
$50,000 and Sellers and Buyer alternating in the same order thereafter, (b) the
maximum amount payable by Buyer shall be four increments of $50,000 each to a
total of $200,000, (c) any additional ALT Litigation Damages shall be borne by
Sellers severally, and (d) any award or benefit resulting from the ALT
Litigation shall be divided equally between Buyer and Sellers to reimburse the
contributions provided for in clause (a) of this Section 10.2.4 and thereafter
to Sellers.
The remedies provided in this Section 10.2 will be the exclusive remedy
that may be available to Buyer under this Agreement, but nothing contained in
this Section 10 shall apply to the rights and obligations under the Employment
Agreements, the Noncompetition Agreements and Sellers' Release by or in favor of
the parties thereto.
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10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer
will indemnify and hold harmless Sellers, and will pay to Sellers the amount of
any Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
10.4. TIME LIMITATIONS. If the Closing occurs, Sellers will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing unless on or before the first anniversary of
the Closing Buyer notifies Sellers of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Buyer. If the
Closing occurs, Buyer will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing, unless on or before the first
anniversary of the Closing Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers. The foregoing limitations shall not apply to (a) a claim with respect
to Sections 3.3, 3.10 and 3.12 or (b) a claim of actual fraud, which may be made
at any time prior to expiration of the applicable statute of limitations for
such Claims.
10.5. LIMITATIONS ON AMOUNT--SELLERS. Except with respect to
actual fraud or Sellers' obligations and liabilities under Section 10.2.4 above,
Sellers will have no liability (for indemnification or otherwise) with respect
to the matters described in Section 10.2: (a) until the total of all Damages
with respect to such matters exceeds Thirty-Five Thousand Dollars ($35,000), and
then only for the amount by which such Damages exceed Thirty Five Thousand
Dollars ($35,000) and (b) for any Damages in excess of One Million Dollars
($1,000,000).
10.6. LIMITATIONS ON AMOUNT--BUYER. Except with respect to
actual fraud, Buyer will have no liability (for indemnification or otherwise)
with respect to the matters described in Section 10.3: (a) until the total of
all Damages with respect to such matters exceeds Thirty Five Thousand Dollars
($35,000), and then only for the amount by which such Damages exceed Thirty Five
Thousand Dollars ($35,000) and (b) for any Damages in excess of One Million
Dollars ($1,000,000).
10.7. PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
10.7.1. Promptly after receipt by an indemnified
party under Section 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
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10.7.2. If any Proceeding referred to in Section
10.7.1 is brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will, unless the claim involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel reasonably satisfactory to the indemnified party and, after notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party. 10.7.3. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
10.7.4. The parties hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought against
any indemnified party for purposes of any claim that an indemnified party may
have under this Agreement with respect to such Proceeding or the matters alleged
therein.
10.8. PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
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11. GENERAL PROVISIONS.
11.1. EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Sellers will cause the
Company not to incur any out-of-pocket expenses in connection with this
Agreement. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
11.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued by the parties jointly, at such time and in such manner as the parties
shall agree to and provided that no party shall unreasonably object to such
announcement unless compelled to do so by law. Sellers and Buyer will consult
with each other concerning the means by which the Company's employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3. CONFIDENTIALITY. Between the date of this Agreement and
the Closing, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings, or
(d) such information is in the public domain.
11.4. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement for the applicable time period set forth in this
Agreement and the consummation of the transactions contemplated hereby
notwithstanding any investigation of the parties.
11.5. NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand, (b) sent by telecopier (with
written confirmation of transmission received by sender), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service, in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
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Sellers: Mr. Paul Mickelsen
1265 Pacific Avenue
Laguna Beach, CA 92651
Telephone No.: (949) 497-4727
The Mickelsen Family Trust
1265 Pacific Avenue
Laguna Beach, CA 92651
Attention: Mr. Paul Mickelsen
Telephone No.: (949) 497-4727
Mr. Todd T. Hammett
267 Ledroit Street
Laguna Beach, CA 92651
Telephone No.: (949) 497-8780
Mr. Mark Wulff
101 Bayhill Drive
Newport Beach, CA 92660
Telephone No.: (949) 760-1075
Mr. Phil Friesen
51 Cape Cod
Irvine, CA 92620
Telephone No.: (949) 551-3717
Mr. Clayton Harless
5 Sage Hill
Laguna Hills, CA 92653
Telephone No. (949) 448-0148
with a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618-2301
Attention: Laura B. Hunter, Esq.
Facsimile No.: (949) 790-6301
Telephone No.: (949) 790-6300
Buyer: SVI Holdings, Inc.
7979 Ivanhoe Avenue, Suite 500
La Jolla, CA 92037
Attention: Barry M. Schechter
Facsimile No.: (619) 551-5067
Telephone No.: (619) 551-2365
with a copy to: Solomon Ward Seidenwurm & Smith, LLP
401 B Street, Suite 1200
San Diego, CA 92101
Attention: Norman L. Smith, Esq.
Facsimile No.: (619) 231-4755
Telephone No.: (619) 231-0303
32
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11.6. BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and
unless otherwise provided in, this Agreement, each and all of the covenants,
terms, provisions, and agreements contained herein shall be binding upon, and
inure to the benefit of, the permitted successors, executors, heirs,
Representatives, administrators and assigns of the parties. Neither Buyer nor
Sellers shall assign this Agreement to any person or entity (including by
operation of law) without the prior written consent of the other parties.
11.7. ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor shall be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, partner of any party hereto or any
other person or entity, and, except as specifically provided otherwise herein or
in the related documents, all provisions hereof shall be personal solely between
the parties.
11.8. ATTORNEYS FEES. The prevailing party(ies) in Proceeding
relating to the enforcement or interpretation of this Agreement may recover from
the unsuccessful party(ies) all costs, expenses, and actual attorney's fees
(including expert witness and other consultants' fees and costs) relating to or
arising out of (a) the Proceeding (whether or not the Proceeding proceeds to
judgment), and (b) any post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from the
Proceeding. All such judgments and awards shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, and actual
attorney's fees. "Prevailing party" includes, without limitation, a party who
agrees to dismiss an action upon the other party's payment of the sums allegedly
due or performance of the covenants allegedly breached, or who obtains
substantially the relief sought by it.
11.9. JURISDICTION; SERVICE OF PROCESS. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement may be brought against any of the parties in the courts
of the State of California, County of San Diego, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein.
11.10. FURTHER ASSURANCES. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
11.11. WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
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11.12. ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter (including the Letter of Intent between Buyer and Sellers dated March 26,
1999) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
11.13. SCHEDULE OF EXCEPTIONS. In the event of any
inconsistency between the statements in the body of this Agreement and those in
the Schedule of Exceptions (other than an exception expressly set forth as such
in the Schedule of Exceptions with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.
11.14. SEVERABILITY. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
11.15. CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties and their attorneys and the language hereof
shall not be construed for or against any party. The titles and headings herein
are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
11.16. PRONOUNS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.
11.17. TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
11.18. GOVERNING LAW. This Agreement will be governed by the
laws of the State of California without regard to conflicts of laws principles.
///
///
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///
///
///
///
///
///
///
///
///
///
///
///
///
///
11.19. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer: Sellers:
SVI Holdings, Inc., The Mickelsen Family Trust
a Nevada Corporation
By: /s/ Barry Schecter By:/S/ Paul Mickelsen
- ----------------------------------- -------------------------------
Its: Paul Mickelsen, Trustee
------------------------------
The Company: SVI By:/S/ Patricia A. Mickelsen
-------------------------------
Patricia A. Mickelsen, Trustee
35
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Island Pacific Systems Corporation
/S/ Todd T. Hammett
-----------------------
By:/s/ Paul Mickelsen Todd T. Hammett
-----------------------------------
Its:
---------------------------------- /S/ Mark Wulff
-----------------------
Mark Wulff
/S/ Phil Friesen
----------------------
Phil Friesen
/S/ Clayton Harless
---------------------
Clayton Harless
For purposes of Sections
2.5.1.2, 2.5.1.4, 2.5.2.4,
the last sentence of
Section 3.2.1, and Section
3.20.3.2 only:
/S/ Paul Mickelsen
----------------------
Paul Mickelsen
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of June 3, 1999
(the "Effective Date") by and between Island Pacific Systems Corporation, a
California corporation (the "Company"), and Todd T. Hammett ("Executive"), with
reference to the following facts:
A. Executive is experienced in managing the business conducted by the
Company.
B. Island Pacific has been acquired by SVI Holdings, Inc., a Nevada
corporation ("SVI"), pursuant to the Stock Purchase Agreement dated as of June
1, 1999 among SVI, the Company, Paul Mickelsen, an individual, The Michelsen
Family Trust, Mark T. Wulff, an individual, Philip J. Friesen, an individual,
Clayton Harless, an individual, and Executive (the "Stock Purchase Agreement").
C. Under the Stock Purchase Agreement Executive sold to SVI, the
holding company of the Company, all of Executive's shares in the Company.
D. The Company desires to employ Executive to perform the duties and
responsibilities described herein on the terms and conditions hereinafter set
forth.
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby accepts such employment upon the terms and conditions hereinafter set
forth.
2. DUTIES. Subject to the terms and provisions of this Agreement,
Executive hereby is employed by the Company as the Chief Financial Officer of
the Company. Executive's duties shall consist of such duties as customarily are
associated with service as the Chief Financial Officer of a corporate business,
and shall have full responsibility and authority, along with the President, for
managing the day-to-day operations of the Company and implementing such policies
as the Board of Directors of the Company may from time to time promulgate.
Executive shall report directly to the Chairman of the Board of Directors of the
Company or his designee.
3. SCOPE OF SERVICES. Executive shall devote substantially all of his
business time, attention, energies, skills, learning and efforts to the
Company's business.
4. TERM OF EMPLOYMENT AND VOLUNTARY TERMINATION. Subject to prior
termination of this Agreement as hereinafter provided, the term of this
Agreement shall commence on the Effective Date and shall continue for three
years thereafter, unless earlier terminated as provided in this Agreement.
5. COMPENSATION.
5.1. Executive's annual compensation ("Base Compensation")
under this Agreement prorated for any partial year, shall be $150,000 per year,
commencing June 1, 1999. The Base Compensation shall be payable semi-monthly in
arrears from the Effective Date in accordance with the ordinary payroll
procedures of the Company. Any increases in Base Compensation shall be in the
sole and absolute discretion of the Company.
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6. OTHER RIGHTS AND BENEFITS. Executive shall also be entitled to
receive all other rights and benefits, including health insurance, vacations,
sick pay and retirement plan participation, as are made available to other
senior executives of the Company and its affiliates.
7. TERMINATION. The employment of Executive may be terminated as
follows:
7.1. TERMINATION BY MUTUAL AGREEMENT. The Company and
Executive may mutually agree in writing to terminate Executive's employment.
7.2. TERMINATION FOR DEATH. Executive's employment shall
terminate immediately upon Executive's death.
7.3. TERMINATION UPON DISABILITY. Executive's employment shall
terminate if Executive should become totally and permanently disabled. For
purposes of this Agreement, Executive shall be considered "totally and
permanently disabled" if Executive is treated as permanently "disabled" under
any permanent disability insurance policy maintained by the Company and is
entitled to full benefits payable under such policy upon a total and permanent
disability. In the event any such policy is either not in force or the benefits
are not available under such policy, then "total and permanent disability" shall
mean the inability of Executive, as a result of substance abuse, any mental,
nervous or psychiatric disorder, or physical condition, injury or illness to
perform substantially all of his duties on a full-time basis currently for a
period of six (6) consecutive months, as determined by a licensed physician
selected by the Board of Directors of the Company.
7.4. TERMINATION BY THE COMPANY OR EXECUTIVE. Executive or the
Company may terminate this Agreement at will, for any reason, or for no reason
at all, upon six (6) months prior written notice.
7.5. TERMINATION BY EMPLOYEE FOR "CAUSE". The Company may
terminate this Agreement for "Cause" upon three days written notice so long as
the Company has given Executive written notice describing the Cause and
Executive has not cured such Cause within a reasonable time, but no less than
fourteen (14) days. For purposes of this Agreement, "Cause" shall mean the
existence or occurrence of any of the following:
7.5.1. Executive's conviction of a felony involving
the Company or moral turpitude.
7.5.2. Executive's commission of theft, embezzlement
or fraud.
7.5.3. Executive's willful violation of a reasonable
the Company policy previously made known to him or a reasonable directive of the
Board of Directors of the Company.
7.5.4. Executive's breach of his obligations set
forth in Sections 9, 10, 11 and 12 below.
7.5.5. Any neglect or breach of duty by Executive
under this Agreement, or any failure by Executive to perform under this
Agreement which remains a breach for fourteen days after receipt of written
notice describing such breach.
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<PAGE>
7.5.6. If Executive breaches any material term of the
Stock Purchase Agreement and remains in breach for 14 days after receipt of
written notice describing such breach.
8. REPRESENTATIONS AND WARRANTIES. Executive hereby represents and
warrants that as of the date of execution of this Agreement: (i) this Agreement
will not cause or require Executive to breach any obligation to, or agreement or
confidence with, any other person; (ii) Executive is not representing, or
otherwise affiliated in any capacity with, any other lines of products,
manufacturers, vendors or customers of the Company; and (iii) Executive has not
been induced to enter into this Agreement by any promise or representation other
than as expressly set forth in this Agreement.
9. CONFIDENTIALITY. Executive hereby acknowledges that the Company has
made (or may make) available to Executive certain customer lists, product design
information, performance standards and other confidential and/or proprietary
information of the Company or licensed to the Company, including without
limitation trade secrets, copyrighted materials and/or financial information of
the Company (or any of its Affiliates, as defined in Section 11.5 below),
including without limitation, financial statements, reports and data
(collectively, the "Confidential Material"). Except as essential to Executive's
obligations under this Agreement, neither Executive nor any agent, employee,
officer, or independent contractor of or retained by Executive shall make any
disclosure of this Agreement, the terms of this Agreement, or any of the
Confidential Material. Except as essential to Executive's obligations under this
Agreement, neither employee nor any agent, employee, officer, or independent
contractor of or retained by Executive shall make any duplication or other copy
of any of the Confidential Material. Immediately upon request from the Company,
Executive shall return to the Company all Confidential Material. Executive shall
notify each person to whom any disclosure is made that such disclosure is made
in confidence, that the Confidential Material shall be kept in confidence by
such person, and that such person shall be bound by the provisions of this
Section. Nothing contained in this section 9 shall be construed as preventing
Executive from providing Confidential Material in compliance with a valid court
order issued by court of competent jurisdiction, providing Executive takes
reasonable steps to prevent dissemination of such Confidential Material.
10. PROPRIETARY INFORMATION. For purposes of this Agreement,
"Proprietary Information" shall mean any information, observation, data, written
material, record, document, computer program, software, firmware, invention,
discovery, improvement, development, tool, machine, apparatus, appliance,
design, promotional idea, customer list, practice, process, formula, method,
technique, trade secret, product and/or research related to the actual or
anticipated research, marketing strategies, pricing information, business
records, development, products, organization, business or finances of the
Company. Proprietary Information shall not include information in the public
domain as of execution of this Agreement except through any act or omission of
Employee. All right, title and interest of every kind and nature whatsoever in
and to the Proprietary Information made, discussed, developed, secured, obtained
or learned by Executive during the term of this Agreement, or the 60-day period
immediately following termination of this Agreement, shall be the sole and
exclusive property of the Company for any purposes or uses whatsoever, and shall
be disclosed promptly by Executive to the Company. The covenants set forth in
the preceding sentence shall apply regardless of whether any Proprietary
Information is made, discovered, developed, secured, obtained or learned (a)
solely or jointly with others, (b) during the usual hours of work or otherwise,
(c) at the request and upon the suggestion of the Company or otherwise, or (d)
with the Company's materials, tools, instruments or on the Company's premises or
otherwise. All Proprietary Information developed, created, invented, devised,
conceived or discovered by Executive that are subject to copyright protection
are explicitly considered by Executive and the Company to be works made for hire
3
<PAGE>
to the extent permitted by law. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to the Proprietary Information.
Executive hereby forever fully releases and discharges the Company, any
Affiliates of the Company and their respective officers, directors and
employees, from and against any and all claims, demands, damages, liabilities,
costs and expenses of Executive arising out of, or relating to, any Proprietary
Information. Executive shall execute any documents and take any action the
Company may deem necessary or appropriate to effectuate the provisions of this
Agreement, including without limitation assisting the Company in obtaining
and/or maintaining patents, copyrights or similar rights to any Proprietary
Information assigned to the Company, if the Company, in its sole discretion,
requests such assistance. Executive shall comply with any reasonable rules
established from time to time by the Company for the protection of the
confidentiality of any Proprietary Information. Executive irrevocably appoints
the Chairman of the Company's Holding Company to act as Executive's agent and
attorney-in-fact to perform all acts necessary to obtain and/or maintain
patents, copyrights and similar rights to any Proprietary Information assigned
by Executive to the Company under this Agreement if (a) Executive refuses to
perform those acts, or (b) is unavailable, within the meaning of any applicable
laws. Executive acknowledges that the grant of the foregoing power of attorney
is coupled with an interest and shall survive the death or disability of
Executive. Executive shall promptly disclose to the Company, in confidence (a)
all Proprietary Information that Executive creates during the term of this
Agreement, and (b) all patent applications filed by Executive within one year
after termination of this Agreement. Any application for a patent, copyright
registration or similar right filed by Executive within one year after
termination of this Agreement shall be presumed to relate to Proprietary
Information created by Executive during the term of this Agreement, unless
Executive can prove otherwise. Nothing contained in this Agreement shall be
construed to preclude the Company from exercising all of its rights and
privileges as sole and exclusive owner of all of the Proprietary Information
owned by or assigned to the Company under this Agreement. The Company, in
exercising such rights and privileges with respect to any particular item of
Proprietary Information, may decide not to file any patent application or any
copyright registration on such Proprietary Information, may decide to maintain
such Proprietary Information as secret and confidential, or may decide to
abandon such Proprietary Information or dedicate it to the public. Executive
shall have no authority to exercise any rights or privileges with respect to the
Proprietary Information owned by or assigned to the Company under this
Agreement. This Agreement does not apply to any Proprietary Information that
qualifies fully under the provisions of California Labor Code Section 2870 or
any similar or successor statute.
11. COVENANT NOT TO COMPETE AND NONCOMPETITION. Executive acknowledges
that this Agreement is being entered in connection with the acquisition by the
Company of all of Executive's shares in the Company. To the extent permitted by
applicable law, during the period of time set forth in Section 11.5 below:
11.1. Executive shall not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, or control of, be employed by, associated
with, or in any manner connected with, or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or business of the Company anywhere in the United States, which
business consists of the business that the Company conducts as of the date of
this Agreement ("the Company's Business"). This paragraph 11.1 shall not apply
if: (a) the Company terminates this Agreement without Cause or (b) the Company
transfers Executive out of Orange County, California and Executive terminates
this Agreement as a result of such transfer.
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<PAGE>
11.2. Executive shall not undertake any employment or activity
competitive with the Company's Business, including without limitation the
inducement or solicitation of the Company's customers, if the duties or work of,
in connection with or related to such competitive employment or activity would
or might cause Executive to reveal or use any Confidential Material or
Proprietary Information. The restriction set forth in this Section 11 shall not
be limited to a particular geographical area.
11.3. Executive shall not, directly or indirectly, either for
himself or any other person, (i) induce or attempt to induce any employee of the
Company or any Affiliate (as defined below) to leave the employ of such the
Company, (ii) in any way interfere with the relationship between the Company or
any Affiliate and any employee of such the Company, (iii) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any employee of the
Company or any Affiliate, or (iv) induce or attempt to induce any customer,
supplier, licensee, or business relation of the Company or any Affiliate to
cease doing business with such company, or in any way interfere with the
relationship between any customer, supplier, licensee, or business relation of
such the Company.
11.4. Executive shall not, directly or indirectly, either for
himself or any other person, solicit the business of any person known to
Executive to be a customer of the Company or any Affiliate, whether or not
Executive had business or personal contact with such person, unless Executive's
solicitation of such person is done in connection with a business that is not
competitive with that of the Company or any Affiliate.
11.5. The duration of the covenants set forth in this Section
11 shall be the entire term of Executive's employment with the Company plus a
period of three years after the termination of such employment. Executive agrees
that this covenant is reasonable with respect to its duration, geographical
area, and scope. Notwithstanding such restriction, Executive may purchase or
otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934.
In the event of a breach by Executive of any covenant set
forth in this Section 11, the term of such covenant will be extended by the
period of the duration of such breach, provided, however, that such extension
shall be limited to three years. In addition to the Company's right to damages
and any other rights it may have, to obtain injunctive or other equitable relief
to restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of this Section, Executive agrees that money damages alone would
be inadequate to compensate the Company and would be an inadequate remedy for
such breach. If a court of competent jurisdiction holds that the obligations of
Executive pursuant to this Section 11 are unenforceable due to the duration,
geographical areas or scope of this covenant, then such duration, geographical
area or scope of this covenant shall be reduced to the least degree necessary to
render this covenant enforceable. For purposes of this Agreement, "Affiliate"
shall mean any partner, employee, director, shareholder, officer of the Company
or any person or entity controlled by, controlling, or under common control
with, directly or indirectly, the Company, and its successor in title and
interest.
5
<PAGE>
12. BUSINESS OPPORTUNITIES. During the term of this Agreement, if
Executive (or any agent, employee, officer or independent contractor of or
retained by Executive) becomes aware of, or develops, creates, invests, devises,
conceives or discovered, any project, investment, venture, business or other
opportunity (any of the preceding, an "Opportunity") that is similar to,
competitive with, related to or in the same field as the Company or any
Affiliate, or any project, investment, venture, or business of the Company or
any Affiliate, then Executive shall so notify the Company immediately in writing
of such Opportunity and shall use Executive's good-faith efforts to cause the
Company to have the opportunity to invest in, participate in or otherwise become
affiliated with such Opportunity.
13. SECTION HEADINGS. The section headings or captions in this
Agreement are for convenience of reference only and do not form a part hereof,
and do not in any way modify, interpret or construe the intent of the parties or
affect any of the provisions of this Agreement.
14. SURVIVAL. The obligations and rights imposed upon the parties
hereto by the provisions of this Agreement which relate to acts or events
subsequent to the termination of this Agreement shall survive the termination of
this Agreement and shall remain fully effective thereafter.
15. VENUE AND JURISDICTION. For purposes of venue and jurisdiction,
this Agreement shall be deemed made and to be performed in the City of San
Diego, California.
16. ARBITRATION.
16.1. Any claim, dispute or other controversy (a
"Controversy") relating to this Agreement shall be settled and resolved by
binding arbitration in San Diego County, California, before the American
Arbitration Association ("AAA"). The arbitration shall be conducted in
accordance with AAA's rules and procedures, except as expressly modified by this
Section. The Parties to this Agreement (the "Parties") shall be entitled to full
discovery regarding the Controversy as permitted by the California Code of Civil
Procedure. The arbitrator's decision on the Controversy shall be a final and
binding determination of the Controversy and shall be fully enforceable as an
arbitration award in any court having jurisdiction and venue over the Parties.
The arbitrator shall also award the prevailing Party any attorneys' fees and
expenses the prevailing Party incurs in connection with the arbitration, and the
other Party shall pay the arbitrator's fees and expenses. The arbitrator shall
determine who is the prevailing Party. Each Party submits to the exclusive
jurisdiction of the courts located in San Diego County, California, for purposes
of Section 16.2 below compelling arbitration or giving legal confirmation of any
arbitration award. Each Party also agrees to accept service of process for all
arbitration proceedings in accordance with AAA's rules.
16.2. The obligation to arbitrate shall not be binding upon
either party with respect to requests for temporary restraining orders,
preliminary injunctions or other procedures in a court of competent jurisdiction
to obtain interim relief when deemed necessary by such court to preserve the
status quo or prevent irreparable injury pending resolution by arbitration of
the actual dispute between the parties.
16.3. The provisions of this Section shall be construed as
independent of any other covenant or provision of this Agreement; provided that
if a court of competent jurisdiction determines that any such provisions are
unlawful in any way, such court shall modify or interpret such provisions to the
minimum extent necessary to have them comply with the law.
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16.4. This arbitration provision shall be deemed to be
self-executing and shall remain in full force and effect after expiration or
termination of this Agreement. In the event either party fails to appear at any
properly noticed arbitration proceeding, an award may be entered against such
party by default or otherwise notwithstanding said failure to appear.
17. SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable in any relevant
jurisdiction, then such illegal or unenforceable provision shall be modified by
the proper court, if possible, but only to the extent necessary to make such
provision enforceable, and such modified provision and all other provisions of
this Agreement shall be given effect separately from the provision or portion
thereof determined to be illegal or unenforceable and shall not be affected
thereby; provided, that any such modification shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
determination of illegality or unenforceability is made.
18. WAIVER. The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights granted both parties herein are
cumulative and the election of one shall not constitute a waiver of such party's
right to assert all other legal remedies available under the circumstances.
19. PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to this Agreement and the
successors, assigns and affiliates of the Company, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third person to any party to this Agreement, nor shall any provision give any
third person any right of action over or against any party to this Agreement.
20. ASSIGNMENT. The rights and obligations under this Agreement shall
be binding upon, and inure to the benefit of, the heirs, executors, successors
and assigns of Executive and the Company. Except as specifically provided in
this Section 20, neither the Company nor Executive may assign this Agreement or
delegate their respective responsibilities under this Agreement without the
consent of the other party hereto. Upon the sale, exchange or other transfer of
substantially all of the assets of the Company, the Company shall assign this
Agreement to the transferee of such assets. No assignment of this Agreement by
the Company shall relieve the Company of, and the Company shall remain obligated
to perform, its duties and obligations under this Agreement, including, without
limitation, payment of the annual salary set forth in Section 5, above.
21. ATTORNEYS' FEES. In the event of any suit, action or arbitration to
enforce any of the terms or provisions of this Agreement, the prevailing party
shall be entitled to its reasonable attorneys' fees and costs. The foregoing
entitlement shall also include attorneys' fees and costs of the prevailing party
on any appeal of a judgment and for any action to enforce a judgment.
22. MODIFICATION. This Agreement may be modified only by a contract in
writing executed by the party(ies) to this Agreement against whom enforcement of
such modification is sought.
23. PRIOR UNDERSTANDINGS. This Agreement contains the entire agreement
between the parties to this Agreement with respect to the subject matter of this
Agreement, is intended as a final expression of such parties' agreement with
respect to such terms as are included in this Agreement, is intended as a
complete and exclusive statement of the terms of such agreement, and supersedes
all negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to such subject matter, which precede or
accompany the execution of this Agreement.
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24. INTERPRETATION. Whenever the context so requires in this Agreement,
all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other
genders, and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed under, and governed by, the laws of the
State of California without giving effect to conflict of laws provisions.
27. DRAFTING AMBIGUITIES. Each party to this Agreement has reviewed and
revised this Agreement. Each party to this Agreement has had the opportunity to
have such party's legal counsel review and revise this Agreement. The rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
28. CONSTRUCTION. Where used in this Agreement, the terms "include" or
"including" mean include or including, as applicable, without limitation.
THE COMPANY:
ISLAND PACIFIC SYSTEMS CORPORATION,
a California corporation
By: /s/ Barry Schechter
------------------------------------
BARRY SCHECHTER
EXECUTIVE:
/S/ Todd T. Hammett
---------------------------------------
TODD T. HAMMETT
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of June 3, 1999
(the "Effective Date") by and between Island Pacific Systems Corporation, a
California corporation (the "Company"), and Mark T. Wulff ("Executive"), with
reference to the following facts:
A. Executive is experienced in managing the business conducted by the
Company.
B. Island Pacific has been acquired by SVI Holdings, Inc., a Nevada
corporation ("SVI"), pursuant to the Stock Purchase Agreement dated as of June
1, 1999 among SVI, the Company, Paul Mickelsen, an individual, The Michelsen
Family Trust, Todd Hammett, an individual, Philip J. Friesen, an individual,
Clayton Harless, an individual, and Executive (the "Stock Purchase Agreement").
C. Under the Stock Purchase Agreement Executive sold to SVI, the
holding company of the Company, all of Executive's shares in the Company.
D. The Company desires to employ Executive to perform the duties and
responsibilities described herein on the terms and conditions hereinafter set
forth.
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby accepts such employment upon the terms and conditions hereinafter set
forth.
2. DUTIES. Subject to the terms and provisions of this Agreement,
Executive hereby is employed by the Company as the Chief Executive Officer of
the Company. Executive's duties shall consist of such duties as customarily are
associated with service as the Chief Executive Officer of a corporate business,
and shall have full responsibility and authority, along with the President, for
managing the day-to-day operations of the Company and implementing such policies
as the Board of Directors of the Company may from time to time promulgate.
Executive shall report directly to the Chairman of the Board of Directors of the
Company or his designee.
3. SCOPE OF SERVICES. Executive shall devote substantially all of his
business time, attention, energies, skills, learning and efforts to the
Company's business.
4. TERM OF EMPLOYMENT AND VOLUNTARY TERMINATION. Subject to prior
termination of this Agreement as hereinafter provided, the term of this
Agreement shall commence on the Effective Date and shall continue for three
years thereafter, unless earlier terminated as provided in this Agreement.
5. COMPENSATION.
5.1. Executive's annual compensation ("Base Compensation")
under this Agreement prorated for any partial year, shall be $300,000 per year,
commencing June 1, 1999. The Base Compensation shall be payable semi-monthly in
arrears from the Effective Date in accordance with the ordinary payroll
procedures of the Company. Any increases in Base Compensation shall be in the
sole and absolute discretion of the Company.
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6. OTHER RIGHTS AND BENEFITS. Executive shall also be entitled to
receive all other rights and benefits, including health insurance, vacations,
sick pay and retirement plan participation, as are made available to other
senior executives of the Company and its affiliates.
7. TERMINATION. The employment of Executive may be terminated as
follows:
7.1. TERMINATION BY MUTUAL AGREEMENT. The Company and
Executive may mutually agree in writing to terminate Executive's employment.
7.2. TERMINATION FOR DEATH. Executive's employment shall
terminate immediately upon Executive's death.
7.3. TERMINATION UPON DISABILITY. Executive's employment shall
terminate if Executive should become totally and permanently disabled. For
purposes of this Agreement, Executive shall be considered "totally and
permanently disabled" if Executive is treated as permanently "disabled" under
any permanent disability insurance policy maintained by the Company and is
entitled to full benefits payable under such policy upon a total and permanent
disability. In the event any such policy is either not in force or the benefits
are not available under such policy, then "total and permanent disability" shall
mean the inability of Executive, as a result of substance abuse, any mental,
nervous or psychiatric disorder, or physical condition, injury or illness to
perform substantially all of his duties on a full-time basis currently for a
period of six (6) consecutive months, as determined by a licensed physician
selected by the Board of Directors of the Company.
7.4. TERMINATION BY THE COMPANY OR EXECUTIVE. Executive or the
Company may terminate this Agreement at will, for any reason, or for no reason
at all, upon six (6) months prior written notice.
7.5. TERMINATION BY EMPLOYEE FOR "CAUSE". The Company may
terminate this Agreement for "Cause" upon three days written notice so long as
the Company has given Executive written notice describing the Cause and
Executive has not cured such Cause within a reasonable time, but no less than
fourteen (14) days. For purposes of this Agreement, "Cause" shall mean the
existence or occurrence of any of the following:
7.5.1. Executive's conviction of a felony involving
the Company or moral turpitude.
7.5.2. Executive's commission of theft, embezzlement
or fraud.
7.5.3. Executive's willful violation of a reasonable
the Company policy previously made known to him or a reasonable directive of the
Board of Directors of the Company.
7.5.4. Executive's breach of his obligations set
forth in Sections 9, 10, 11 and 12 below.
7.5.5. Any neglect or breach of duty by Executive
under this Agreement, or any failure by Executive to perform under this
Agreement which remains a breach for fourteen days after receipt of written
notice describing such breach.
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<PAGE>
7.5.6. If Executive breaches any material term of the
Stock Purchase Agreement and remains in breach for 14 days after receipt of
written notice describing such breach.
8. REPRESENTATIONS AND WARRANTIES. Executive hereby represents and
warrants that as of the date of execution of this Agreement: (i) this Agreement
will not cause or require Executive to breach any obligation to, or agreement or
confidence with, any other person; (ii) Executive is not representing, or
otherwise affiliated in any capacity with, any other lines of products,
manufacturers, vendors or customers of the Company; and (iii) Executive has not
been induced to enter into this Agreement by any promise or representation other
than as expressly set forth in this Agreement.
9. CONFIDENTIALITY. Executive hereby acknowledges that the Company has
made (or may make) available to Executive certain customer lists, product design
information, performance standards and other confidential and/or proprietary
information of the Company or licensed to the Company, including without
limitation trade secrets, copyrighted materials and/or financial information of
the Company (or any of its Affiliates, as defined in Section 11.5 below),
including without limitation, financial statements, reports and data
(collectively, the "Confidential Material"). Except as essential to Executive's
obligations under this Agreement, neither Executive nor any agent, employee,
officer, or independent contractor of or retained by Executive shall make any
disclosure of this Agreement, the terms of this Agreement, or any of the
Confidential Material. Except as essential to Executive's obligations under this
Agreement, neither employee nor any agent, employee, officer, or independent
contractor of or retained by Executive shall make any duplication or other copy
of any of the Confidential Material. Immediately upon request from the Company,
Executive shall return to the Company all Confidential Material. Executive shall
notify each person to whom any disclosure is made that such disclosure is made
in confidence, that the Confidential Material shall be kept in confidence by
such person, and that such person shall be bound by the provisions of this
Section. Nothing contained in this section 9 shall be construed as preventing
Executive from providing Confidential Material in compliance with a valid court
order issued by court of competent jurisdiction, providing Executive takes
reasonable steps to prevent dissemination of such Confidential Material.
10. PROPRIETARY INFORMATION. For purposes of this Agreement,
"Proprietary Information" shall mean any information, observation, data, written
material, record, document, computer program, software, firmware, invention,
discovery, improvement, development, tool, machine, apparatus, appliance,
design, promotional idea, customer list, practice, process, formula, method,
technique, trade secret, product and/or research related to the actual or
anticipated research, marketing strategies, pricing information, business
records, development, products, organization, business or finances of the
Company. Proprietary Information shall not include information in the public
domain as of execution of this Agreement except through any act or omission of
Employee. All right, title and interest of every kind and nature whatsoever in
and to the Proprietary Information made, discussed, developed, secured, obtained
or learned by Executive during the term of this Agreement, or the 60-day period
immediately following termination of this Agreement, shall be the sole and
exclusive property of the Company for any purposes or uses whatsoever, and shall
be disclosed promptly by Executive to the Company. The covenants set forth in
the preceding sentence shall apply regardless of whether any Proprietary
Information is made, discovered, developed, secured, obtained or learned (a)
solely or jointly with others, (b) during the usual hours of work or otherwise,
(c) at the request and upon the suggestion of the Company or otherwise, or (d)
with the Company's materials, tools, instruments or on the Company's premises or
otherwise. All Proprietary Information developed, created, invented, devised,
conceived or discovered by Executive that are subject to copyright protection
are explicitly considered by Executive and the Company to be works made for hire
3
<PAGE>
to the extent permitted by law. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to the Proprietary Information.
Executive hereby forever fully releases and discharges the Company, any
Affiliates of the Company and their respective officers, directors and
employees, from and against any and all claims, demands, damages, liabilities,
costs and expenses of Executive arising out of, or relating to, any Proprietary
Information. Executive shall execute any documents and take any action the
Company may deem necessary or appropriate to effectuate the provisions of this
Agreement, including without limitation assisting the Company in obtaining
and/or maintaining patents, copyrights or similar rights to any Proprietary
Information assigned to the Company, if the Company, in its sole discretion,
requests such assistance. Executive shall comply with any reasonable rules
established from time to time by the Company for the protection of the
confidentiality of any Proprietary Information. Executive irrevocably appoints
the Chairman of the Company's Holding Company to act as Executive's agent and
attorney-in-fact to perform all acts necessary to obtain and/or maintain
patents, copyrights and similar rights to any Proprietary Information assigned
by Executive to the Company under this Agreement if (a) Executive refuses to
perform those acts, or (b) is unavailable, within the meaning of any applicable
laws. Executive acknowledges that the grant of the foregoing power of attorney
is coupled with an interest and shall survive the death or disability of
Executive. Executive shall promptly disclose to the Company, in confidence (a)
all Proprietary Information that Executive creates during the term of this
Agreement, and (b) all patent applications filed by Executive within one year
after termination of this Agreement. Any application for a patent, copyright
registration or similar right filed by Executive within one year after
termination of this Agreement shall be presumed to relate to Proprietary
Information created by Executive during the term of this Agreement, unless
Executive can prove otherwise. Nothing contained in this Agreement shall be
construed to preclude the Company from exercising all of its rights and
privileges as sole and exclusive owner of all of the Proprietary Information
owned by or assigned to the Company under this Agreement. The Company, in
exercising such rights and privileges with respect to any particular item of
Proprietary Information, may decide not to file any patent application or any
copyright registration on such Proprietary Information, may decide to maintain
such Proprietary Information as secret and confidential, or may decide to
abandon such Proprietary Information or dedicate it to the public. Executive
shall have no authority to exercise any rights or privileges with respect to the
Proprietary Information owned by or assigned to the Company under this
Agreement. This Agreement does not apply to any Proprietary Information that
qualifies fully under the provisions of California Labor Code Section 2870 or
any similar or successor statute.
11. COVENANT NOT TO COMPETE AND NONCOMPETITION. Executive acknowledges
that this Agreement is being entered in connection with the acquisition by the
Company of all of Executive's shares in the Company. To the extent permitted by
applicable law, during the period of time set forth in Section 11.5 below:
11.1. Executive shall not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, or control of, be employed by, associated
with, or in any manner connected with, or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or business of the Company anywhere in the United States, which
business consists of the business that the Company conducts as of the date of
this Agreement ("the Company's Business"). This paragraph 11.1 shall not apply
if: (a) the Company terminates this Agreement without Cause or (b) the Company
transfers Executive out of Orange County, California and Executive terminates
this Agreement as a result of such transfer.
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<PAGE>
11.2. Executive shall not undertake any employment or activity
competitive with the Company's Business, including without limitation the
inducement or solicitation of the Company's customers, if the duties or work of,
in connection with or related to such competitive employment or activity would
or might cause Executive to reveal or use any Confidential Material or
Proprietary Information. The restriction set forth in this Section 11 shall not
be limited to a particular geographical area.
11.3. Executive shall not, directly or indirectly, either for
himself or any other person, (i) induce or attempt to induce any employee of the
Company or any Affiliate (as defined below) to leave the employ of such the
Company, (ii) in any way interfere with the relationship between the Company or
any Affiliate and any employee of such the Company, (iii) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any employee of the
Company or any Affiliate, or (iv) induce or attempt to induce any customer,
supplier, licensee, or business relation of the Company or any Affiliate to
cease doing business with such company, or in any way interfere with the
relationship between any customer, supplier, licensee, or business relation of
such the Company.
11.4. Executive shall not, directly or indirectly, either for
himself or any other person, solicit the business of any person known to
Executive to be a customer of the Company or any Affiliate, whether or not
Executive had business or personal contact with such person, unless Executive's
solicitation of such person is done in connection with a business that is not
competitive with that of the Company or any Affiliate.
11.5. The duration of the covenants set forth in this Section
11 shall be the entire term of Executive's employment with the Company plus a
period of three years after the termination of such employment. Executive agrees
that this covenant is reasonable with respect to its duration, geographical
area, and scope. Notwithstanding such restriction, Executive may purchase or
otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934.
In the event of a breach by Executive of any covenant set
forth in this Section 11, the term of such covenant will be extended by the
period of the duration of such breach, provided, however, that such extension
shall be limited to three years. In addition to the Company's right to damages
and any other rights it may have, to obtain injunctive or other equitable relief
to restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of this Section, Executive agrees that money damages alone would
be inadequate to compensate the Company and would be an inadequate remedy for
such breach. If a court of competent jurisdiction holds that the obligations of
Executive pursuant to this Section 11 are unenforceable due to the duration,
geographical areas or scope of this covenant, then such duration, geographical
area or scope of this covenant shall be reduced to the least degree necessary to
render this covenant enforceable. For purposes of this Agreement, "Affiliate"
shall mean any partner, employee, director, shareholder, officer of the Company
or any person or entity controlled by, controlling, or under common control
with, directly or indirectly, the Company, and its successor in title and
interest.
5
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12. BUSINESS OPPORTUNITIES. During the term of this Agreement, if
Executive (or any agent, employee, officer or independent contractor of or
retained by Executive) becomes aware of, or develops, creates, invests, devises,
conceives or discovered, any project, investment, venture, business or other
opportunity (any of the preceding, an "Opportunity") that is similar to,
competitive with, related to or in the same field as the Company or any
Affiliate, or any project, investment, venture, or business of the Company or
any Affiliate, then Executive shall so notify the Company immediately in writing
of such Opportunity and shall use Executive's good-faith efforts to cause the
Company to have the opportunity to invest in, participate in or otherwise become
affiliated with such Opportunity.
13. SECTION HEADINGS. The section headings or captions in this
Agreement are for convenience of reference only and do not form a part hereof,
and do not in any way modify, interpret or construe the intent of the parties or
affect any of the provisions of this Agreement.
14. SURVIVAL. The obligations and rights imposed upon the parties
hereto by the provisions of this Agreement which relate to acts or events
subsequent to the termination of this Agreement shall survive the termination of
this Agreement and shall remain fully effective thereafter.
15. VENUE AND JURISDICTION. For purposes of venue and jurisdiction,
this Agreement shall be deemed made and to be performed in the City of San
Diego, California.
16. ARBITRATION.
16.1. Any claim, dispute or other controversy (a
"Controversy") relating to this Agreement shall be settled and resolved by
binding arbitration in San Diego County, California, before the American
Arbitration Association ("AAA"). The arbitration shall be conducted in
accordance with AAA's rules and procedures, except as expressly modified by this
Section. The Parties to this Agreement (the "Parties") shall be entitled to full
discovery regarding the Controversy as permitted by the California Code of Civil
Procedure. The arbitrator's decision on the Controversy shall be a final and
binding determination of the Controversy and shall be fully enforceable as an
arbitration award in any court having jurisdiction and venue over the Parties.
The arbitrator shall also award the prevailing Party any attorneys' fees and
expenses the prevailing Party incurs in connection with the arbitration, and the
other Party shall pay the arbitrator's fees and expenses. The arbitrator shall
determine who is the prevailing Party. Each Party submits to the exclusive
jurisdiction of the courts located in San Diego County, California, for purposes
of Section 16.2 below compelling arbitration or giving legal confirmation of any
arbitration award. Each Party also agrees to accept service of process for all
arbitration proceedings in accordance with AAA's rules.
16.2. The obligation to arbitrate shall not be binding upon
either party with respect to requests for temporary restraining orders,
preliminary injunctions or other procedures in a court of competent jurisdiction
to obtain interim relief when deemed necessary by such court to preserve the
status quo or prevent irreparable injury pending resolution by arbitration of
the actual dispute between the parties.
16.3. The provisions of this Section shall be construed as
independent of any other covenant or provision of this Agreement; provided that
if a court of competent jurisdiction determines that any such provisions are
unlawful in any way, such court shall modify or interpret such provisions to the
minimum extent necessary to have them comply with the law.
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<PAGE>
16.4. This arbitration provision shall be deemed to be
self-executing and shall remain in full force and effect after expiration or
termination of this Agreement. In the event either party fails to appear at any
properly noticed arbitration proceeding, an award may be entered against such
party by default or otherwise notwithstanding said failure to appear.
17. SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable in any relevant
jurisdiction, then such illegal or unenforceable provision shall be modified by
the proper court, if possible, but only to the extent necessary to make such
provision enforceable, and such modified provision and all other provisions of
this Agreement shall be given effect separately from the provision or portion
thereof determined to be illegal or unenforceable and shall not be affected
thereby; provided, that any such modification shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
determination of illegality or unenforceability is made.
18. WAIVER. The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights granted both parties herein are
cumulative and the election of one shall not constitute a waiver of such party's
right to assert all other legal remedies available under the circumstances.
19. PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to this Agreement and the
successors, assigns and affiliates of the Company, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third person to any party to this Agreement, nor shall any provision give any
third person any right of action over or against any party to this Agreement.
20. ASSIGNMENT. The rights and obligations under this Agreement shall
be binding upon, and inure to the benefit of, the heirs, executors, successors
and assigns of Executive and the Company. Except as specifically provided in
this Section 20, neither the Company nor Executive may assign this Agreement or
delegate their respective responsibilities under this Agreement without the
consent of the other party hereto. Upon the sale, exchange or other transfer of
substantially all of the assets of the Company, the Company shall assign this
Agreement to the transferee of such assets. No assignment of this Agreement by
the Company shall relieve the Company of, and the Company shall remain obligated
to perform, its duties and obligations under this Agreement, including, without
limitation, payment of the annual salary set forth in Section 5, above.
21. ATTORNEYS' FEES. In the event of any suit, action or arbitration to
enforce any of the terms or provisions of this Agreement, the prevailing party
shall be entitled to its reasonable attorneys' fees and costs. The foregoing
entitlement shall also include attorneys' fees and costs of the prevailing party
on any appeal of a judgment and for any action to enforce a judgment.
22. MODIFICATION. This Agreement may be modified only by a contract in
writing executed by the party(ies) to this Agreement against whom enforcement of
such modification is sought.
23. PRIOR UNDERSTANDINGS. This Agreement contains the entire agreement
between the parties to this Agreement with respect to the subject matter of this
Agreement, is intended as a final expression of such parties' agreement with
respect to such terms as are included in this Agreement, is intended as a
complete and exclusive statement of the terms of such agreement, and supersedes
all negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to such subject matter, which precede or
accompany the execution of this Agreement.
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24. INTERPRETATION. Whenever the context so requires in this Agreement,
all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other
genders, and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed under, and governed by, the laws of the
State of California without giving effect to conflict of laws provisions.
27. DRAFTING AMBIGUITIES. Each party to this Agreement has reviewed and
revised this Agreement. Each party to this Agreement has had the opportunity to
have such party's legal counsel review and revise this Agreement. The rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
28. CONSTRUCTION. Where used in this Agreement, the terms "include" or
"including" mean include or including, as applicable, without limitation.
THE COMPANY:
ISLAND PACIFIC SYSTEMS CORPORATION,
a California corporation
By: /s/ Barry Schechter
--------------------------------------
BARRY SCHECHTER
EXECUTIVE:
/S/ Mark T. Wulff
-----------------------------------------
MARK T. WULFF
<PAGE>
COVENANT NOT TO COMPETE AGREEMENT
---------------------------------
This Covenant Not to Compete Agreement ("Agreement") is entered into as
of June 3, 1999, by and between SVI HOLDINGS , INC., a Nevada corporation
("SVI"), having an address for notices at 7979 Ivanhoe Ave., Suite 500, La
Jolla, California 92037, and THE MICKELSEN FAMILY TRUST, (the "Trust"), having
an address for notices at 1265 Pacific Avenue, Laguna Beach, CA 92651, who agree
as follows:
1. RECITALS. This Agreement is made pursuant to the following recitals
of fact, which recitals constitute an integral part of this Agreement.
1.1. This Agreement is being executed in accordance with the
provisions of that certain Stock Purchase Agreement between SVI, the Trust and
the other parties listed therein (the "Purchase Agreement").
1.2. Pursuant to the Purchase Agreement, SVI has agreed to
purchase all of the outstanding shares of capital stock of Island Pacific
Systems Corporation, a California corporation ("Island Pacific").
1.3. Pursuant to the Purchase Agreement, The Mickelsen Family
Trust (the "Trust") has agreed to sell all of the shares of capital stock of
Island Pacific owned by the Trust to SVI. The Trust is the trustor and a trustee
of, and otherwise controls, the Trust.
1.4. The terms of the Purchase Agreement provide that as a
condition to SVI purchasing Island Pacific, the Trust must not directly or
indirectly own or participate in any business that is in competition with Island
Pacific's business. This Agreement is a material and integral part of the
consideration to be received by SVI pursuant to the Purchase Agreement. SVI
would not have entered into the Purchase Agreement without this Agreement.
2. COVENANT NOT TO COMPETE AND NONCOMPETITION. The Trust acknowledges
that this Agreement is being entered in connection with the acquisition by SVI
of all of the shares of capital stock of Island Pacific, with respect to which
the Trust is a major shareholder. To the extent permitted by applicable law,
during the period of time set forth in Section 2.5 below:
2.1. The Trust shall not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, or control of, be employed by, associated
with, or in any manner connected with, or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or business of Island Pacific anywhere in the United States or the
United Kingdom, which business consists of the business that Island Pacific
conducts as of the date of this Agreement (the "Business").
2.2. The Trust shall not undertake any employment or activity
competitive with the Business, including without limitation the inducement or
solicitation of the Island Pacific's customers, if the duties or work of, in
connection with or related to such competitive employment or activity would or
might cause the Trust to reveal or use any Intellectual Property Assets of
Island Pacific (as defined in the Purchase Agreement). The restriction set forth
in this Section 2.2 shall not be limited to a particular geographical area.
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2.3. The Trust shall not undertake any employment or activity
competitive with the Business, including without limitation the inducement or
solicitation of Island Pacific's customers, anywhere in the United States or the
United Kingdom.
2.4. The Trust shall not, directly or indirectly, either for
himself or any other person, (i) induce or attempt to induce any employee of
Island Pacific or any Affiliate (as defined below) to leave the employ of Island
Pacific or any Affiliate, (ii) in any way interfere with the relationship
between Island Pacific or any Affiliate and any employee of such company, or
(iii) induce or attempt to induce any customer, supplier, licensee, or business
relation of Island Pacific or any Affiliate to cease doing business with such
company, or in any way interfere with the relationship between any customer,
supplier, licensee, or business relation of Island Pacific or any Affiliate.
2.5. The Trust shall not, directly or indirectly, either for
himself or any other person, solicit the business of any person known to the
Trust to be a customer of Island Pacific or any Affiliate, whether or not the
Trust had business or personal contact with such person, unless the Trust's
solicitation of such person is done in connection with a business that is not
competitive with that of Island Pacific or any Affiliate.
2.6. The duration of the covenants set forth in this Section 2
shall be two years after the date of the Closing (as defined in the Purchase
Agreement). The Trust agrees that this covenant is reasonable with respect to
its duration, geographical area, and scope. Notwithstanding such restriction,
the Trust may purchase or otherwise acquire up to (but not more than) one
percent (1%) of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934.
In the event of a breach by the Trust of any covenant set
forth in this Section 2, the term of such covenant will be extended by the
period of the duration of such breach, provided, however, that such extension
shall be limited to two years. If a court of competent jurisdiction holds that
the obligations of the Trust pursuant to this Section 2 are unenforceable due to
the duration, geographical areas or scope of this covenant, then such duration,
geographical area or scope of this covenant shall be reduced to the least degree
necessary to render this covenant enforceable. For purposes of this Agreement,
"Affiliate" shall mean any partner, employee, director, shareholder, officer of
Island Pacific or any person or entity controlled by, controlling, or under
common control with, directly or indirectly, Island Pacific, and its successor
in title and interest.
3. BREACH. The Trust acknowledges and agrees that, in the event of any
violation of this Agreement, SVI shall be authorized and entitled to obtain,
from any court of competent jurisdiction, preliminary and permanent injunctive
relief, as well as an equitable accounting of all profits or benefits arising
out of such violation, if any, which rights and remedies shall be cumulative and
in addition to any other rights and remedies to which SVI may be entitled. The
Trust agrees that money damages alone would be inadequate to compensate SVI and
would be an inadequate remedy for such breach.
4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
5. FURTHER ASSURANCES. Each party to this Agreement shall execute all
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement.
2
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6. VENUE AND JURISDICTION. For purposes of venue and jurisdiction, this
Agreement shall be deemed made and to be performed in San Diego, California.
7. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one document.
8. TIME OF ESSENCE. Time and strict and punctual performance are of the
essence with respect to each provision of this Agreement.
9. ATTORNEY'S FEES. In the event any litigation, arbitration,
mediation, or other proceeding ("Proceeding") is initiated by any party against
any other party to enforce, interpret or otherwise obtain judicial or
quasi-judicial relief in connection with this Agreement, the prevailing party in
such Proceeding shall be entitled to recover from the unsuccessful party all
costs, expenses, and actual attorney's fees relating to or arising out of (a)
such Proceeding (whether or not such Proceeding proceeds to judgment), and (b)
any post-judgment or post-award proceeding including without limitation one to
enforce any judgment or award resulting from any such Proceeding. Any such
judgment or award shall contain a specific provision for the recovery of all
such subsequently incurred costs, expenses, and actual attorney's fees.
10. MODIFICATION. This Agreement may be modified only by a contract in
writing executed by the party to this Agreement against whom enforcement of such
modification is sought.
11. HEADINGS. The headings of the Paragraphs of this Agreement have
been included only for convenience, and shall not be deemed in any manner to
modify or limit any of the provisions of this Agreement, or be used in any
manner in the interpretation of this Agreement.
12. PRIOR UNDERSTANDINGS. This Agreement contains the entire agreement
between the parties to this Agreement with respect to the subject matter of this
Agreement, is intended as a final expression of such parties' agreement with
respect to such terms as are included in this Agreement, is intended as a
complete and exclusive statement of the terms of such agreement, and supersedes
all negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to such subject matter, which precede or
accompany the execution of this Agreement.
13. INTERPRETATION. Whenever the context so requires in this Agreement,
all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other
genders, and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate or any
other entity.
14. PARTIAL INVALIDITY. Each provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law. If any provision of this
Agreement or the application of such provision to any person or circumstance
shall, to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected by such invalidity or unenforceability, unless such provision or such
application of such provision is essential to this Agreement.
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15. SUCCESSORS-IN-INTEREST AND ASSIGNS. No party hereto shall assign or
delegate to any other person this Agreement or any rights or obligations under
this Agreement. Subject to any restriction on transferability contained in this
Agreement, this Agreement shall be binding upon and shall inure to the benefit
of the successors-in-interest and assigns of each party to this Agreement.
Nothing in this Paragraph shall create any rights enforceable by any person not
a party to this Agreement, except for the rights of the successors-in-interest
and assigns of each party to this Agreement, unless such rights are expressly
granted in this Agreement to other specifically identified persons.
16. NOTICES. All notices or other communications required or permitted
to be given to a party to this Agreement shall be in writing and shall be
personally delivered, sent by certified mail, postage prepaid, return receipt
requested, or sent by an overnight express courier service that provides written
confirmation of delivery, to such party at its address as set forth above in the
introductory Paragraph of this Agreement. Each such notice or other
communication shall be deemed given, delivered and received upon its actual
receipt, except that if it is sent by mail in accordance with this Paragraph,
then it shall be deemed given, delivered and received three days after the date
such notice or other communication is deposited with the United States Postal
Service in accordance with this Paragraph. Any party to this Agreement may give
a notice of a change of its address to the other party to this Agreement.
17. WAIVER. Any waiver of a default under this Agreement must be in a
writing executed by the party to this Agreement against whom enforcement of such
waiver is sought and shall not be a waiver of any other default concerning the
same or any other provision of this Agreement. No delay or omission in the
exercise of any right or remedy shall impair such right or remedy or be
construed as a waiver. A consent to or approval of any act shall not be deemed
to waive or render unnecessary consent to or approval of any other or subsequent
act.
18. DRAFTING AMBIGUITIES. Each party to this Agreement and its legal
counsel have reviewed and revised this Agreement. The rule of construction that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or of any amendments or
exhibits to this Agreement.
SVI HOLDINGS INC., a Nevada corporation0
By: /s/ Barry Schechter
------------------------------------------
Name: Barry Schechter
----------------------------------------
Title:
--------------------------------------
THE MICKELSEN FAMILY TRUST
By:/S/ Paul Mickelsen
------------------------------------------
Paul Mickelsen, Trustee
By:/S/ Patricia A. Mickelsen
------------------------------------------
Patricia A. Mickelsen, Trustee
4
<PAGE>
TERM LOAN AGREEMENT
Dated as of June 3, 1999
between
SVI HOLDINGS, INC.
and
UNION BANK OF CALIFORNIA, N.A.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
Article 1
DEFINITIONS AND ACCOUNTING TERMS.........................................1
1.1 Defined Terms.......................................................1
1.2 Use of Defined Terms...............................................23
1.3 Accounting Terms...................................................24
1.4 Exhibits and Schedules.............................................24
1.5 References to "Borrower and its Subsidiaries"......................24
1.6 Miscellaneous Terms................................................24
Article 2
TERM LOANS..............................................................25
2.1 Term Loans-General.................................................25
2.2 Alternate Base Rate Loans..........................................26
2.3 Eurodollar Rate Loans..............................................26
Article 3
PAYMENTS AND FEES.......................................................27
3.1 Principal and Interest.............................................27
3.2 Intentionally Omitted..............................................28
3.3 Loan Fee...........................................................28
3.4 Examination Fee....................................................29
3.5 Increased Commitment Costs.........................................29
3.6 Eurodollar Costs and Related Matters...............................29
3.7 Late Payments......................................................33
3.8 Computation of Interest and Fees...................................33
3.9 Non-Banking Days...................................................33
3.10 Manner and Treatment of Payments..................................33
3.11 Intentionally Omitted. ...........................................34
3.12 Failure to Charge Not Subsequent Waiver...........................34
3.13 Intentionally Omitted.............................................35
3.14 Fee Determination Detail..........................................35
3.15 Survivability.....................................................35
Article 4
REPRESENTATIONS AND WARRANTIES..........................................36
4.1 Existence and Qualification; Power; Compliance With Laws...........36
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4.2 Authority; Compliance With Other Agreements and Instruments and
Government Regulations.............................................36
4.3 No Governmental Approvals Required.................................37
4.4 Subsidiaries.......................................................37
4.5 Financial Statements...............................................38
4.6 No Other Liabilities; No Material Adverse Changes..................38
4.7 Title to and Location of Property..................................39
4.8 Intangible Assets..................................................39
4.9 Public Utility Holding Company Act.................................39
4.10 Litigation........................................................39
4.11 Binding Obligations...............................................39
4.12 No Default........................................................40
4.13 ERISA.............................................................40
4.14 Regulation U; Investment Company Act..............................40
4.15 Disclosure........................................................41
4.16 Tax Liability.....................................................41
4.17 Projections.......................................................41
4.18 Hazardous Materials...............................................41
4.19 Security Interests................................................41
Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS).................................................43
5.1 Payment of Taxes and Other Potential Liens.........................43
5.2 Preservation of Existence..........................................43
5.3 Maintenance of Properties..........................................43
5.4 Maintenance of Insurance...........................................43
5.5 Compliance With Laws...............................................44
5.6 Inspection Rights..................................................44
5.7 Keeping of Records and Books of Account............................44
5.8 Compliance With Agreements.........................................44
5.9 Use of Proceeds....................................................44
5.10 Hazardous Materials Laws..........................................44
5.11 Future Subsidiaries...............................................45
5.12 Future Real Property..............................................45
5.13 Year 2000 Compliance..............................................45
Article 6
NEGATIVE COVENANTS......................................................46
6.1 Payment of Subordinated Obligations................................46
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6.2 Disposition of Property............................................46
6.3 Mergers............................................................46
6.4 Hostile Acquisitions...............................................46
6.5 Acquisitions.......................................................47
6.6 Distributions......................................................47
6.7 ERISA..............................................................47
6.8 Change in Nature of Business.......................................47
6.9 Liens and Negative Pledges.........................................47
6.10 Indebtedness and Guaranty Obligations.............................48
6.11 Transactions with Affiliates......................................49
6.12 Investments.......................................................49
6.13 Capital Expenditures..............................................50
6.14 Operating Leases..................................................50
6.15 Subsidiary Indebtedness...........................................50
6.16 Amendments to Subordinated Obligations............................50
6.17 Minimum Book Net Worth............................................50
Article 7
INFORMATION AND REPORTING REQUIREMENTS..................................51
7.1 Financial and Business Information.................................51
7.2 Compliance Certificates............................................53
Article 8
CONDITIONS..............................................................54
8.1 The Loans..........................................................54
8.2 Refinance Loan.....................................................56
Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
.......................................................................58
9.1 Events of Default..................................................58
9.2 Remedies Upon Event of Default.....................................60
Article 10
[INTENTIONALLY OMITTED].................................................62
Article 11
MISCELLANEOUS...........................................................63
11.1 Cumulative Remedies; No Waiver....................................63
11.2 Amendments; Consents..............................................63
11.3 Costs, Expenses and Taxes.........................................63
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11.4 Intentionally Omitted.............................................64
11.5 Survival of Representations and Warranties........................64
11.6 Notices...........................................................64
11.7 Execution of Loan Documents.......................................64
11.8 Binding Effect; Assignment........................................65
11.9 Right of Setoff...................................................66
11.10 Intentionally Omit...............................................66
11.11 Indemnity by Borrower............................................66
11.12 Nonliability of Lender...........................................67
11.13 No Third Parties Benefitted......................................68
11.14 Confidentiality..................................................68
11.15 Further Assurances...............................................69
11.16 Integration......................................................69
11.17 Governing Law; JURISDICTION AND VENUE............................69
11.18 Severability of Provisions.......................................70
11.19 Headings.........................................................70
11.20 Time of the Essence..............................................70
11.21 Intentionally Omitted............................................70
11.22 Hazardous Material Indemnity.....................................70
11.23 Waiver of Right to Trial by Jury.................................71
11.24 Purported Oral Amendments........................................71
EXHIBITS
A - Borrower Security Agreement
B - Compliance Certificate
C - Pledge Agreement
D - Projections
E - Request for Loan/Conversion
F - Subsidiary Guaranty
G - Subsidiary Security Agreement
H - Term Loan A Note
I - Term Loan B Note
SCHEDULES
4.4 Subsidiaries
4.6 Material Adverse Changes
4.7A Existing Liens, Negative Pledges and Rights of Others
4.7B Location of Property
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4.8 Trade Names
4.10 Material Litigation
4.18 Hazardous Materials Matters
6.10 Existing Indebtedness and Guaranty Obligations
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<PAGE>
Dated as of June 3, 1999
THIS TERM LOAN AGREEMENT is entered into by and between SVI HOLDINGS,
INC., a Nevada corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A.
("Lender"), with reference to the following facts:
RECITALS
--------
A. Borrower has requested that Lender provide Borrower with
term loans in the amount of $15,000,000 and $3,500,000 to facilitate Borrower's
consummation of the Island Pacific Acquisition (as hereinafter defined).
B. Lender is willing to provide Borrower with such loans on
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
Article 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 DEFINED TERMS. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
"ACQUISITION" means any transaction, or any series of related
transactions, consummated after the Closing Date, by which Borrower
and/or any of its Subsidiaries directly or indirectly (a) acquires any
ongoing business or all or substantially all of the assets of any
Person engaged in any ongoing business, whether through purchase of
assets, merger or otherwise, (b) acquires control of securities of a
Person engaged in an ongoing business representing more than 50% of the
ordinary voting power for the election of directors or other governing
position if the business affairs of such Person are managed by a board
of directors or other governing body or (c) acquires control of more
than 50% of the ownership interest in any partnership, joint venture,
limited liability company, business trust or other Person engaged in an
ongoing business that is not managed by a board of directors or other
governing body, including, without limitation, the Island Pacific
Acquisition.
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"AFFILIATE" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (and
the correlative terms, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise); PROVIDED that, in any event, any Person that
owns, directly or indirectly, 10% or more of the securities having
ordinary voting power for the election of directors or other governing
body of a corporation that has more than 100 record holders of such
securities, or 10% or more of the partnership or other ownership
interests of any other Person that has more than 100 record holders of
such interests, will be deemed to be an Affiliate of such corporation,
partnership or other Person.
"AGREEMENT" means this Term Loan Agreement, either as
originally executed or as it may from time to time be supplemented,
modified, amended, restated or extended.
"ALTERNATE BASE RATE" means, as of any date of determination,
the rate per annum (rounded upwards, if necessary, to the next 1/100 of
1%) equal to the HIGHER OF (a) the Prime Rate in effect on such date or
(b) the Federal Funds Rate in effect on such date plus 1/2 of 1% (50
basis points).
"ALTERNATE BASE RATE LOAN" means the entire principal balance
of a Loan or that portion of the principal balance of a Loan which is
specified to be an Alternate Base Rate Loan in accordance with ARTICLE
2.
"APPLICABLE ALTERNATE BASE RATE MARGIN" means (i) with respect
to Term Loan A, 1/4 of 1% (25 basis points), and (ii) with respect to
Term Loan B, 1/2 of 1% (50 basis points) .
"APPLICABLE EURODOLLAR RATE MARGIN" means (i) with respect to
Term Loan A, 2.75% (275 basis points), and (ii) with respect to Term
Loan B, 3.00% (300 basis points).
"BANKING DAY" means any Monday, Tuesday, Wednesday, Thursday
or Friday, OTHER THAN a day on which banks are authorized or required
to be closed in California.
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"BOOK NET WORTH" means, as of any date of determination, the
consolidated total assets of Borrower and its Subsidiaries MINUS the
consolidated total liabilities of Borrower and its Subsidiaries,
determined in accordance with GAAP, consistently applied.
"BORROWER" has the meaning specified in the introduction to
this Agreement.
"BORROWER SECURITY AGREEMENT" means the security agreement to
be executed and delivered pursuant to ARTICLE 8 by Borrower, in the
form of EXHIBIT A, either as originally executed or as it may from time
to time be supplemented, modified, amended, extended or supplanted.
"CAPITAL EXPENDITURE" means any expenditure by Borrower or any
of its Subsidiaries for or related to fixed assets or purchased
intangibles that is treated as a capital expenditure under GAAP,
INCLUDING any amount which is required to be treated as an asset
subject to a Capital Lease Obligation. The amount of Capital
Expenditures in respect of fixed assets purchased or constructed by
Borrower or any of its Subsidiaries in any fiscal period shall be NET
OF (a) any net sales proceeds received during such fiscal period by
Borrower or such Subsidiary for fixed assets sold by Borrower or such
Subsidiary and (b) any casualty insurance proceeds received during such
fiscal period by Borrower or such Subsidiary for casualties to fixed
assets and applied to the repair or replacement thereof.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of
a Person under any leasing or similar arrangement which, in accordance
with GAAP, is classified as a capital lease.
"CASH" means, when used in connection with any Person, all
monetary and non-monetary items owned by that Person that are treated
as cash in accordance with GAAP, consistently applied.
"CASH EQUIVALENTS" means, when used in connection with any
Person, that Person's Investments in:
(a) Government Securities due within one year after
the date of the making of the Investment;
(b) readily marketable direct obligations of any
State of the United States of America or any political subdivision of
any such State or any public agency or instrumentality thereof given on
the date of such Investment a credit rating of at least Aa by Moody's
Investors Service, Inc. or AA by Standard & Poor's Rating Group (a
division of McGraw-Hill, Inc.), in each case due within one year from
the making of the Investment;
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(c) certificates of deposit issued by, bank deposits
in, Eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by Lender
or any bank incorporated under the Laws of the United States of
America, any State thereof or the District of Columbia and having on
the date of such Investment combined capital, surplus and undivided
profits of at least $250,000,000, or total assets of at least
$5,000,000,000, in each case due within one year after the date of the
making of the Investment;
(d) certificates of deposit issued by, bank deposits
in, Eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by Lender
or any branch or office located in the United States of America of a
bank incorporated under the Laws of any jurisdiction outside the United
States of America having on the date of such Investment combined
capital, surplus and undivided profits of at least $500,000,000, or
total assets of at least $15,000,000,000, in each case due within one
year after the date of the making of the Investment;
(e) repurchase agreements covering Government
Securities executed by a broker or dealer registered under Section
15(b) of the Securities Exchange Act of 1934, as amended, having on the
date of the Investment capital of at least $50,000,000, due within 90
days after the date of the making of the Investment; PROVIDED that the
maker of the Investment receives written confirmation of the transfer
to it of record ownership of the Government Securities on the books of
a "primary dealer" in such Government Securities or on the books of
such registered broker or dealer, as soon as practicable after the
making of the Investment;
(f) readily marketable commercial paper or other debt
securities issued by corporations doing business in and incorporated
under the Laws of the United States of America or any State thereof or
of any corporation that is the holding company for a bank described in
clause (c) or (d) above given on the date of such Investment a credit
rating of at least P-1 by Moody's Investors Service, Inc. or A-1 by
Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in
each case due within one year after the date of the making of the
Investment;
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(g) "money market preferred stock" issued by a
corporation incorporated under the Laws of the United States of America
or any State thereof (i) given on the date of such Investment a credit
rating of at least Aa by Moody's Investors Service, Inc. and AA by
Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.), in
each case having an investment period not exceeding 50 days or (ii) to
the extent that investors therein have the benefit of a standby letter
of credit issued by Lender or a bank described in clauses (c) or (d)
above; PROVIDED that (y) the amount of all such Investments issued by
the same issuer does not exceed $5,000,000 and (z) the aggregate amount
of all such Investments does not exceed $15,000,000;
(h) a readily redeemable "money market mutual fund"
sponsored by a bank described in clause (c) or (d) hereof, or a
registered broker or dealer described in clause (e) hereof, that has
and maintains an investment policy limiting its investments primarily
to instruments of the Types described in clauses (a) through (g) hereof
and given on the date of such Investment a credit rating of at least Aa
by Moody's Investors Service, Inc. and AA by Standard & Poor's Rating
Group (a division of McGraw-Hill, Inc.); and
(i) corporate notes or bonds having an original term
to maturity of not more than one year issued by a corporation
incorporated under the Laws of the United States of America, or a
participation interest therein; PROVIDED that (i) commercial paper
issued by such corporation is given on the date of such Investment a
credit rating of at least Aa by Moody's Investors Service, Inc. and AA
by Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.),
(ii) the amount of all such Investments issued by the same issuer does
not exceed $5,000,000 and (iii) the aggregate amount of all such
Investments does not exceed $15,000,000.
"CASH INCOME TAXES" means, with respect to any fiscal period,
taxes on or measured by the income of Borrower that are paid or
currently payable in Cash by Borrower during that fiscal period.
"CASH INTEREST EXPENSE" means Interest Expense that is paid or
currently payable in Cash.
"CERTIFICATE" means a certificate signed by a Senior Officer
or Responsible Official (as applicable) of the Person providing the
certificate.
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"CHANGE IN CONTROL" means (a) any transaction or series of
related transactions in which any Unrelated Person or two or more
Unrelated Persons acting in concert acquire beneficial ownership
(within the meaning of Rule 13d-3(a)(1) under the Securities Exchange
Act of 1934, as amended), directly or indirectly, of 20% or more of the
outstanding Common Stock, (b) Borrower consolidates with or merges into
another Person or conveys, transfers or leases its properties and
assets substantially as an entirety to any Person or any Person
consolidates with or merges into Borrower, in either event pursuant to
a transaction in which the outstanding Common Stock is changed into or
exchanged for cash, securities or other property, with the effect that
any Unrelated Person becomes the beneficial owner, directly or
indirectly, of 20% or more of Common Stock or that the Persons who were
the holders of Common Stock immediately prior to the transaction hold
less than 80% of the common stock of the surviving corporation after
the transaction, (c) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted the board
of directors of Borrower (together with any new or replacement
directors whose election by the board of directors, or whose nomination
for election, was approved by a vote of at least a majority of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for reelection
was previously so approved) cease for any reason to constitute a
majority of the directors then in office or (d) a "change in control"
as defined in any document governing Indebtedness of Borrower in excess
of $5,000,000 which gives the holders of such Indebtedness the right to
accelerate or otherwise require payment of such Indebtedness prior to
the maturity date thereof.
"CLOSING DATE" means the time and Banking Day on which the
conditions set forth in Section 8.1 are satisfied or waived. Lender
shall notify Borrower of the date that is the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended or
replaced and as in effect from time to time.
"COLLATERAL" means all of the collateral covered by the
Collateral Documents.
"COLLATERAL DOCUMENTS" means, collectively, the Borrower
Security Agreement, the Pledge Agreement, the Subsidiary Security
Agreement and any other security agreement, pledge agreement, deed of
trust, mortgage, notice to or acknowledgment of a registrar or
depositary institution, control agreement or other collateral security
agreement executed and delivered by Borrower or any of its Subsidiaries
(and executed by any third party whose signature is necessary) to
secure the Obligations.
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"COMMON STOCK" means the common stock of Borrower or its
successor.
"COMPLIANCE CERTIFICATE" means a certificate in the form of
EXHIBIT B, properly completed and signed by a Senior Officer of
Borrower.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any outstanding security issued by that Person or of any
material agreement, instrument or undertaking to which that Person is a
party or by which it or any of its Property is bound.
"CONVERSION" means the conversion of the Loan, or any portion
thereof, from one Type to another.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United
States of America, as amended from time to time, and all other
applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws from time to time in effect affecting the rights of
creditors generally.
"DEFAULT" means any event that, with the giving of any
applicable notice or passage of time specified in Section 9.1, or both,
would be an Event of Default.
"DEFAULT RATE" means the SUM OF (a) any incremental interest
rate then in effect pursuant to Section 3.1(d) PLUS (b) the interest
rate prescribed in Section 3.7.
"DESIGNATED DEPOSIT ACCOUNT" means a deposit account to be
maintained by Borrower with Union Bank of California, N.A. or one of
its Affiliates, as from time to time designated by Borrower by written
notification to Lender.
"DESIGNATED EURODOLLAR MARKET" means, with respect to any
Eurodollar Rate Loan, the London Eurodollar Market.
"DISQUALIFIED STOCK" means any capital stock, warrants,
options or other rights to acquire capital stock (but excluding any
debt security which is convertible, or exchangeable, for capital
stock), which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to the
Maturity Date.
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"DISPOSITION" means the sale, transfer or other disposition in
any single transaction or series of related transactions of any asset,
or group of related assets, of Borrower or any of its Subsidiaries (a)
which asset or assets constitute a line of business or substantially
all the assets of Borrower or the Subsidiary or (b) the aggregate
amount of the Net Cash Sales Proceeds of such assets is more than
$500,000, OTHER THAN (i) inventory or other assets sold or otherwise
disposed of in the ordinary course of business of Borrower or its
Subsidiary, (ii) equipment sold or otherwise disposed of where
substantially similar equipment in replacement thereof has theretofore
been acquired, or thereafter within 90 days is acquired, by Borrower or
its Subsidiary and (iii) obsolete assets no longer useful in the
business of Borrower and its Subsidiaries whose carrying value on the
books of Borrower or such Subsidiary is zero or DE MINIMUS.
"DISTRIBUTION" means, with respect to any shares of capital
stock or any warrant or option to purchase an equity security or other
equity security issued by a Person, (a) the retirement, redemption,
purchase or other acquisition for Cash or for Property by such Person
of any such security, (b) the declaration or (without duplication)
payment by such Person of any dividend in Cash or in Property on or
with respect to any such security, (c) any Investment by such Person in
the holder of 5% or more of any such security if a purpose of such
Investment is to avoid characterization of the transaction as a
Distribution and (d) any other payment in Cash or Property by such
Person constituting a distribution under applicable Laws with respect
to such security.
"DOLLARS" or "$" means United States of America dollars.
"EBITDA" means with respect to any fiscal period, the SUM OF
(a) Net Income for that period, PLUS (b) any non-operating
non-recurring loss reflected in such Net Income, MINUS (c) any
non-operating non-recurring gain reflected in such Net Income, PLUS (d)
Interest Expense of Borrower and its Subsidiaries for that period, PLUS
(e) the aggregate amount of federal and state taxes on or measured by
income of Borrower and its Subsidiaries for that period (whether or not
payable during that period), MINUS (f) the aggregate amount of federal
and state credits against taxes on or measured by income of Borrower
and its Subsidiaries for that period (whether or not usable during that
period), PLUS (g) depreciation, amortization and all other non-cash
expenses of Borrower and its Subsidiaries for that period, in each case
as determined in accordance with GAAP, consistently applied.
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"ERISA" means the Employee Retirement Income Security Act of
1974, and any regulations issued pursuant thereto, as amended or
replaced and as in effect from time to time.
"ERISA AFFILIATE" means each Person (whether or not
incorporated) which is required to be aggregated with Borrower pursuant
to Section 414 of the Code.
"EURODOLLAR BANKING DAY" means any Banking Day on which
dealings in Dollar deposits are conducted by and among banks in the
Designated Eurodollar Market.
"EURODOLLAR LENDING OFFICE" means Lender's office or branch so
designated by written notice to Borrower as its Eurodollar Lending
Office. If no Eurodollar Lending Office is designated by Lender, its
Eurodollar Lending Office shall be its office at its address for
purposes of notices hereunder.
"EURODOLLAR MARKET" means a regular established market located
outside the United States of America by and among banks for the
solicitation, offer and acceptance of Dollar deposits in such banks.
"EURODOLLAR OBLIGATIONS" means eurocurrency liabilities, as
defined in Regulation D or any comparable regulation of any
Governmental Agency having jurisdiction over Lender.
"EURODOLLAR PERIOD" means, as to each Eurodollar Rate Loan,
the period commencing on the date specified by Borrower pursuant to
Section 2.1(b) and ending 1, 2 or 6 months (or, with the written
consent of Lender, any other period) thereafter, as specified by
Borrower in the applicable Request for Loan/Conversion; PROVIDED that:
(a) The first day of any Eurodollar Period shall be a
Eurodollar Banking Day;
(b) Any Eurodollar Period that would otherwise end on
a day that is not a Eurodollar Banking Day shall be extended
to the immediately succeeding Eurodollar Banking Day unless
such Eurodollar Banking Day falls in another calendar month,
in which case such Eurodollar Period shall end on the
immediately preceding Eurodollar Banking Day; and
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(c) No Eurodollar Period shall extend beyond the
Maturity Date.
"EURODOLLAR RATE" means, with respect to any Eurodollar Rate
Loan, the average of the interest rates per annum (rounded upward, if
necessary, to the next 1/16 of 1%) at which deposits in Dollars are
offered to Lender in the Designated Eurodollar Market at or about 11:00
a.m. local time in the Designated Eurodollar Market, two (2) Eurodollar
Banking Days before the first day of the applicable Eurodollar Period
in an aggregate amount approximately equal to the amount of the Loan to
be made by Lender with respect to such Eurodollar Rate Loan and for a
period of time comparable to the number of days in the applicable
Eurodollar Period.
"EURODOLLAR RATE LOAN" means the entire principal balance of a
Loan or such portion or portions thereof specified to be a Eurodollar
Rate Loan in accordance with ARTICLE 2.
"EVENT OF DEFAULT" shall have the meaning provided in Section
9.1.
"FEDERAL FUNDS RATE" means, as of any date of determination,
the rate set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Federal
Reserve Board (including any such successor, "H.15(519)") for such date
opposite the caption "Federal Funds (Effective)". If for any relevant
date such rate is not yet published in H.15(519), the rate for such
date will be the rate set forth in the daily statistical release
designated as the Composite 3:30 p.m. Quotations for U.S. Government
Securities, or any successor publication, published by the Federal
Reserve Lender of New York (including any such successor, the
"Composite 3:30 p.m. Quotation") for such date under the caption
"Federal Funds Effective Rate". If on any relevant date the appropriate
rate for such date is not yet published in either H.15(519) or the
Composite 3:30 p.m. Quotations, the rate for such date will be the
arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that
date by each of three leading brokers of Federal funds transactions in
New York City selected by the Administrative Agent. For purposes of
this Agreement, any change in the Alternate Base Rate due to a change
in the Federal Funds Rate shall be effective as of the opening of
business on the effective date of such change.
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"FISCAL QUARTER" means the fiscal quarter of Borrower ending
on each June 30, September 30, December 31 and March 31.
"FISCAL YEAR" means the fiscal year of Borrower ending on each
March 31.
"FIXED CHARGE COVERAGE RATIO" means, as of the last day of any
Fiscal Quarter, the RATIO OF (a) EBITDA for the fiscal period
consisting of the four (4) Fiscal Quarters ended on that date MINUS
Capital Expenditures made by Borrower and its Subsidiaries during such
fiscal period TO (b) THE SUM OF (i) Interest Expense of Borrower and
its Subsidiaries for such fiscal period PLUS (ii) income taxes of
Borrower payable with respect to such fiscal period plus (iii) Cash
dividends on Common Stock paid during such periods PLUS (iv) regularly
scheduled payments on long-term debt of Borrower and its Subsidiaries
coming due within twelve months of such date PLUS (v) regularly
scheduled payments on long-term lease obligations of Borrower and its
Subsidiaries coming due within twelve months of such date.
"FOREIGN SUBSIDIARY" means a Subsidiary of Borrower that (a)
is organized under the Laws of a country (or political subdivision
thereof) OTHER THAN the United States of America and (b) holds all or
substantially all of its assets outside the United States of America.
"GAAP" means, as of any date of determination, accounting
principles (a) set forth as generally accepted in then currently
effective Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (b) set forth as generally
accepted in then currently effective Statements of the Financial
Accounting Standards Board or (c) that are then approved by such other
entity as may be approved by a significant segment of the accounting
profession in the United States of America. The term "CONSISTENTLY
APPLIED," as used in connection therewith, means that the accounting
principles applied are consistent in all material respects with those
applied at prior dates or for prior periods.
"GOVERNMENT SECURITIES" means readily marketable (a) direct
full faith and credit obligations of the United States of America or
obligations guaranteed by the full faith and credit of the United
States of America and (b) obligations of an agency or instrumentality
of, or corporation owned, controlled or sponsored by, the United States
of America that are generally considered in the securities industry to
be implicit obligations of the United States of America.
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"GOVERNMENTAL AGENCY" means (a) any international, foreign,
federal, state, county or municipal government, or political
subdivision thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or
public body or (c) any court or administrative tribunal of competent
jurisdiction.
"GUARANTY OBLIGATION" means, as to any Person, any (a)
guarantee by that Person of Indebtedness of, or other obligation
performable by, any other Person or (b) assurance given by that Person
to an obligee of any other Person with respect to the performance of an
obligation by, or the financial condition of, such other Person,
whether direct, indirect or contingent, INCLUDING any purchase or
repurchase agreement covering such obligation or any collateral
security therefor, any agreement to provide funds (by means of loans,
capital contributions or otherwise) to such other Person, any agreement
to support the solvency or level of any balance sheet item of such
other Person or any "keep-well" or other arrangement of whatever nature
given for the purpose of assuring or holding harmless such obligee
against loss with respect to any obligation of such other Person;
PROVIDED, HOWEVER, that the term Guaranty Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guaranty Obligation in respect of
Indebtedness shall be deemed to be an amount equal to the stated or
determinable amount of the related Indebtedness (unless the Guaranty
Obligation is limited by its terms to a lesser amount, in which case to
the extent of such amount) or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as
determined by the Person in good faith. The amount of any other
Guaranty Obligation shall be deemed to be zero unless and until the
amount thereof has been (or in accordance with Financial Accounting
Standards Board Statement No. 5 should be) quantified and reflected or
disclosed in the consolidated financial statements (or notes thereto)
of Borrower.
"HAZARDOUS MATERIALS" means substances defined as "hazardous
substances" pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., or
as "hazardous", "toxic" or "pollutant" substances or as "solid waste"
pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. ss.
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901, et seq., or as "friable asbestos" pursuant to the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq. or any other
applicable Hazardous Materials Law, in each case as such Laws are
amended from time to time.
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"HAZARDOUS MATERIALS LAWS" means all Laws governing the
treatment, transportation or disposal of Hazardous Materials applicable
to any of the Real Property.
"INDEBTEDNESS" means, as to any Person (without duplication),
(a) indebtedness of such Person for borrowed money or for the deferred
purchase price of Property (EXCLUDING trade and other accounts payable
in the ordinary course of business in accordance with ordinary trade
terms), INCLUDING any Guaranty Obligation for any such indebtedness,
(b) indebtedness of such Person of the nature described in clause (a)
that is non-recourse to the credit of such Person but is secured by
assets of such Person, to the extent of the fair market value of such
assets as determined in good faith by such Person, (c) Capital Lease
Obligations of such Person, (d) indebtedness of such Person arising
under bankers' acceptance facilities or under facilities for the
discount of accounts receivable of such Person, (e) any direct or
contingent obligations of such Person under letters of credit issued
for the account of such Person, and (f) any net obligations of such
Person under Interest Rate Protection Agreements.
"INTANGIBLE ASSETS" means assets that are considered
intangible assets under GAAP, INCLUDING customer lists, goodwill,
covenants not to compete, copyrights, trade names, trademarks and
patents.
"INTEREST EXPENSE" means, with respect to any Person and as of
the last day of any fiscal period, the SUM OF (a) all interest, fees,
charges and related expenses (in each case as such expenses are
calculated according to GAAP) paid or payable (without duplication) for
that fiscal period by that Person to a lender in connection with
borrowed money (INCLUDING any obligations for fees, charges and related
expenses payable to the issuer of any letter of credit) or the deferred
purchase price of assets that are considered "interest expense" under
GAAP PLUS (b) the portion of rent paid or payable (without duplication)
for that fiscal period by that Person under Capital Lease Obligations
that should be treated as interest in accordance with Financial
Accounting Standards Board Statement No. 13.
"INVESTMENT" means, when used in connection with any Person,
any investment by or of that Person, whether by means of purchase or
other acquisition of stock or other securities of any other Person or
by means of a loan, advance creating a debt, capital contribution,
guaranty or other debt or equity participation or interest in any other
Person, INCLUDING any partnership and joint venture interests of such
Person. The amount of any Investment shall be the amount actually
invested (MINUS any return of capital with respect to such Investment
which has actually been received in Cash or has been converted into
Cash), without adjustment for subsequent increases or decreases in the
value of such Investment.
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"ISLAND PACIFIC" means Island Pacific Systems Corporation, a
California corporation.
"ISLAND PACIFIC ACQUISITION" means the Acquisition by Borrower
or one of its Affiliates, on terms and conditions reasonably acceptable
to Lender, of substantially all of the capital stock of Island Pacific.
"JOINT VENTURE" means any Investment by Borrower in any Person
that is not a Wholly-Owned Subsidiary of Borrower, which Person is
engaged in the same or a similar line of business as Borrower.
"LAWS" means, collectively, all international, foreign,
federal, state and local statutes, treaties, rules, regulations,
ordinances, codes and administrative or judicial precedents.
"LENDER" has the meaning specified in the introduction to this
Agreement.
"LENDER'S OFFICE" means Lender's address as set forth on the
signature page of this Agreement, or such other address as Lender
hereafter may designate by written notice to Borrower.
"LEVERAGE RATIO" means, as of the last day of an applicable
Fiscal Quarter, the RATIO OF (a) all Indebtedness of Borrower and its
Subsidiaries on that date TO (b) EBITDA for the fiscal period
consisting of the four (4) Fiscal Quarters ended on that date.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest, encumbrance,
lien or charge of any kind, whether voluntarily incurred or arising by
operation of Law or otherwise, affecting any Property, INCLUDING any
conditional sale or other title retention agreement, any lease in the
nature of a security interest, and/or the filing of any financing
statement (OTHER THAN a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the
Uniform Commercial Code or comparable Law of any jurisdiction with
respect to any Property.
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"LOANS" means, collectively, Term Loan A and Term Loan B, and
"LOAN" means either one of Term Loan A or Term Loan B, individually.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Notes, the Subsidiary Guaranty, the Collateral Documents, and any other
agreements of any Type or nature hereafter executed and delivered by
Borrower or any of the Subsidiary Guarantors to Lender in any way
relating to or in furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be
supplemented, modified, amended, restated, extended or supplanted.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation U.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or
events which (a) has had or could reasonably be expected to have any
material adverse effect whatsoever upon the validity or enforceability
of any Loan Document, (b) has been or could reasonably be expected to
be substantial and adverse to the business or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole or (c)
has materially impaired or could reason ably be expected to materially
impair the ability of Borrower to perform the Obligations.
"MONTHLY PAYMENT DATE" means the last day of each calendar
month.
"MULTIEMPLOYER PLAN" means any employee benefit plan of the
Type described in Section 4001(a)(3) of ERISA to which Borrower or any
of its ERISA Affiliates contributes or is obligated to contribute.
"NEGATIVE PLEDGE" means a Contractual Obligation which
contains a covenant binding on Borrower or any of its Subsidiaries that
prohibits Liens on any of its Property, OTHER THAN (a) any such
covenant contained in a Contractual Obligation granting or relating to
a particular Lien which affects only the Property that is the subject
of such Lien and (b) any such covenant that does not apply to Liens
securing the Obligations.
"NET CASH ISSUANCE PROCEEDS" means, with respect to the
issuance of any debt security or equity security by Borrower or any of
its Subsidiaries, the Cash proceeds received by or for the account of
Borrower or such Subsidiary in consideration of such issuance NET OF
(a) underwriting discounts and commissions actually paid to any Person
not an Affiliate of Borrower and (b) professional fees and
disbursements actually paid in connection therewith.
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"NET CASH SALES PROCEEDS" means, with respect to any
Disposition, the SUM OF (a) the Cash proceeds received by or for the
account of Borrower and its Subsidiaries from such Disposition PLUS (b)
the amount of Cash received by or for the account of Borrower and its
Subsidiaries upon the sale, collection or other liquidation of any
proceeds that are not Cash from such Disposition, in each case NET OF
(i) any amount required to be paid to any Person owning an interest in
the assets disposed of, (ii) any amount applied to the repayment of
Indebtedness secured by a Lien permitted under Section 6.9 on the asset
disposed of, (iii) any transfer, income or other taxes payable as a
result of such Disposition, (iv) professional fees and expenses, fees
due to any Governmental Agency, broker's commissions and other
out-of-pocket costs of sale actually paid to any Person that is not an
Affiliate of Borrower attributable to such Disposition and (v) any
reserves established in accordance with GAAP in connection with such
Disposition.
"NET INCOME" means, with respect to any fiscal period, the
consolidated net income of Borrower and its Subsidiaries for that
period, determined in accordance with GAAP, consistently applied.
"NOTES" means, collectively, the Term Loan A Note and the Term
Loan B Note, and "NOTE" means either one of the Term Loan A Note or the
Term Loan B Note, individually.
"OBLIGATIONS" means all present and future obligations of
every kind or nature of Borrower or any of the Subsidiary Guarantors at
any time and from time to time owed to Lender under any one or more of
the Loan Documents, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, INCLUDING
obligations of performance as well as obligations of payment, and
INCLUDING interest that accrues after the commencement of any
proceeding under any Debtor Relief Law by or against Borrower or any of
the Subsidiary Guarantors.
"PARTY" means any Person other than Lender or Lender's
successor which now or hereafter is a party to any of the Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereof established under ERISA.
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"PENSION PLAN" means any "employee pension benefit plan" (as
such term is defined in Section 3(2) of ERISA), OTHER THAN a
Multiemployer Plan, which is subject to Title IV of ERISA and is
maintained by Borrower or to which Borrower contributes or has an
obligation to contribute.
"PERMITTED ENCUMBRANCES" means:
(a) Liens for taxes and assessments on Property which
are not yet past due; or Liens for taxes and assessments on Property
for which adequate reserves have been set aside and are being contested
in good faith by appropriate proceedings and have not proceeded to
judgment, PROVIDED that, by reason of nonpayment of the obligations
secured by such Liens, no such Property is subject to a material
impending risk of loss or forfeiture;
(b) defects and irregularities in title to any
Property which in the aggregate do not materially impair the fair
market value or use of the Property for the purposes for which it is or
may reasonably be expected to be held;
(c) rights reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
Governmental Agency with respect to, the use of any Property;
(d) rights reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
Governmental Agency with respect to, any right, power, franchise,
grant, license, or permit;
(e) statutory Liens, other than those described in
clauses (a) or (b) above, arising in the ordinary course of business
with respect to obligations which are not delinquent or are being
contested in good faith, PROVIDED that, if delinquent, adequate
reserves have been set aside with respect thereto and, by reason of
nonpayment, no Property is subject to a material impending risk of loss
or forfeiture;
(f) covenants, conditions, and restrictions affecting
the use of Property which in the aggregate do not materially impair the
fair market value or use of the Property for the purposes for which it
is or may reasonably be expected to be held;
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(g) Liens consisting of pledges or deposits to secure
obligations under workers' compensation laws or similar legislation,
including Liens of judgments thereunder which are not currently
dischargeable;
(h) Liens consisting of pledges or deposits of
Property to secure performance in connection with operating leases made
in the ordinary course of business, PROVIDED the aggregate value of all
such pledges and deposits in connection with any such lease does not at
any time exceed 20% of the annual fixed rentals payable under such
lease;
(i) Liens consisting of deposits of Property to
secure bids made with respect to, or performance of, contracts (OTHER
THAN contracts creating or evidencing an extension of credit to the
depositor);
(j) Liens consisting of any right of offset, or
statutory bankers' lien, on bank deposit accounts maintained in the
ordinary course of business so long as such bank deposit accounts are
not established or maintained for the purpose of providing such right
of offset or bankers' lien;
(k) Liens consisting of deposits of Property to
secure statutory obligations of Borrower;
(l) Liens consisting of deposits of Property to
secure (or in lieu of) surety, appeal or customs bonds;
(m) Liens created by or resulting from any litigation
or legal proceeding in the ordinary course of business which is
currently being contested in good faith by appropriate proceedings,
PROVIDED that, adequate reserves have been set aside and no material
Property is subject to a material impending risk of loss or forfeiture;
and
(n) other non-consensual Liens incurred in the
ordinary course of business but not in connection with the incurrence
of any Indebtedness, which do not in the aggregate, when taken together
with all other Liens, materially impair the fair market value or use of
the Property for the purposes for which it is or may reasonably be
expected to be held.
"PERMITTED RIGHT OF OTHERS" means a Right of Others consisting
of (a) an interest (OTHER THAN a legal or equitable co-ownership
interest, an option or right to acquire a legal or equitable
co-ownership interest and any interest of a ground lessor under a
ground lease), that does not materially impair the fair market value or
use of Property for the purposes for which it is or may reason ably be
-18-
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expected to be held, (b) an option or right to acquire a Lien that
would be a Permitted Encumbrance, (c) the subordination of a lease or
sublease in favor of a financing entity and (d) a license, or similar
right, of or to Intangible Assets granted in the ordinary course of
business.
"PERSON" means any individual or entity, INCLUDING a trustee,
corporation, limited liability company, general partnership, limited
partnership, joint stock company, trust, estate, unincorporated
organization, business association, firm, joint venture, Governmental
Agency, or other entity.
"PLEDGE AGREEMENT" means the pledge agreement to be executed
and delivered pursuant to ARTICLE 8 by Borrower, in the form of EXHIBIT
C, either as originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"PLEDGED COLLATERAL" means (a) the certificates evidencing
100% of the shares of capital stock held by Borrower in all Significant
Domestic Subsidiaries and (b) certificates evidencing 65% of the shares
of capital stock held by Borrower in all Significant Foreign
Subsidiaries other than IBIS Systems Limited.
"PRIME RATE" means the rate of interest publicly announced
from time to time by Lender in San Francisco, California (or other
headquarters city of Lender) as its "reference rate." The "reference
rate" is one of several base rates used by Lender and serves as the
basis upon which effective rates of interest are calculated for loans
and other credits making reference thereto. The "reference rate" is not
necessarily the lowest base interest rate used by Lender. The
"reference rate" is evidenced by the recording thereof after its
announcement in such internal publication or publications as Lender may
designate. Any change in the Prime Rate announced by Lender shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"PROJECTIONS" means the projected financial information
prepared by Borrower and attached hereto as EXHIBIT D.
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"REAL PROPERTY" means, as of any date of determination, all
real property then or theretofore owned, leased or occupied by any of
Borrower.
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"REGULATION D" means Regulation D, as at any time amended, of
the Board of Governors of the Federal Reserve System, or any other
regulation in substance substituted therefor.
"REGULATION U" means Regulation U, as at any time amended, of
the Board of Governors of the Federal Reserve System, or any other
regulation in substance substituted therefor.
"REQUEST FOR LOAN/CONVERSION" means a written request for a
Loan or for the Conversion of a Loan or a portion thereof from one Type
to another, substantially in the form of EXHIBIT E, signed by a
Responsible Official of Borrower, on behalf of Borrower, and properly
completed to provide all information required to be included therein.
"REQUIREMENT OF LAW" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any Law, or judgment, award,
decree, writ or determination of a Governmental Agency, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"RESPONSIBLE OFFICIAL" means (a) any Senior Officer of
Borrower and (b) any other responsible official of Borrower so
designated in a written notice thereof from a Senior Officer to Lender.
Lender shall be entitled to conclusively rely upon any document or
certificate that is signed or executed by a Responsible Official of
Borrower or any of its Subsidiaries as having been authorized by all
necessary corporate, partnership and/or other action on the part of
Borrower or such Subsidiary.
"RIGHT OF OTHERS" means, as to any Property in which a Person
has an interest, any legal or equitable right, title or other interest
(other than a Lien) held by any other Person in that Property, and any
option or right held by any other Person to acquire any such right,
title or other interest in that Property, INCLUDING any option or right
to acquire a Lien; PROVIDED, however, that (a) no covenant restricting
the use or disposition of Property of such Person contained in any
Contractual Obligation of such Person and (b) no provision contained in
a contract creating a right of payment or performance in favor of a
Person that conditions, limits, restricts, diminishes, transfers or
terminates such right shall be deemed to constitute a Right of Others.
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"SENIOR OFFICER" means (a) the chief executive officer, (b)
the president, (c) any executive vice president, (d) the chief
financial officer or (e) the treasurer, in each case of Borrower.
"SIGNIFICANT DOMESTIC SUBSIDIARY" means a Significant
Subsidiary that is not a Foreign Subsidiary.
"SIGNIFICANT FOREIGN SUBSIDIARY" means a Foreign Subsidiary
that is a Significant Subsidiary.
"SIGNIFICANT SUBSIDIARY" means, collectively, (i) Island
Pacific and (ii) each other Subsidiary that either (a) had net income
for the Fiscal Year then most recently ended in excess of 5% of Net
Income for such Fiscal Year or (b) had assets in excess of 5% of the
total assets of Borrower and its Subsidiaries on a consolidated basis
as at the end of the Fiscal Year then most recently ended.
"SPECIAL EURODOLLAR CIRCUMSTANCE" means the application or
adoption after the Closing Date of any Law or interpretation, or any
change therein or thereof, or any change in the interpretation or
administration thereof by any Governmental Agency, central bank or
comparable authority charged with the interpretation or administration
thereof, or compliance by Lender or its Eurodollar Lending Office with
any request or directive (whether or not having the force of Law) of
any such Governmental Agency, central bank or comparable authority.
"STOCKHOLDERS' EQUITY" means, as of any date of determination
and with respect to any Person, the consolidated stockholders' equity
of the Person as of that date determined in accordance with GAAP;
PROVIDED that there shall be excluded from Stockholders' Equity any
amount attributable to Disqualified Stock.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement
dated as of, or about, the date of this Agreement, by and among
Borrower, as Buyer, Island Pacific, as the Company, and The Mickelsen
Family Trust, Paul Mickelsen, Todd Hammett, Mark Wulff, Phil Friesen
and Clayton Harless, collectively as Sellers, relating to Borrower's
purchase of all of the issued and outstanding shares of capital stock
of Island Pacific.
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"SUBORDINATED OBLIGATIONS" means any Indebtedness of Borrower
that (a) does not have any scheduled principal payment, mandatory
principal prepayment or sinking fund payment due prior to the date that
is one year after the Maturity Date, (b) is not secured by any Lien on
any Property of Borrower or any of its Subsidiaries, (c) is not
guaranteed by any Subsidiary of Borrower, (d) is subordinated by its
terms in right of payment to the Obligations pursuant to provisions
acceptable to Lender, (e) is subject to such financial and other
covenants and events of defaults as may be acceptable to Lender and (f)
is subject to customary interest blockage and delayed acceleration
provisions as may be acceptable to Lender.
"SUBSIDIARY" means, as of any date of determination and with
respect to any Person, any corporation, limited liability company or
partnership (whether or not, in any case, characterized as such or as a
"joint venture"), whether now existing or hereafter organized or
acquired: (a) in the case of a corporation or limited liability
company, of which a majority of the securities having ordinary voting
power for the election of directors or other governing body (other than
securities having such power only by reason of the happening of a
contingency) are at the time beneficially owned by such Person and/or
one or more Subsidiaries of such Person, or (b) in the case of a
partnership, of which a majority of the partnership or other ownership
interests are at the time beneficially owned by such Person and/or one
or more of its Subsidiaries.
"SUBSIDIARY GUARANTORS" means all Significant Domestic
Subsidiaries.
"SUBSIDIARY GUARANTY" means the continuing guaranty of the
Obligations to be executed and delivered pursuant to ARTICLE 8 by the
Subsidiary Guarantors, in the form of EXHIBIT F, either as originally
executed or as it may from time to time be supplemented, modified,
amended, extended or supplanted.
"SUBSIDIARY SECURITY AGREEMENT" means the security agreement
to be executed and delivered pursuant to ARTICLE 8 by the Subsidiary
Guarantors, in the form of EXHIBIT G, either as originally executed or
as it may from time to time be supplemented, modified, amended,
extended or supplanted.
"TERM LOAN A" means the term loan in the original principal
amount of $15,000,000 to be provided by Lender to Borrower pursuant to
Section 2.1(a).
"TERM LOAN A MATURITY DATE" means, in respect of Term Loan A,
the maturity date of such Loan, which is 180 days after the Closing
Date.
"TERM LOAN A NOTE" means the Term Loan A Note in the original
principal amount of $15,000,000 executed by Borrower to the order of
Lender, substantially in the form of EXHIBIT H, either as originally
executed or as the same may from time to time be supplemented,
modified, amended, extended or supplanted.
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"TERM LOAN B" means the term loan in the original principal
amount of $3,500,000 to be provided by Lender to Borrower pursuant to
Section 2.1(a).
"TERM LOAN B MATURITY DATE" means June 1, 2001.
"TERM LOAN B NOTE" means the Term Loan B Note in the original
principal amount of $3,500,000 executed by Borrower to the order of
Lender, substantially in the form of EXHIBIT I, either as originally
executed or as the same may from time to time be supplemented,
modified, amended, extended or supplanted.
"TO THE BEST KNOWLEDGE OF" means, when modifying a
representation, warranty or other statement of any Person, that the
fact or situation described therein is known by the Person (or, in the
case of a Person other than a natural Person, known by a Responsible
Official of that Person) making the representation, warranty or other
statement, or with the exercise of reasonable due diligence under the
circumstances (in accordance with the standard of what a reasonable
Person in similar circumstances would have done) would have been known
by the Person (or, in the case of a Person other than a natural Person,
would have been known by a Responsible Official of that Person);
PROVIDED, HOWEVER, in the case of each representation and warranty made
by the Borrower to Lender hereunder in respect of Island Pacific, "to
the best knowledge of" Borrower means Borrower's actual knowledge based
solely upon the representations and warranties, including the
information contained in the related disclosure schedules, made to
Borrower by the Sellers under (and as defined in) the Stock Purchase
Agreement.
"TYPE", when used with respect to any Loan means the
designation of whether such Loan is an Alternate Base Rate Loan or a
Eurodollar Rate Loan.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of Borrower, 100%
of the capital stock or other equity interest of which is owned,
directly or indirectly, by Borrower, EXCEPT for director's qualifying
shares required by applicable Laws.
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1.2 USE OF DEFINED TERMS. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class.
1.3 ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, EXCEPT as otherwise
specifically prescribed herein. In the event that GAAP changes during the term
of this Agreement such that the covenants contained in this Agreement would then
be calculated in a different manner or with different components, (a) Borrower
and Lender agree to amend this Agreement in such respects as are necessary to
conform those covenants as criteria for evaluating Borrower's financial
condition to substantially the same criteria as were effective prior to such
change in GAAP and (b) Borrower shall be deemed to be in compliance with the
covenants contained in the aforesaid Sections if and to the extent that Borrower
would have been in compliance therewith under GAAP as in effect immediately
prior to such change, but shall have the obligation to deliver each of the
materials described in ARTICLE 7 to Lender, on the dates therein specified, with
financial data presented in a manner which conforms with GAAP as in effect
immediately prior to such change.
1.4 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.5 REFERENCES TO "BORROWER AND ITS SUBSIDIARIES". Any
reference herein to "Borrower and its Subsidiaries" or the like shall refer
solely to Borrower during such times, if any, as Borrower shall have no
Subsidiaries.
1.6 MISCELLANEOUS TERMS. The term "or" is disjunctive; the
term "and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.
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Article 2
TERM LOANS
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2.1 TERM LOANS-GENERAL.
(a) Subject to the terms and conditions set forth in
this Agreement, on the Closing Date, Lender shall make the Loans to
Borrower. Lender shall credit the proceeds of the Loans on the Closing
Date in immediately available funds to the Designated Deposit Account.
Amounts repaid under the Loans may not be reborrowed.
(b) Subject to the next sentence, each Loan and each
Conversion shall be made pursuant to a Request for Loan/Conversion
which shall specify, as applicable, the requested (i) date of the Loan
or Conversion, (ii) Type of Loan into which the Loan or a portion
thereof is to be converted, (iii) amount of the Loan or Conversion, and
(iv) in the case of a Eurodollar Rate Loan, the applicable Eurodollar
Period. Unless Lender, in its sole and absolute discretion, has
notified Borrower to the contrary, the Loans or any Conversion may be
requested by telephone by a Responsible Official of Borrower, in which
case Borrower shall confirm such request by promptly delivering a
Request for Loan/Conversion (conforming to the preceding sentence) in
person or by telecopier to Lender. Lender shall incur no liability
whatsoever hereunder in acting upon any such telephonic request for a
Loan confirmed in person or by telecopier purportedly made by a
Responsible Official of Borrower, and Borrower hereby agrees to
indemnify Lender from any loss, cost, expense or liability as a result
of so acting.
(c) Unless Lender otherwise consents, each Alternate
Base Rate Loan shall be not less than $1,000,000 and in an integral
multiple of $100,000 and each Eurodollar Rate Loan shall be not less
than $3,000,000 and in an integral multiple of $1,000,000.
(d) Term Loan A shall be evidenced by the Term Loan A
Note and Term Loan B shall be evidenced by the Term Loan B Note.
(e) A Request for Loan/Conversion shall be
irrevocable upon Lender's receipt thereof.
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(f) If no Request for Loan/Conversion (or telephonic
request therefor referred to in the second sentence of Section 2.1(c),
if applicable) has been made within the requisite notice periods set
forth in Section 2.2 or 2.3 prior to the end of the Eurodollar Period
for any outstanding Eurodollar Rate Loan, then on the last day of such
Eurodollar Period, such Eurodollar Rate Loan shall be automatically
converted into an Alternate Base Rate Loan in the same amount.
2.2 ALTERNATE BASE RATE LOANS. Each request by Borrower for an
Alternate Base Rate Loan shall be made pursuant to a Request for Loan/Conversion
(or telephonic or other request for loan referred to in the second sentence of
Section 2.1(c), if applicable) received by Lender, at Lender's Office, not later
than 11:00 a.m. California time, on the date (which must be a Banking Day)
immediately prior to the date of the requested Alternate Base Rate Loan. The
entire principal balance of each Loan shall constitute an Alternate Base Rate
Loan unless all or any portion of such Loan is properly designated as a
Eurodollar Rate Loan pursuant to Section 2.3.
2.3 EURODOLLAR RATE LOANS.
(a) Each request by Borrower for the Conversion of
all or a portion of a Loan from an Alternate Base Rate Loan to a
Eurodollar Rate Loan shall be made pursuant to a Request For
Loan/Conversion (or telephonic or other request therefor referred to in
the second sentence of Section 2.1(c), if applicable) received by
Lender at Lender Office, not later than 9:00 a.m., California time, at
least three (3) Eurodollar Banking Days before the first day of the
applicable Eurodollar Period.
(b) On the date which is two (2) Eurodollar Banking
Days before the first day of the applicable Eurodollar Period, Lender
shall confirm its determination of the applicable Eurodollar Rate
(which determination shall be conclusive in the absence of manifest
error) and promptly shall give notice of the same to Borrower and the
Lenders by telephone or telecopier (and if by telephone, promptly
confirmed by telecopier).
(c) Unless Lender otherwise consents, no more than
three (3) Eurodollar Rate Loans shall be outstanding at any one time.
(d) No Eurodollar Rate Loan may be requested during
the continuation of a Default or an Event of Default.
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Article 3
PAYMENTS AND FEES
-----------------
3.1 PRINCIPAL AND INTEREST.
(a) Interest shall be payable on the outstanding
daily unpaid principal amount of each Loan from the Closing Date until
payment in full is made and shall accrue and be payable at the rates
set forth or provided for herein before and after Default, before and
after maturity, before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Law, with
interest on overdue interest at the Default Rate to the fullest extent
permitted by applicable Laws.
(b) Interest accrued on each Alternate Base Rate Loan
shall be due and payable on each Monthly Payment Date. EXCEPT as
otherwise provided in Sections 3.1(d) and 3.8, the unpaid principal
amount of any Alternate Base Rate Loan shall bear interest at a
fluctuating rate per annum equal to the Alternate Base Rate PLUS the
Alternate Base Rate Margin. Each change in the interest rate under this
Section 3.1(b) due to a change in the Alternate Base Rate shall take
effect simultaneously with the corresponding change in the Alternate
Base Rate.
(c) Interest accrued on each Eurodollar Rate Loan
which is for a term of two months or less shall be due and payable on
the last day of the related Eurodollar Period. Interest accrued on each
other Eurodollar Rate Loan which is for a term of six months shall be
due and payable on the date which is three months after the date such
Eurodollar Rate Loan was made and on the last day of the related
Eurodollar Period. EXCEPT as otherwise provided in Sections 3.1(d) and
3.8, the unpaid principal amount of any Eurodollar Rate Loan shall bear
interest at a rate per annum equal to the Eurodollar Rate for that
Eurodollar Rate Loan PLUS the Eurodollar Rate Margin.
(d) During the existence of an Event of Default, the
Loans shall bear interest at a rate equal to the SUM OF (i) the
interest rate specified in Sections 3.1(b) or 3.1(c), whichever is
applicable PLUS (ii) such incremental rate not in excess of 2% per
annum as may be specified by Lender.
(e) If not sooner paid, the principal Indebtedness
evidenced by the Term Loan A Note shall be payable in full in one lump
sum payment on the Term Loan A Maturity Date, unless the Term Loan A
Maturity Date is extended pursuant to Section 8.2 below. The principal
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Indebtedness evidenced by the Term Loan B Note shall be payable in
twenty-four (24) equal consecutive monthly installments of $145,833.33
each, commencing on July 1, 1999 and continuing on the first calendar
day of each month thereafter through and including the Term Loan B
Maturity Date.
(f) The principal Indebtedness evidenced by each Note
shall be prepaid on or before the third Banking Day following the
receipt by Borrower or any of its Subsidiaries of (i) Net Cash Issuance
Proceeds from the issuance of debt securities of Borrower or any of its
Subsidiaries by an amount equal to 100% of such Net Cash Issuance
Proceeds and (iv) Net Cash Issuance Proceeds from the issuance of
equity securities of Borrower or any of its Subsidiaries (EXCEPT an
issuance of equity securities to Borrower or to a Wholly-Owned
Subsidiary or to employees or former employees of Borrower pursuant to
an employee stock option plan maintained by Borrower), by an amount
equal to 100% of such Net Cash Issuance Proceeds. Such amount shall be
applied to the principal balance of each Note on a PRO RATA basis.
(g) The principal Indebtedness evidenced by each Note
may, at any time and from time to time, voluntarily be paid or prepaid
in whole or in part without premium or penalty, EXCEPT that with
respect to any voluntary prepayment under this Subsection, (i) any
partial prepayment shall be not less than $1,000,000 and shall be an
integral multiple of $500,000, (ii) shall have received written notice
of any prepayment by 9:00 a.m. California time on the date that is one
(1) Banking Day before the date of prepayment (which must be a Banking
Day) in the case of an Alternate Base Rate Loan, and, in the case of a
Eurodollar Rate Loan, three (3) Banking Days before the date of
prepayment, which notice shall identify the date and amount of the
prepayment and the Loan(s) being prepaid, (iii) each prepayment of
principal on any Eurodollar Rate Loan shall be accompanied by payment
of interest accrued to the date of payment on the amount of principal
paid, and (iv) any payment or prepayment of all or any part of any
Eurodollar Rate Loan on a day other than the last day of the applicable
Eurodollar Period shall be subject to Section 3.6(e).
3.2 INTENTIONALLY OMITTED.
3.3 LOAN FEE. On the Closing Date, Borrower shall pay to
Lender a loan fee in the sum of $277,500 from the proceeds of Term Loan A. Such
fee shall be fully-earned upon the funding of the Loans and shall thereafter be
non-refundable.
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3.4 EXAMINATION FEE. On the Closing Date, Borrower shall pay
Lender a fee in an amount equal to $500 per day (including both field days and
report preparation days) per examiner plus out-of-pocket expenses incurred by
Lender for Lender's pre-closing audit of Borrower's books and records.
3.5 INCREASED COMMITMENT COSTS. If Lender shall determine in
good faith that the introduction after the Closing Date of any applicable law,
rule, regulation or guideline regarding capital adequacy, or any change therein
or any change in the interpretation or administration thereof by any central
bank or other Governmental Agency charged with the interpretation or
administration thereof, or compliance by Lender (or its Eurodollar Lending
Office) or any corporation controlling Lender, with any request, guideline or
directive regarding capital adequacy (whether or not having the force of Law) of
any such central bank or other authority not imposed as a result of Lender's or
such corporation's failure to comply with any other Laws, affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling Lender and (taking into consideration
Lender's or such corporation's policies with respect to capital adequacy and
Lender's desired return on capital) determines in good faith that the amount of
such capital is increased, or the rate of return on capital is reduced, as a
consequence of its obligations under this Agreement, then, within five (5)
Banking Days after demand of Lender, Borrower shall pay to Lender, from time to
time as specified in good faith by Lender, additional amounts sufficient to
compensate Lender in light of such circumstances, to the extent reasonably
allocable to such obligations under this Agreement, PROVIDED that Borrower shall
not be obligated to pay any such amount which arose prior to the date which is
ninety (90) days preceding the date of such demand or is attributable to periods
prior to the date which is ninety (90) days preceding the date of such demand.
Lender's determination of such amounts shall be conclusive in the absence of
manifest error.
3.6 EURODOLLAR COSTS AND RELATED MATTERS.
(a) In the event that any Governmental Agency imposes
on Lender any reserve or comparable requirement (INCLUDING any
emergency, supplemental or other reserve) with respect to the
Eurodollar Obligations of Lender, Borrower shall pay Lender within five
(5) Banking Days after demand all amounts necessary to compensate such
Lender in respect of the imposition of such reserve requirements
(PROVIDED, that Borrower shall not be obligated to pay any such amount
which arose prior to the date which is ninety (90) days preceding the
date of such demand or is attributable to periods prior to the date
which is ninety (90) days preceding the date of such demand). Lender's
determination of such amount shall be conclusive in the absence of
manifest error.
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(b) If, after the date hereof, the existence or
occurrence of any Special Eurodollar Circumstance:
(1) shall subject Lender or its Eurodollar
Lending Office to any tax, duty or other charge or cost with
respect to any Eurodollar Rate Loan, or shall change the basis
of taxation of payments to Lender attributable to the
principal of or interest on any Eurodollar Rate Loan or any
other amounts due under this Agreement in respect of any
Eurodollar Rate Loan, EXCLUDING (i) taxes imposed on or
measured in whole or in part by its overall net income by (A)
any jurisdiction (or political subdivision thereof) in which
it is organized or maintains its principal office or
Eurodollar Lending Office or (B) any jurisdiction (or
political subdivision thereof) in which it is "doing business"
and (ii) any withholding taxes or other taxes based on gross
income imposed by the United States of America for any period
with respect to which it has failed to provide Borrower with
the appropriate form or forms required by Section 11.21, to
the extent such forms are then required by applicable Laws;
(2) shall impose, modify or deem applicable
any reserve not applicable or deemed applicable on the date
hereof (INCLUDING any reserve imposed by the Board of
Governors of the Federal Reserve System, special deposit,
capital or similar requirements against assets of, deposits
with or for the account of, or credit extended by, Lender or
its Eurodollar Lending Office); or
(3) shall impose on Lender or its Eurodollar
Lending Office or the Designated Eurodollar Market any other
condition affecting any Eurodollar Rate Advance, of its Note
evidencing Eurodollar Rate Loans, or this Agreement, or shall
otherwise affect any of the same;
and the result of any of the foregoing, as determined in good faith by
Lender, increases the cost to Lender or its Eurodollar Lending Office
of making or maintaining any Eurodollar Rate Loan or reduces the amount
of any sum received or receivable by Lender or its Eurodollar Lending
Office with respect to any Eurodollar Rate Loan then, within five (5)
Banking Days after demand by Lender, Borrower shall pay to Lender such
additional amount or amounts as will compensate Lender for such
increased cost or reduction; PROVIDED, that Borrower shall not be
obligated to pay any such amount which arose prior to the date which is
ninety (90) days preceding the date of such demand or is
attributable to periods prior to the date which is ninety (90) days
preceding the date of such demand. A statement of Lender claiming
compensation under this subsection shall be conclusive in the absence
of manifest error.
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(c) If, after the date hereof, the existence or
occurrence of any Special Eurodollar Circumstance shall, in the good
faith opinion of Lender, make it unlawful or impossible for Lender or
its Eurodollar Lending Office to make, maintain or fund any Eurodollar
Rate Loan, or materially restrict the authority of Lender to purchase
or sell, or to take deposits of, Dollars in the Designated Eurodollar
Market, or to determine or charge interest rates based upon the
Eurodollar Rate, and Lender shall so notify Borrower, then Lender's
obligation to make Eurodollar Rate Advances shall be suspended for the
duration of such illegality or impossibility and Lender forthwith shall
give notice thereof to Borrower. Upon receipt of such notice, the
outstanding principal amount of Lender's Eurodollar Rate Loans together
with accrued interest thereon, automatically shall be converted to
Alternate Base Rate Loans on either (1) the last day of the Eurodollar
Period(s) applicable to such Euro dollar Rate Loans if Lender may
lawfully continue to maintain such Eurodollar Rate Loans to such day(s)
or (2) immediately, if Lender may not lawfully continue to maintain
such Eurodollar Rate Loans to such day(s), PROVIDED that in such event
the Conversion shall not be subject to payment of a prepayment fee
under Section 3.6(e). Lender agrees to designate a different Eurodollar
Lending Office if such designation will avoid the need to notify
Borrower of any such Special Eurodollar Circumstance and will not, in
the good faith judgment of Lender, otherwise be materially
disadvantageous to Lender. In the event that Lender is unable, for the
reasons set forth above, to make, maintain or fund any Eurodollar Rate
Loan, Lender shall fund such amount as an Alternate Base Rate Loan for
the same period of time, and such amount shall be treated in all
respects as an Alternate Base Rate Loan.
(d) If, with respect to any proposed Eurodollar Rate
Loan:
(1) Lender reasonably determines in good
faith that, by reason of circumstances affecting the
Designated Eurodollar Market generally that are beyond the
reasonable control of Lender, deposits in Dollars (in the
applicable amounts) are not being offered to Lender in the
Designated Eurodollar Market for the applicable Eurodollar
Period; or
(2) the Eurodollar Rate as determined in
good faith by Lender (i) does not represent the effective
pricing to Lender for deposits in Dollars in the Designated
Eurodollar Market in the relevant amount for the applicable
Eurodollar Period, or (ii) will not adequately and fairly
reflect the cost to Lender of making the applicable Eurodollar
Rate Loans;
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then Lender forthwith shall give notice thereof to Borrower, whereupon
until Lender notifies Borrower that the circumstances giving rise to
such suspension no longer exist, the obligation of Lender to make any
future Eurodollar Rate Loans shall be suspended.
(e) Upon payment or prepayment of any Eurodollar Rate
Loan (OTHER THAN as the result of a Conversion required under Section
3.6(c)) on a day other than the last day in the applicable Eurodollar
Period (whether voluntarily, involuntarily, by reason of acceleration,
or otherwise), Borrower shall pay to Lender within five (5) Banking
Days after demand a prepayment fee (determined as though 100% of the
Eurodollar Rate Loan had been funded in the Designated Eurodollar
Market) equal to the SUM of:
(1) $250; PLUS
(2) the amount, if any, by which (i) the
additional interest would have accrued on the amount prepaid
at the Eurodollar Rate PLUS the Applicable Eurodollar Rate
Margin if that amount had remained or been outstanding through
the last day of the applicable Eurodollar Period EXCEEDS (ii)
the interest that Lender could recover by placing such amount
on deposit in the Designated Eurodollar Market for a period
beginning on the date of the prepayment and ending on the last
day of the applicable Eurodollar Period (or, if no deposit
rate quotation is available for such period, for the most
comparable period for which a deposit rate quotation may be
obtained); PLUS
(3) all out-of-pocket expenses incurred by
Lender reasonably attributable to such payment or prepayment.
Lender's good faith determination of the amount of any prepayment fee
payable under this Section after Lender has exercised reasonable
efforts to mitigate the amount of such fee shall be conclusive in the
absence of manifest error.
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(f) Lender agrees to endeavor promptly to notify
Borrower of any event of which it has actual knowledge, occurring after
the Closing Date, which will entitle Lender to compensation pursuant to
clause (a) or clause (b) of this Section, and agrees to designate a
different Eurodollar Lending Office if such designation will avoid the
need for or reduce the amount of such compensation and will not, in the
good faith judgment of Lender, otherwise be materially disadvantageous
to Lender. Any request for compensation by Lender under this Section
shall set forth the basis upon which it has been determined that such
an amount is due from Borrower, a calculation of the amount due, and a
certification that the corresponding costs have been incurred by
Lender.
3.7 LATE PAYMENTS. If any payment of principal or interest or
any fee or cost or other amount payable under any Loan Document to Lender is not
paid when due, it shall thereafter bear interest at a fluctuating interest rate
per annum at all times equal to the SUM OF the Alternate Base Rate PLUS 2%, to
the fullest extent permitted by applicable Laws. Accrued and unpaid interest on
past due amounts (INCLUDING, without limitation, interest on past due interest)
shall be compounded monthly, on the last day of each calendar month, to the
fullest extent permitted by applicable Laws.
3.8 COMPUTATION OF INTEREST AND FEES. Computation of interest
and fees under this Agreement shall be calculated on the basis of a year of 360
days and the actual number of days elapsed. Interest shall accrue on each Loan
for the day on which the Loan is made; interest shall not accrue on a Loan, or
any portion thereof, for the day on which the Loan or such portion is paid. Any
Loan that is repaid on the same day on which it is made shall bear interest for
one day. Notwithstanding anything in this Agreement to the contrary, interest in
excess of the maximum amount permitted by applicable Laws shall not accrue or be
payable hereunder or under any Note, and any amount paid as interest hereunder
or under a Note which would otherwise be in excess of such maximum permitted
amount shall instead be treated as a payment of principal.
3.9 NON-BANKING DAYS. If any payment to be made by Borrower or
any other Party under any Loan Document shall come due on a day other than a
Banking Day, payment shall instead be considered due on the next succeeding
Banking Day and the extension of time shall be reflected in computing interest
and fees.
3.10 MANNER AND TREATMENT OF PAYMENTS.
(a) Each payment hereunder (EXCEPT payments pursuant
to Sections 3.5, 3.6, 11.3, 11.11 and 11.22) or on a Note or under any
other Loan Document shall be made to Lender at Lender's Office in
immediately available funds not later than 11:00 a.m. California time,
on the day of payment (which must be a Banking Day). All payments
received after such time, on any Banking Day, shall be deemed received
on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
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(b) Borrower hereby authorizes Lender to debit the
general operating bank account of Borrower to effect any payment due to
Lender or pursuant to this Agreement. Any resulting overdraft in such
account shall be payable by Borrower to Lender on the next following
Banking Day.
(c) Lender shall use its best efforts to keep a
record (in writing or by an electronic data entry system) of the Loans
and payments received by it with respect to the Loans and such record
shall, as against Borrower, be presumptive evidence of the amount of
the Obligations. Notwithstanding the foregoing sentence, the failure by
Lender to keep such a record shall not affect Borrower's obligation to
pay the Obligations.
(d) Each payment of any amount payable by Borrower or
any other Party under this Agreement or any other Loan Document shall
be made free and clear of, and without reduction by reason of, any
taxes, assessments or other charges imposed by any Governmental Agency,
central bank or comparable authority, EXCLUDING (i) taxes imposed on or
measured in whole or in part by its overall net income by (A) any
jurisdiction (or political subdivision thereof) in which it is
organized or maintains its principal office or Eurodollar Lending
Office or (B) any jurisdiction (or political subdivision thereof) in
which it is "doing business" and (ii) any withholding taxes or other
taxes based on gross income imposed by the United States of America for
any period with respect to which it has failed to provide Borrower with
the appropriate form or forms required by Section 11.21, to the extent
such forms are then required by applicable Laws (all such non-excluded
taxes, assessments or other charges being hereinafter referred to as
"Taxes"). To the extent that Borrower is obligated by applicable Laws
to make any deduction or withholding on account of Taxes from any
amount payable to Lender under this Agreement, Borrower shall (i) make
such deduction or withholding and pay the same to the relevant
Governmental Agency and (ii) pay such additional amount to Lender as is
necessary to result in Lender's receiving a net after-Tax amount equal
to the amount to which Lender would have been entitled under this
Agreement absent such deduction or withholding. If and when receipt of
such payment results in an excess payment or credit to Lender on
account of such Taxes, that Lender shall promptly refund such excess to
Borrower.
3.11 INTENTIONALLY OMITTED.
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3.12 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Any decision by
Lender not to require payment of any interest (INCLUDING interest arising under
Section 3.7), fee, cost or other amount payable under any Loan Document, or to
calculate any amount payable by a particular method, on any occasion shall in no
way limit or be deemed a waiver of Lender's right to require full payment of any
interest (INCLUDING interest arising under Section 3.7), fee, cost or other
amount payable under any Loan Document, or to calculate an amount payable by
another method that is not inconsistent with this Agreement, on any other or
subsequent occasion.
3.13 INTENTIONALLY OMITTED.
3.14 FEE DETERMINATION DETAIL. Lender shall provide reasonable
detail to Borrower regarding the manner in which the amount of any payment due
to Lender under ARTICLE 3 has been determined, concurrently with demand for such
payment.
3.15 SURVIVABILITY. All of Borrower's obligations under
Sections 3.5 and 3.6 shall survive for the ninety (90) day period following the
date on which each Loan is fully paid and Borrower shall remain obligated
thereunder for all claims under such Sections made by Lender to Borrower prior
to the expiration of such period.
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Article 4
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lender as follows with
respect to Borrower and its Subsidiaries, PROVIDED that each of Borrower's
following representations and warranties concerning Island Pacific is made to
the best of Borrower's knowledge:
4.1 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS.
Borrower is a corporation duly formed, validly existing and in good standing
under the Laws of Nevada. Borrower is duly qualified or registered to transact
business and is in good standing in California and each other jurisdiction in
which the conduct of its business or the ownership or leasing of its Properties
makes such qualification or registration necessary, EXCEPT where the failure so
to qualify or register and to be in good standing would not constitute a
Material Adverse Effect. Borrower has all requisite power and authority to
conduct its business, to own and lease its Properties and to execute and deliver
each Loan Document to which it is a Party and to perform its Obligations. The
chief executive offices of Borrower are located in California. All outstanding
shares of capital stock of Borrower are duly authorized, validly issued, fully
paid and non-assessable, and no holder thereof has any enforceable right of
rescission under any applicable state or federal securities Laws. Borrower is in
compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders, licenses
and permits from, and has accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing from, any
Governmental Agency that are necessary for the transaction of its business,
EXCEPT where the failure so to comply, obtain authorizations, etc., file,
register, qualify or obtain exemptions does not constitute a Material Adverse
Effect.
4.2 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND
INSTRUMENTS AND GOVERNMENT REGULATIONS. The execution, delivery and performance
by Borrower and the Subsidiary Guarantors of the Loan Documents to which it is a
Party have been duly authorized by all necessary corporate action, and do not
and will not:
(a) Require any consent or approval not heretofore
obtained of any partner, director, stockholder, security holder or
creditor of such Party;
(b) Violate or conflict with any provision of such
Party's charter, articles of incorporation or bylaws, as applicable;
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(c) Result in or require the creation or imposition
of any Lien (OTHER THAN pursuant to the Loan Documents) or Right of
Others upon or with respect to any Property now owned or leased or
hereafter acquired by such Party;
(d) Violate any Requirement of Law applicable to such
Party;
(e) Result in a breach of or constitute a default
under, or cause or permit the acceleration of any obligation owed
under, any indenture or loan or credit agreement or any other
Contractual Obligation to which such Party is a party or by which such
Party or any of its Property is bound or affected;
and such Party is not in violation of, or default under, any Requirement of Law
or Contractual Obligation, or any indenture, loan or credit agreement described
in Section 4.2(e), in any respect that constitutes a Material Adverse Effect.
4.3 NO GOVERNMENTAL APPROVALS REQUIRED. EXCEPT as previously
obtained or made, no authorization, consent, approval, order, license or permit
from, or filing, registration or qualification with, any Governmental Agency is
or will be required to authorize or permit under applicable Laws the execution,
delivery and performance by Borrower or any Subsidiary Guarantor of the Loan
Documents to which it is a Party.
4.4 SUBSIDIARIES.
(a) SCHEDULE 4.4 hereto correctly sets forth the
names, form of legal entity, number of shares of capital stock issued
and outstanding, number of shares owned by Borrower or a Subsidiary of
Borrower (specifying such owner) and jurisdictions of organization of
all Subsidiaries of Borrower and specifies which thereof, as of the
Closing Date, are inactive Subsidiaries. Except as described in
SCHEDULE 4.4, Borrower does not own any capital stock, equity interest
or debt security which is convertible, or exchangeable, for capital
stock or equity interest in any Person. Unless otherwise indicated in
SCHEDULE 4.4, all of the outstanding shares of capital stock, or all of
the units of equity interest, as the case may be, of each Subsidiary
are owned of record and beneficially by Borrower, there are no
outstanding options, warrants or other rights to purchase capital stock
of any such Subsidiary, and all such shares or equity interests so
owned are duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with all applicable state
and federal securities and other Laws, and are free and clear of all
Liens, EXCEPT for Permitted Encumbrances.
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(b) Each Subsidiary is a legal entity of the Type
described in SCHEDULE 4.4 duly formed, validly existing and in good
standing under the Laws of its jurisdiction of organization, is duly
qualified to do business as a foreign organization and is in good
standing as such in each jurisdiction in which the conduct of its
business or the ownership or leasing of its Properties makes such
qualification necessary (EXCEPT where the failure to be so duly
qualified and in good standing does not constitute a Material Adverse
Effect), and has all requisite power and authority to conduct its
business and to own and lease its Properties.
(c) Each Subsidiary is in compliance with all Laws
and other requirements applicable to its business and has obtained all
authorizations, consents, approvals, orders, licenses, and permits
from, and each such Subsidiary has accomplished all filings,
registrations, and qualifications with, or obtained exemptions from any
of the foregoing from, any Governmental Agency that are necessary for
the transaction of its business, EXCEPT where the failure to be in such
compliance, obtain such authorizations, consents, approvals, orders,
licenses, and permits, accomplish such filings, registrations, and
qualifications, or obtain such exemptions, does not constitute a
Material Adverse Effect.
4.5 FINANCIAL STATEMENTS. Borrower has furnished to Lender (a)
the audited financial statements of Borrower for the Fiscal Year ended March 31,
1998 and (b) the unaudited balance sheet and statement of operations of Borrower
for the Fiscal Year ended March 31, 1999. The financial statements described in
clause (a) fairly present in all material respects the financial condition,
results of operations and changes in financial position, and the balance sheet
and statement of operations described in clause (b) fairly present the financial
condition and results of operations of Borrower as of such dates and for such
periods in conformity with GAAP consistently applied, subject only to normal
year-end accruals and audit adjustments.
4.6 NO OTHER LIABILITIES; NO MATERIAL ADVERSE CHANGES.
Borrower and its Subsidiaries do not have any material liability or material
contingent liability required under GAAP to be reflected or disclosed, and not
reflected or disclosed, in the balance sheet described in Section 4.5(b), OTHER
THAN liabilities and contingent liabilities arising in the ordinary course of
business since the date of such financial statements. Except as set forth on
SCHEDULE 4.6, as of the Closing Date, no circumstance or event has occurred that
constitutes a Material Adverse Effect since March 31, 1999.
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4.7 TITLE TO AND LOCATION OF PROPERTY. Borrower and its
Subsidiaries have valid title to the Property (OTHER THAN assets which are the
subject of a Capital Lease Obligation) reflected in the balance sheet described
in Section 4.5(b), OTHER THAN items of Property or exceptions to title which are
in each case immaterial and Property subsequently sold or disposed of in the
ordinary course of business. Such Property is free and clear of all Liens and
Rights of Others, OTHER THAN Liens or Rights of Others described in SCHEDULE
4.7A and Permitted Encumbrances and Permitted Rights of Others. All Property of
Borrower and its Subsidiaries is located at one of the locations described in
SCHEDULE 4.7B.
4.8 INTANGIBLE ASSETS. To the best of Borrower's knowledge
after due investigation, Borrower and its Subsidiaries own, or possess the right
to use to the extent necessary in their respective businesses, all material
trademarks, trade names, copyrights, patents, patent rights, computer software,
licenses and other Intangible Assets that are used in the conduct of their
businesses as now operated, and no such Intangible Asset conflicts with the
valid trademark, trade name, copyright, patent, patent right or Intangible Asset
of any other Person to the extent that such conflict constitutes a Material
Adverse Effect. EXCEPT as set forth in SCHEDULE 4.8, Borrower has not used any
trade name, trade style or "dba" during the five year period ending on the
Closing Date.
4.9 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.10 LITIGATION. EXCEPT for (a) any matter fully covered as to
subject matter and amount (subject to applicable deductibles and retentions) by
insurance for which the insurance carrier has not asserted lack of subject
matter coverage or reserved its right to do so, (b) any matter, or series of
related matters, involving a claim against Borrower or any of its Subsidiaries
of less than $1,000,000, (c) matters of an administrative nature not involving
a claim or charge against Borrower or any of its Subsidiaries and (d) matters
set forth in SCHEDULE 4.10, there are no actions, suits, proceedings or
investigations pending as to which Borrower or any of its Subsidiaries have been
served or have received notice or, to the best knowledge of Borrower, threatened
against or affecting Borrower or any of its Subsidiaries or any Property of any
of them before any Governmental Agency.
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4.11 BINDING OBLIGATIONS. Each of the Loan Documents to which
Borrower and any Subsidiary Guarantor is a Party will, when executed and
delivered by such Party, constitute the legal, valid and binding obligation of
such Party, enforceable against such Party in accordance with its terms, EXCEPT
as enforcement may be limited by Debtor Relief Laws or equitable principles
relating to the granting of specific performance and other equitable remedies as
a matter of judicial discretion.
4.12 NO DEFAULT. No event has occurred and is continuing that
is a Default or Event of Default.
4.13 ERISA.
(a) With respect to each Pension Plan:
(i) such Pension Plan complies in all material
respects with ERISA and any other applicable Laws to the
extent that noncompliance could reasonably be expected to have
a Material Adverse Effect;
(ii) such Pension Plan has not incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA) that could reasonably be expected to have a Material
Adverse Effect;
(iii) no "reportable event" (as defined in
Section 4043 of ERISA, but EXCLUDING such events as to which
the PBGC has by regulation waived the requirement therein
contained that it be notified within thirty days of the
occurrence of such event) has occurred that could reasonably
be expected to have a Material Adverse Effect; and
(iv) neither Borrower nor any of its Subsidiaries
has engaged in any non-exempt "prohibited transaction" (as
defined in Section 4975 of the Code) that could reasonably be
expected to have a Material Adverse Effect.
(b) Neither Borrower nor any of its Subsidiaries has
incurred or expects to incur any withdrawal liability to any
Multiemployer Plan that could reasonably be expected to have a Material
Adverse Effect.
4.14 REGULATION U; INVESTMENT COMPANY ACT. No part of the
proceeds of the Loans will be used to purchase or carry, or to extend credit to
others for the purpose of purchasing or carrying, any Margin Stock in violation
of Regulation U. Neither Borrower nor any of its Subsidiaries is or is required
to be registered as an "investment company" under the Investment Company Act of
1940.
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4.15 DISCLOSURE. No written statement made by a Senior Officer
to Lender in connection with this Agreement, as of the date thereof contained
any untrue statement of a material fact or omitted a material fact necessary to
make the statement made not misleading in light of all the circumstances
existing at the date the statement was made.
4.16 TAX LIABILITY. Borrower and its Subsidiaries have filed
all tax returns which are required to be filed, and have paid, or made provision
for the payment of, all taxes with respect to the periods, Property or
transactions covered by said returns, or pursuant to any assessment received by
Borrower or any of its Subsidiaries, EXCEPT (a) such taxes, if any, as are being
contested in good faith by appropriate proceedings and as to which adequate
reserves have been established and maintained and (b) immaterial taxes so long
as no material Property of Borrower or any of its Subsidiaries is at impending
risk of being seized, levied upon or forfeited.
4.17 PROJECTIONS. As of the Closing Date, to the best
knowledge of Borrower, the assumptions set forth in the Projections are
reasonable and consistent with each other and with all facts known to Borrower,
and the Projections are reasonably based on such assumptions. Nothing in this
Section 4.17 shall be construed as a representation or covenant that the
Projections in fact will be achieved.
4.18 HAZARDOUS MATERIALS. Except as described in SCHEDULE
4.18, as of the Closing Date (a) neither Borrower nor any of its Subsidiaries at
any time has disposed of, discharged, released or threatened the release of any
Hazardous Materials on, from or under the Real Property in violation of any
Hazardous Materials Law that would individually or in the aggregate constitute a
Material Adverse Effect, (b) to the best knowledge of Borrower, no condition
exists that violates any Hazardous Material Law affecting any Real Property
except for such violations that would not individually or in the aggregate
constitute a Material Adverse Effect, (c) no Real Property or any portion
thereof is or has been utilized by Borrower or any of its Subsidiaries as a site
for the manufacture of any Hazardous Materials and (d) to the extent that any
Hazardous Materials are used, generated or stored by Borrower or any of its
Subsidiaries on any Real Property, or transported to or from such Real Property
by Borrower or any of its Subsidiaries, such use, generation, storage and
transportation are in compliance with all Hazardous Materials Laws except for
such non-compliance that would not constitute a Material Adverse Effect or be
materially adverse to the interests of Lender.
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4.19 SECURITY INTERESTS. Upon the execution and delivery of
the Borrower Security Agreement and the Subsidiary Security Agreement, such
documents will create a valid first priority security interest in the Collateral
described therein securing the Obligations (subject only to Permitted
Encumbrances, Permitted Rights of Others and other matters permitted by Section
6.9 and to such qualifications and exceptions as are contained in the Uniform
Commercial Code with respect to the priority of security interests perfected by
means other than the filing of a financing statement or with respect to the
creation of security interests in Property to which Division 9 of the Uniform
Commercial Code does not apply) and all actions necessary to perfect the
security interests so created, OTHER THAN filing of the UCC-1 financing
statements delivered to Lender pursuant to Section 8.1 with the appropriate
Governmental Agency, have been taken and completed. Upon the execution and
delivery of the Pledge Agreement, the Pledge Agreement will create a valid first
priority security interest in the Pledged Collateral and upon delivery of the
Pledged Collateral to Lender all action necessary to perfect the security
interest so created will have been taken and completed.
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Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
-----------------------
So long as any Loan or other Obligation remains unpaid,
Borrower shall, and shall cause its Subsidiaries to, unless Lender otherwise
consents:
5.1 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon any of them, upon their respective Property or any part thereof and
upon their respective income or profits or any part thereof, EXCEPT that
Borrower and its Subsidiaries shall not be required to pay or cause to be paid
(a) any tax, assessment, charge or levy that is not yet past due, or is being
contested in good faith by appropriate proceedings so long as the relevant
entity has established and maintains adequate reserves for the payment of the
same or (b) any immaterial tax so long as no material Property of Borrower or
its Subsidiaries is at impending risk of being seized, levied upon or forfeited.
5.2 PRESERVATION OF EXISTENCE. Preserve and maintain their
respective existences in the jurisdiction of their formation and all material
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits, or registrations from any Governmental Agency that are
necessary for the transaction of their respective business and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of their respective business or the ownership
or leasing of their respective Properties EXCEPT (a) a merger permitted by
Section 6.3 or as otherwise permitted by this Agreement and (b) where the
failure to so qualify or remain qualified would not constitute a Material
Adverse Effect.
5.3 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect
all of their respective Properties in good order and condition, subject to wear
and tear in the ordinary course of business, and not permit any waste of their
respective Properties, EXCEPT that the failure to maintain, preserve and protect
a particular item of Property that is at the end of its useful life or that is
not of significant value, either intrinsically or to the operations of Borrower,
shall not constitute a violation of this covenant.
5.4 MAINTENANCE OF INSURANCE. Maintain liability, casualty and
other insurance (subject to customary deductibles and retentions) with
responsible insurance companies in such amounts and against such risks as is
carried by responsible companies engaged in similar businesses and owning
similar assets in the general areas in which Borrower and its Subsidiaries
operate.
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5.5 COMPLIANCE WITH LAWS. Comply with all Requirements of Law
noncompliance with which constitutes a Material Adverse Effect, EXCEPT that
Borrower and its Subsidiaries need not comply with a Requirement of Law then
being contested by any of them in good faith by appropriate proceedings.
5.6 INSPECTION RIGHTS. Upon reasonable notice, at any time
during regular business hours and as often as reasonably requested (but not so
as to materially interfere with the business of Borrower or any of its
Subsidiaries) permit Lender, or any authorized employee, agent or representative
thereof, to examine, audit and make copies and abstracts from the records and
books of account of, and to visit and inspect the Properties of, Borrower and
its Subsidiaries and to discuss the affairs, finances and accounts of Borrower
and its Subsidiaries with any of their officers, key employees or accountants.
5.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate
records and books of account reflecting all financial transactions in conformity
with GAAP, consistently applied, and in material conformity with all applicable
requirements of any Governmental Agency having regulatory jurisdiction over
Borrower and its Subsidiaries.
5.8 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with
all Contractual Obligations to which any one or more of them is a party, EXCEPT
for any such Contractual Obligations (a) the performance of which would cause a
Default or (b) then being contested by any of them in good faith by appropriate
proceedings or (c) if the failure to comply does not constitute a Material
Adverse Effect.
5.9 USE OF PROCEEDS. Use the proceeds of the Loans to
consummate the Island Pacific Acquisition.
5.10 HAZARDOUS MATERIALS LAWS. Keep and maintain all Real
Property and each portion thereof in compliance in all material respects with
all applicable Hazardous Materials Laws and promptly notify Lender in writing
(attaching a copy of any pertinent written material) of (a) any and all material
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened in writing by a Governmental Agency
pursuant to any applicable Hazardous Materials Laws, (b) any and all material
claims made or threatened in writing by any Person against Borrower relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
any Hazardous Materials and (c) discovery by any Senior Officer of any of
Borrower of any material occurrence or condition on any real Property adjoining
or in the vicinity of such Real Property that could reasonably be expected to
cause such Real Property or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use of such Real Property under
any applicable Hazardous Materials Laws.
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5.11 FUTURE SUBSIDIARIES. Pledge all of the capital stock of
any Significant Domestic Subsidiary, and 65% of the capital stock of any
Significant Foreign Subsidiary formed or acquired after the Closing Date
pursuant to the Pledge Agreement, and cause each such future Significant
Domestic Subsidiary to execute and deliver an appropriate joinder to the
Subsidiary Guaranty and the Subsidiary Security Agreement.
5.12 FUTURE REAL PROPERTY. Promptly following its acquisition
of any fee simple real property, execute and deliver to Lender a deed of trust
or mortgage in form and substance acceptable to Lender creating a first priority
Lien on such real property securing the Obligations, and provide to the Lender
such customary lender's title insurance policies, appraisals, environmental
reports and other related documents as Lender may reasonably request.
5.13 YEAR 2000 COMPLIANCE. Take such steps as are reasonably
necessary to assure that, prior to November 1, 1999, Borrower and its
Subsidiaries are Year 2000 Compliant. Such steps shall include the performance
of a comprehensive review and assessment of all data storage and operating
systems and the adoption of a detailed plan and budget for the remediation,
monitoring and testing of such systems. The term "YEAR 2000 COMPLIANT" means,
for purposes of the foregoing, that all hardware, software, firmware, equipment,
goods and systems used by Borrower and its Subsidiaries or which are material to
the business operations or financial condition of Borrower and its Subsidiaries
will properly perform date-sensitive functions on and after January 1, 2000.
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Article 6
NEGATIVE COVENANTS
------------------
So long as any Loan or other Obligation remains unpaid,
Borrower shall not, and shall not permit any of its Subsidiaries to, unless
otherwise consents:
6.1 PAYMENT OF SUBORDINATED OBLIGATIONS. Pay any (a) principal
(INCLUDING sinking fund payments) or any other amount (OTHER THAN scheduled
interest payments) with respect to any Subordinated Obligation, or purchase or
redeem (or offer to purchase or redeem) any Subordinated Obligation, or deposit
any monies, securities or other Property with any trustee or other Person to
provide assurance that the principal or any portion thereof of any Subordinated
Obligation will be paid when due or otherwise to provide for the defeasance of
any Subordinated Obligation or (b) scheduled interest on any Subordinated
Obligation UNLESS the payment thereof is then permitted pursuant to the terms of
the indenture or other agreement governing such Subordinated Obligation.
6.2 DISPOSITION OF PROPERTY. Make any Disposition of its
Property, whether now owned or hereafter acquired, EXCEPT (a) a Disposition by
Borrower to a Wholly-Owned Subsidiary, or by a Subsidiary to Borrower or a
Wholly-Owned Subsidiary and (b) a Disposition by Borrower of all of the capital
stock or substantially all of the assets of IBIS Systems Limited.
6.3 MERGERS. Merge or consolidate with or into any Person,
EXCEPT (a) mergers and consolidations of a Subsidiary of Borrower into Borrower
or a Wholly-Owned Subsidiary or of Subsidiaries with each other and (b) a merger
or consolidation of a Person into Borrower or with or into a Wholly-Owned
Subsidiary of Borrower which constitutes an Acquisition permitted by Section
6.5; PROVIDED that (i) Borrower or a Wholly-Owned Subsidiary is the surviving
entity, (ii) no Change in Control results therefrom, (iii) no Default or Event
of Default then exists or would result therefrom and (iv) Borrower and each of
the Subsidiary Guarantors execute such amendments to the Loan Documents as
Lender may reasonably determine are appropriate as a result of such merger.
6.4 HOSTILE ACQUISITIONS. Directly or indirectly use the
proceeds of the Loans in connection with the acquisition of part or all of a
voting interest of five percent (5%) or more in any corporation or other
business entity if such acquisition is opposed by the board of directors of such
corporation or business entity.
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6.5 ACQUISITIONS. Make any Acquisition, EXCEPT (a) the Island
Pacific Acquisition and (b) any Acquisition of a Person engaged in the same line
of business as Borrower if the aggregate consideration paid and payable by
Borrower in respect of such Acquisition and in respect of all transactions
related to such Acquisition does not exceed $8,000,000.
6.6 DISTRIBUTIONS. Make any Distribution, whether from
capital, income or otherwise, and whether in Cash or other Property, EXCEPT:
(a) Distributions by any Subsidiary of Borrower to
Borrower or any Wholly-Owned Subsidiary; and
(b) dividends payable on Common Stock; PROVIDED that
no Default or Event of Default then exists or would result therefrom.
6.7 ERISA. At any time, permit any Pension Plan to: (i) engage
in any non-exempt "prohibited transaction" (as defined in Section 4975 of the
Code); (ii) fail to comply with ERISA or any other applicable Laws; (iii) incur
any material "accumulated funding deficiency" (as defined in Section 302 of
ERISA); or (iv) terminate in any manner, which, with respect to each event
listed above, could reasonably be expected to result in a Material Adverse
Effect or (b) withdraw, completely or partially, from any Multiemployer Plan if
to do so could reasonably be expected to result in a Material Adverse Effect.
6.8 CHANGE IN NATURE OF BUSINESS. Make any material change in
the nature of the business of Borrower and its Subsidiaries, taken as a whole.
6.9 LIENS AND NEGATIVE PLEDGES. Create, incur, assume or
suffer to exist any Lien or Negative Pledge of any nature upon or with respect
to any of their respective Properties, or engage in any sale and leaseback
transaction with respect to any of their respective Properties, whether now
owned or hereafter acquired, EXCEPT:
(a) Liens and Negative Pledges existing on the
Closing Date and disclosed in SCHEDULE 4.7 and any renewals/extensions
or amendments thereof, PROVIDED that the obligations secured or
benefitted thereby are not increased;
(b) Liens and Negative Pledges under the Loan
Documents;
(c) Permitted Encumbrances;
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(d) Liens on Property acquired by Borrower or any of
its Subsidiaries that were in existence at the time of the acquisition
of such Property and were not created in contemplation of such
acquisition;
(e) Liens securing Indebtedness permitted by Section
6.10(d) on and limited to the capital assets acquired, constructed or
financed with the proceeds of such Indebtedness or with the proceeds of
any Indebtedness directly or indirectly refinanced by such
Indebtedness; and
(f) Non-consensual Liens securing Indebtedness of not
more than $500,000, PROVIDED that such Liens are discharged within
thirty (30) days after their incurrence by Borrower.
6.10 INDEBTEDNESS AND GUARANTY OBLIGATIONS. Create, incur or
assume any Indebtedness or Guaranty Obligation EXCEPT:
(a) Indebtedness and Guaranty Obligations existing on
the Closing Date and disclosed in SCHEDULE 6.10, and refinancings,
renewals, extensions or amendments that do not increase the amount
thereof;
(b) Indebtedness and Guaranty Obligations under the
Loan Documents;
(c) Indebtedness and Guaranty Obligations owed to
Borrower or any of its Subsidiaries;
(d) Indebtedness consisting of Capital Lease
Obligations, or otherwise incurred to finance the purchase or
construction of capital assets (which shall be deemed to exist if the
Indebtedness is incurred at or within 90 days before or after the
purchase or construction of the capital asset), or to refinance any
such Indebtedness;
(e) Subordinated Obligations in such amount as may be
approved in writing by Lender;
(f) Indebtedness consisting of debt securities for
which the Net Cash Issuance Proceeds will be applied as a mandatory
prepayment pursuant to Section 3.1(f); and
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(g) Guaranty Obligations in support of the
obligations of a Wholly-Owned Subsidiary, PROVIDED that such
obligations are not prohibited by this Agreement.
6.11 TRANSACTIONS WITH AFFILIATES. Enter into any transaction
of any kind with any Affiliate of Borrower OTHER THAN (a) salary, bonus,
employee stock option and other compensation arrangements with directors or
officers in the ordinary course of business, (b) transactions that are fully
disclosed to the board of directors (or executive committee thereof) of Borrower
and expressly authorized by a resolution of the board of directors (or executive
committee) of Borrower which is approved by a majority of the directors (or
executive committee) not having an interest in the transaction, (c) transactions
(other than inter-company loans) between or among Borrower and its Subsidiaries
and (d) transactions on overall terms at least as favorable to Borrower or its
Subsidiaries as would be the case in an arm's-length transaction between
unrelated parties of equal bargaining power.
6.12 INVESTMENTS. Make or suffer to exist any Investment,
OTHER THAN:
(a) Investments in existence on the Closing Date and
disclosed on SCHEDULE 6.12;
(b) Investments consisting of Cash Equivalents;
(c) Investments in a Person that is the subject of an
Acquisition permitted by Section 6.5;
(d) Investments consisting of advances to officers,
directors and employees of Borrower and its Subsidiaries for travel,
entertainment, relocation, anticipated bonus and analogous ordinary
business purposes;
(e) Investments in a Domestic Subsidiary that is a
Wholly- Owned Subsidiary;
(f) Investments in a Foreign Subsidiary that is a
Wholly- Owned Subsidiary and Investments in Joint Ventures;
(g) Investments consisting of the extension of credit
to customers or suppliers of Borrower and its Subsidiaries in the
ordinary course of business and any Investments received in
satisfaction or partial satisfaction thereof;
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(h) Investments received in connection with the
settlement of a bona fide dispute with another Person;
(i) Investments representing all or a portion of the
sales price of Property sold or services provided to another Person;
(j) Investments by Foreign Subsidiaries in any other
Subsidiary of Borrower (whether a Domestic Subsidiary or a Foreign
Subsidiary); and
(k) Investments not described above not in excess of
$50,000 during the term of this Agreement.
6.13 CAPITAL EXPENDITURES. Make any Capital Expenditure if to
do so would result in the aggregate of all Capital Expenditures made during the
term of this Agreement to exceed $750,000.
6.14 OPERATING LEASES. Incur any obligation to pay rent under
an operating lease during the term of this Agreement if to do so would result in
the aggregate obligation of Borrower and its Subsidiaries to pay rent under all
operating leases during the term of this Agreement to exceed $1,000,000.
6.15 SUBSIDIARY INDEBTEDNESS. Permit (whether or not otherwise
permitted under Section 6.10) any Subsidiary to create, incur, assume or suffer
to exist any Indebtedness or Guaranty Obligation, EXCEPT (a) Indebtedness and
Guaranty Obligations in existence on the Closing Date, (b) a Guaranty Obligation
required by Section 5.11, (c) Indebtedness owed to Borrower or another
Subsidiary of Borrower, (d) Capital Lease Obligations and purchase money
obligations of a Subsidiary in respect of Property used by that Subsidiary, and
(e) line of credit debt of up to $10,000,000 outstanding at any time.
6.16 AMENDMENTS TO SUBORDINATED OBLIGATIONS. Amend or modify
any term or provision of any indenture, agreement or instrument evidencing or
governing any Subordinated Obligation in any respect that will or may adversely
affect the interests of Lender.
6.17 MINIMUM BOOK NET WORTH. Permit Book Net Worth to be less
than the sum of (i) $47,000,000 and (ii) the consolidated net profit after taxes
of Borrower and its Subsidiaries for each Fiscal Quarter ending after the
Closing Date, commencing with the Fiscal Quarter ending June 30, 1999.
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Article 7
INFORMATION AND REPORTING REQUIREMENTS
--------------------------------------
7.1 FINANCIAL AND BUSINESS INFORMATION. So long as any Loan or
other Obligation remains unpaid, Borrower shall, unless Lender otherwise
consents, at Borrower's sole expense, deliver the following to Lender:
(a) As soon as practicable, and in any event within
45 days after the end of each Fiscal Quarter (OTHER THAN the fourth
Fiscal Quarter in any Fiscal Year), the consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as at the end of such
Fiscal Quarter and the consolidated and consolidating statements of
operations and cash flows for such Fiscal Quarter, and the portion of
the Fiscal Year ended with such Fiscal Quarter, all in reasonable
detail. Such financial statements shall be certified by the chief
financial officer of Borrower as fairly presenting the financial
condition, results of operations and cash flows of Borrower and its
Subsidiaries in accordance with GAAP (other than footnote disclosures),
consistently applied, as at such date and for such periods, subject
only to normal year-end accruals and audit adjustments;
(b) As soon as practicable, and in any event within
90 days after the end of Borrower's Fiscal Year ended March 31, 1999,
the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such Fiscal Year and the consolidated and
consolidating statements of operations, stockholders' equity and cash
flows, in each case of Borrower and its Subsidiaries for such Fiscal
Year, all in reasonable detail. Such financial statements shall be
prepared in accordance with GAAP, consistently applied, and such
consolidated financial statements shall be accompanied by a report of
Deloitte & Touche LLP or other independent public accountants of
recognized standing selected by Borrower and reasonably satisfactory to
Lender, which report shall be prepared in accordance with generally
accepted auditing standards as at such date, and shall not be subject
to any qualifications or exceptions as to the scope of the audit nor to
any other qualification or exception determined by Lender in its good
faith business judgment to be adverse to the interests of Lender. Such
accountants' report shall be accompanied by a certificate stating that,
in making the examination pursuant to generally accepted auditing
standards necessary for the certification of such financial statements
and such report, such accountants have obtained no knowledge of any
Default then existing or, if, in the opinion of such accountants, any
such Default shall exist, stating the nature and status of such
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Default, and stating that such accountants have reviewed Borrower's
financial calculations as at the end of such Fiscal Year (which shall
accompany such certificate) under Sections 6.12 through 6.17, have read
such Sections (including the definitions of all defined terms used
therein) and that nothing has come to the attention of such accountants
in the course of such examination that would cause them to believe that
the same were not calculated by Borrower in the manner prescribed by
this Agreement;
(c) Promptly after request by Lender, copies of any
detailed audit reports by independent accountants in connection with
the accounts or books of Borrower or any of its Subsidiaries, or any
audit of any of them;
(d) Promptly after the same are available, and in any
event within five (5) Banking Days after filing with the Securities and
Exchange Commission, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of
Borrower, and copies of all annual, regular, periodic and special
reports and registration statements which Borrower may file or be
required to file with the Securities and Exchange Commission under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
and not otherwise required to be delivered to the Lenders pursuant to
other provisions of this Section 7.1;
(e) Promptly after request by Lender, copies of any
other report or other document that was filed by Borrower with any
Governmental Agency;
(f) Promptly upon a Senior Officer becoming aware,
and in any event within five (5) Banking Days after becoming aware, of
the occurrence of any (i) "reportable event" (as such term is defined
in Section 4043 of ERISA, but EXCLUDING such events as to which the
PBGC has by regulation waived the requirement therein contained that it
be notified within thirty days of the occurrence of such event) or (ii)
non-exempt "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) involving any Pension Plan or
any trust created thereunder, telephonic notice specifying the nature
thereof, and, no more than two (2) Banking Days after such telephonic
notice, written notice again specifying the nature thereof and
specifying what action Borrower is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto;
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(g) As soon as practicable, and in any event within
two (2) Banking Days after a Senior Officer becomes aware of the
existence of any condition or event which constitutes a Default or
Event of Default, telephonic notice specifying the nature and period of
existence thereof, and, no more than two (2) Banking Days after such
telephonic notice, written notice again specifying the nature and
period of existence thereof and specifying what action Borrower is
taking or proposes to take with respect thereto;
(h) Promptly upon a Senior Officer becoming aware
that (i) any Person has commenced a legal proceeding with respect to a
claim against Borrower that is $1,000,000 or more in excess of the
amount thereof that is fully covered by insurance, (ii) any creditor
under a credit agreement involving Indebtedness of $1,000,000 or more
or any lessor under a lease involving aggregate rent of $1,000,000 or
more has asserted a default thereunder on the part of Borrower or,
(iii) any Person has commenced a legal proceeding with respect to a
claim against Borrower under a contract that is not a credit agreement
or material lease with respect to a claim of in excess of $1,000,000 or
which otherwise may reasonably be expected to result in a Material
Adverse Effect, a written notice describing the pertinent facts
relating thereto and what action Borrower is taking or proposes to take
with respect thereto; and
(i) Such other data and information relating to the
financial condition of Borrower as from time to time may be reasonably
requested by Lender.
7.2 COMPLIANCE CERTIFICATES. So long as any Loan or other
Obligation remains unpaid or unperformed, Borrower shall, at Borrower's sole
expense, deliver to Lender concurrently with the financial statements required
pursuant to Sections 7.1(a) and 7.1(b), a Compliance Certificate signed by a
Senior Officer.
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Article 8
CONDITIONS
----------
8.1 THE LOANS. The obligation of Lender to make the Loans is
subject to the following conditions precedent, each of which shall be satisfied
prior to the making of the Loans (unless Lender, in its sole and absolute
discretion, shall agree otherwise):
(a) Lender shall have received all of the following,
each of which shall be originals unless otherwise specified, each
properly executed by a Responsible Official of each party thereto, each
dated as of the Closing Date and each in form and substance
satisfactory to Lender and its legal counsel (unless otherwise
specified or, in the case of the date of any of the following, unless
Lender otherwise agrees or directs):
(1) at least one (1) executed counterpart of
this Agreement;
(2) the Term Loan A Note and the Term Loan B
Note, each executed by Borrower to the order of Lender;
(3) the Borrower Security Agreement executed
by Borrower;
(4) the Subsidiary Guaranty executed by the
Subsidiary Guarantors;
(5) the Subsidiary Security Agreement
executed by the Subsidiary Guarantors;
(6) the Pledge Agreement executed by
Borrower;
(7) the Pledged Collateral, together with
executed undated stock powers relating thereto;
(8) such financing statements on Form UCC-1
executed by Borrower and the Subsidiary Guarantors with
respect to the Borrower Security Agreement and the Subsidiary
Security Agreement as Lender may request;
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(9) with respect to Borrower and the
Subsidiary Guarantors, such documentation as Lender may
reasonably require to establish the due organization, valid
existence and good standing of Borrower and the Subsidiary
Guarantors, their qualification to engage in business in each
material jurisdiction in which they are engaged in business
and required to be so qualified, their authority to execute,
deliver and perform the Loan Documents to which it is a Party,
the identity, authority and capacity of each Responsible
Official thereof authorized to act on its behalf, INCLUDING
certified copies of articles of incorporation and amendments
thereto, bylaws and amendments thereto, certificates of good
standing and/or qualification to engage in business, tax
clearance certificates, certificates of corporate resolutions,
incumbency certificates, Certificates of Responsible
Officials, and the like;
(10) a copy of the executed Stock Purchase
Agreement, the exhibits and schedules thereto, and all other
material ancillary documents relating to the Island Pacific
Acquisition;
(11) a Certificate of the chief financial
officer of Borrower certifying that the representation
contained in Section 4.17 is, to the best of his or her
knowledge, true and correct; and
(12) a Certificate of the chief financial
officer of Borrower certifying that the conditions specified
in Sections 8.1(e) and 8.1(f) have been satisfied.
(b) The fees payable on the Closing Date pursuant to
Section 3.3 shall be paid from the proceeds of Term Loan A.
(c) Lender shall be reasonably satisfied that, upon
the filing of the financing statements described in Section 8.1(a)(8)
with the appropriate Governmental Agencies, Lender will hold a first
priority perfected Lien in the Collateral, subject only to Permitted
Encumbrances.
(d) The reasonable costs and expenses of Lender in
connection with the preparation of the Loan Documents payable pursuant
to Section 11.3, and invoiced to Borrower prior to the Closing Date,
shall have been paid or provided to be paid on the Closing Date.
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(e) The representations and warranties of Borrower
contained in ARTICLE 4 shall be true and correct in all material
respects.
(f) Borrower and any other Parties shall be in
compliance with all the terms and provisions of the Loan Documents, and
giving effect to the Loans, no Default or Event of Default shall have
occurred and be continuing.
(g) Lender shall have been satisfied with each of:
(i) its due diligence investigation of Borrower, its Subsidiaries and
their respective assets; (ii) its audit of the books and records of
Borrower and its Subsidiaries; (iii) its review of the budget of
Borrower and its Subsidiaries for Capital Expenditures; (iv) its review
of the Projections; (v) its review of the operating financial
statements of Borrower and its Subsidiaries; (vi) its review of the
material agreements, including management agreements, of Borrower and
its Subsidiaries; and (vii) its review of the Stock Purchase Agreement
and the terms and conditions of the Island Pacific Acquisition.
(h) All legal matters relating to the Loan Documents
and the Island Pacific Acquisition shall be reasonably satisfactory to
Sheppard, Mullin, Richter & Hampton LLP, special counsel to Lender.
8.2 REFINANCE LOAN. The obligation of Lender to refinance Term
Loan A on the Term Loan A Maturity Date is subject to the following conditions
precedent (unless Lender, in its sole and absolute discretion, shall agree
otherwise):
(a) EXCEPT (i) for representations and warranties
which expressly speak as of a particular date or are no longer true and
correct as a result of a change which is permitted by this Agreement or
(ii) as disclosed by Borrower and approved in writing by Lender, the
representations and warranties contained in ARTICLE 4 (OTHER THAN
Sections 4.4, 4.6 (first sentence), 4.10 and 4.17) shall be true and
correct in all material respects on and as of the Term Loan A Maturity
Date as though made on that date;
(b) no circumstance or event shall have occurred that
constitutes a Material Adverse Effect since the Closing Date;
(c) other than matters described in SCHEDULE 4.10 or
not required as of the Closing Date to be therein described, there
shall not be then pending or threatened any action, suit, proceeding or
investigation against or affecting Borrower or any of its Subsidiaries
or any Property of any of them before any Governmental Agency that
constitutes a Material Adverse Effect;
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(d) Lender shall have received such security
agreements, financing statements and other security documents, in each
case duly executed by Borrower or the applicable Subsidiary Guarantor,
as Lender may require to create, evidence or a perfect a Lien in favor
of Lender on all patents and other intellectual property assets of
Borrower, which shall be substantially identical and not more onerous
to Borrower than the documents executed and delivered at the Closing
Date;
(e) Borrower and Lender shall have entered into a
definitive loan agreement, in form and substance reasonably acceptable
to Lender, providing for, among other terms, a loan fee of $37,500 and
the following financial covenants (Borrower's compliance with which
shall be determined quarterly, on a consolidated basis) but which
otherwise shall be substantially similar to this Agreement:
(i) a Leverage Ratio of not less than 2.50
to 1.00; and
(ii) a Fixed Charge Coverage Ratio of not
less than 1.25 to 1.00;
(f) Borrower shall have failed to complete the sale
of substantially all of the assets or capital stock of IBIS Systems
Limited, or the promissory note in the approximate original principal
amount of $14,000,000 issued to Borrower by the purchaser of IBIS
Systems Limited shall not have been paid in full; and
(g) Lender shall have received, in form and substance
reasonably satisfactory to Lender, such other assurances, certificates,
documents or consents related to the foregoing as the Lenders
reasonably may require.
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Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
----------------------------------------------------
9.1 EVENTS OF DEFAULT. The existence or occurrence of any one
or more of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrower fails to pay any principal on either of
the Notes, or any portion thereof, on the date when due; or
(b) Borrower fails to pay any interest on either of
the Notes within two (2) Banking Days after the date when due, or any
fees under Sections 3.3, 3.4 or 3.5, or any portion thereof within two
(2) Banking Days after demand therefor; or fails to pay any other fee
or amount payable to Lender under any other Loan Document, or any
portion thereof, within three (3) Banking Days after demand therefor;
or
(c) Borrower fails to comply with any of the
covenants contained in ARTICLE 6, unless such default (other than any
breach of Section 6.13, 6.14, 6.17 or any financial covenant which
hereafter may be added to this Agreement) can be cured and Borrower
remedies such default within seven (7) calendar days after Borrower's
receipt of written notice thereof from Lender; or
(d) Borrower fails to comply with Section 7.1(g) in
any respect that is materially adverse to the interests of Lender; or
(e) Borrower or any other Party fails to perform or
observe any other covenant or agreement (not specified in clause (a),
(b), (c) or (d) above) contained in any Loan Document on its part to be
performed or observed within twenty (20) Banking Days after the giving
of notice by Lender of such Default or, if such Default is not
reasonably susceptible of cure within such period, within such longer
period as is reasonably necessary to effect a cure so long as such
Borrower or such Party continues to diligently pursue cure of such
Default but not in any event in excess of forty (40) Banking Days; or
(f) Any representation or warranty of Borrower or any
other Party made in any Loan Document, or in any certificate or other
writing delivered by Borrower or such Party pursuant to any Loan
Document, proves to have been materially incorrect when made or
reaffirmed in any respect that will have a materially adverse effect on
the interests of Lender; or
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(g) Borrower (i) without cause fails to pay the
principal, or any principal installment, of any present or future
Indebtedness of $5,000,000 or more, or any guaranty of present or
future Indebtedness of $5,000,000 or more, on its part to be paid, when
due (or within any stated grace period or extended due date), whether
at the stated maturity, upon acceleration, by reason of required
prepayment or otherwise or (ii) fails to perform or observe any other
term, covenant or agreement on its part to be performed or observed, or
suffers any event of default to occur, in connection with any present
or future Indebtedness of $5,000,000 or more, or of any guaranty of
present or future Indebtedness of $5,000,000 or more, if as a result of
such failure or sufferance any holder or holders thereof (or an agent
or trustee on its or their behalf) has the right to declare such
Indebtedness due before the date on which it otherwise would become due
or the right to require Borrower to redeem or purchase, or offer to
redeem or purchase, all or any portion of such Indebtedness; or
(h) Any Loan Document, at any time after its
execution and delivery and for any reason OTHER THAN the agreement or
action (or omission to act) of Lender or satisfaction in full of all
the Obligations, ceases to be in full force and effect or is declared
by a court of competent jurisdiction to be null and void, invalid or
unenforceable in any respect which is materially adverse to the
interests of Lender; or any Collateral Document ceases (other than by
action or inaction of Lender) to create a valid and effective Lien in
any material portion of the Collateral; or any Party thereto denies in
writing that it has any or further liability or obligation under any
Loan Document, or purports to revoke, terminate or rescind same; or
(i) A final judgment against Borrower is entered for
the payment of money in excess of $1,000,000 (not covered by insurance
or for which an insurer has reserved its rights) and, absent
procurement of a stay of execution, such judgment remains unsatisfied
for thirty (30) calendar days after the date of entry of judgment, or
in any event later than five (5) days prior to the date of any proposed
sale thereunder; or any writ or warrant of attachment or execution or
similar process is issued or levied against all or any material part of
the Property of Borrower and is not released, vacated or fully bonded
within sixty (60) calendar days after its issue or levy; or
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(j) Borrower institutes or consents to the
institution of any proceeding under a Debtor Relief Law relating to it
or to all or any material part of its Property, or is unable or admits
in writing its inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors; or applies for or consents to
the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any
material part of its Property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed
without the application or consent of that Person and the appointment
continues undischarged or unstayed for sixty (60) calendar days; or any
proceeding under a Debtor Relief Law relating to any such Person or to
all or any part of its Property is instituted without the consent of
that Person and continues undismissed or unstayed for sixty (60)
calendar days; or
(k) The occurrence of an Event of Default (as such
term is or may hereafter be specifically defined in any other Loan
Document) under any other Loan Document; or
(l) Any Pension Plan maintained by Borrower is
finally determined by the PBGC to have a material "accumulated funding
deficiency" as that term is defined in Section 302 of ERISA in excess
of an amount equal to 5% of the consolidated total assets of Borrower
as of the most-recently ended Fiscal Quarter; or
(m) Lender determines in good faith that a
circumstance or event has occurred that constitutes a Material Adverse
Effect.
9.2 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other
rights or remedies of Lender provided for elsewhere in this Agreement, or the
other Loan Documents, or by applicable Law, or in equity, or otherwise:
(a) Upon the occurrence, and during the continuance,
of any Event of Default, OTHER THAN an Event of Default described in
Section 9.1(j), Lender may declare all or any part of the unpaid
principal of each of the Notes, all interest accrued and unpaid thereon
and all other amounts payable under the Loan Documents to be forthwith
due and payable, whereupon the same shall become and be forthwith due
and payable, without protest, presentment, notice of dishonor, demand
or further notice of any kind, all of which are expressly waived by
Borrower.
(b) Upon the occurrence of any Event of Default
described in Section 9.1(j), the entire unpaid principal balance of
each of the Loans, all interest accrued and unpaid thereon and all
other amounts payable under the Loan Documents shall be forthwith due
and payable, without protest, presentment, notice of dishonor, demand
or further notice of any kind, all of which are expressly waived by
Borrower.
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(c) Upon the occurrence of any Event of Default,
Lender, without notice to (EXCEPT as expressly provided for in any Loan
Document) or demand upon Borrower, which are expressly waived by
Borrower (EXCEPT as to notices expressly provided for in any Loan
Document), may proceed to protect, exercise and enforce its rights and
remedies under the Loan Documents against Borrower and any other Party
and such other rights and remedies as are provided by Law or equity.
(d) The order and manner in which Lender's rights and
remedies are to be exercised shall be determined by Lender in its sole
discretion, and all payments received by Lender shall be applied first
to the costs and expenses (including reasonable attorneys' fees and
disbursements and the reasonably allocated costs of attorneys employed
by Lender) of Lender, and thereafter to the other Obligations. For the
purpose of computing Borrower's Obligations hereunder and under the
Notes, payments shall be applied FIRST, to the costs and expenses of
Lender, as set forth above, SECOND, to the payment of accrued and
unpaid interest due under any Loan Documents to and including the date
of such application and THIRD, to the payment of all other amounts
(including principal and fees) then owing to Lender under the Loan
Documents. No application of payments will cure any Event of Default,
or prevent acceleration, or continued acceleration, of amounts payable
under the Loan Documents, or prevent the exercise, or continued
exercise, of rights or remedies of Lender hereunder or thereunder or at
Law or in equity.
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Article 10
[INTENTIONALLY OMITTED]
-----------------------
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Article 11
MISCELLANEOUS
-------------
11.1 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers,
privileges and remedies of Lender provided herein or in the Notes or any other
Loan Document are cumulative and not exclusive of any right, power, privilege or
remedy provided by Law or equity. No failure or delay on the part of Lender in
exercising any right, power, privilege or remedy may be, or may be deemed to be,
a waiver thereof; nor may any single or partial exercise of any right, power,
privilege or remedy preclude any other or further exercise of the same or any
other right, power, privilege or remedy.
11.2 AMENDMENTS; CONSENTS. No amendment, modification,
supplement, extension, termination or waiver of any provision of this Agreement
or any other Loan Document, no approval or consent thereunder, and no consent to
any departure by Borrower or any other Party therefrom, may in any event be
effective unless in writing signed by Lender, and then only in the specific
instance and for the specific purpose given.
11.3 COSTS, EXPENSES AND TAXES. Borrower shall pay within five
(5) Banking Days after demand, accompanied by an invoice therefor, the
reasonable costs and expenses of Lender in connection with the negotiation,
preparation, execution and delivery of the Loan Documents and any amendment
thereto or waiver thereof. Borrower shall also pay on demand, accompanied by an
invoice therefor, the reason able costs and expenses of Lender in connection
with the refinancing, restructuring, reorganization (INCLUDING a bankruptcy
reorganization) and enforcement or attempted enforcement of the Loan Documents,
and any matter related thereto. The foregoing costs and expenses shall include
filing fees, appraisal fees, search fees, and other out-of-pocket expenses and
the reasonable fees and out-of-pocket expenses of any legal counsel (INCLUDING
reasonably allocated costs of legal counsel employed by Lender), independent
public accountants and other outside experts retained by Lender, whether or not
such costs and expenses are incurred or suffered by Lender in connection with
or during the course of any bankruptcy or insolvency proceedings of any of
Borrower or any Subsidiary thereof. Borrower shall pay any and all documentary
and other taxes, EXCLUDING (i) taxes imposed on or measured in whole or in part
by Lender's overall net income imposed on it by (A) any jurisdiction (or
political subdivision thereof) in which it is organized or maintains its
principal office or Eurodollar Lending Office or (B) any jurisdiction (or
political subdivision thereof) in which it is "doing business" or (ii) any
withholding taxes or other taxes based on gross income imposed by the United
States of America for any period with respect to which it has failed to provide
Borrower with the appropriate form or forms required by Section 11.21, to the
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extent such forms are then required by applicable Laws, and all costs, expenses,
fees and charges payable or determined to be payable in connection with the
filing or recording of this Agreement, any other Loan Document or any other
instrument or writing to be delivered hereunder or thereunder, or in connection
with any transaction pursuant hereto or thereto, and shall reimburse, hold
harmless and indemnify on the terms set forth in 11.11 Lender from and against
any and all loss, liability or legal or other expense with respect to or
resulting from any delay in paying or failure to pay any such tax, cost,
expense, fee or charge or that any of them may suffer or incur by reason of the
failure of any Party to perform any of its Obligations. Any amount payable to
Lender under this Section 11.3 shall bear interest from the fifth Banking Day
following the date of demand for payment at the Default Rate.
11.4 INTENTIONALLY OMITTED.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or in any other Loan Document,
or in any certificate or other writing delivered by or on behalf of any one or
more of the Parties to any Loan Document, will survive the making of the Loans
hereunder and the execution and delivery of the Notes, and have been or will be
relied upon by Lender, notwithstanding any investigation made by Lender.
11.6 NOTICES. EXCEPT as otherwise expressly provided in the
Loan Documents, all notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must be
in writing and must be mailed, telegraphed, telecopied, dispatched by commercial
courier or delivered to the appropriate party at the address set forth on the
signature page of this Agreement or other applicable Loan Document or, as to any
party to any Loan Document, at any other address as may be designated by it in a
written notice sent to all other parties to such Loan Document in accordance
with this Section. EXCEPT as otherwise expressly provided in any Loan Document,
if any notice, request, demand, direction or other communication required or
permitted by any Loan Document is given by mail it will be effective on the
earlier of receipt or the fourth Banking Day after deposit in the United States
mail with first class or airmail postage prepaid; if given by telegraph or
cable, when delivered to the telegraph company with charges prepaid; if given by
telecopier, when sent; if dispatched by commercial courier, on the scheduled
delivery date; or if given by personal delivery, when delivered.
11.7 EXECUTION OF LOAN DOCUMENTS. Unless Lender otherwise
specifies with respect to any Loan Document, (a) this Agreement and any other
Loan Document may be executed in any number of counterparts and any party hereto
or thereto may execute any counterpart, each of which when executed and
delivered will be deemed to be an original and all of which counterparts of this
Agreement or any other Loan Document, as the case may be, when taken together
will be deemed to be but one and the same instrument and (b) execution of any
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such counterpart may be evidenced by a telecopier transmission of the signature
of such party. The execution of this Agreement or any other Loan Document by
any party hereto or thereto will not become effective until counterparts hereof
or thereof, as the case may be, have been executed by all the parties hereto or
thereto.
11.8 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and the other Loan Documents to
which Borrower is a Party will be binding upon and inure to the benefit
of Borrower, Lender, and their respective successors and assigns,
EXCEPT that Borrower may not assign its rights hereunder or thereunder
or any interest herein or therein without the prior written consent of
Lender. Lender represents that it is not acquiring the Notes with a
view to the distribution thereof within the meaning of the Securities
Act of 1933, as amended (subject to any requirement that disposition of
such Notes must be within the control of Lender). Lender may at any
time pledge the Notes or any other instrument evidencing its rights
under this Agreement to a Federal Reserve Bank, but no such pledge
shall release Lender from its obligations hereunder or grant to such
Federal Reserve Bank the rights of Lender hereunder absent foreclosure
of such pledge.
(b) Lender may from time to time grant participations
to one or more banks or other financial institutions in a portion of
either of the Loans; PROVIDED, HOWEVER, that (i) Lender's obligations
under this Agreement shall remain unchanged, (ii) Lender shall remain
solely responsible for the performance of such obligations, (iii) the
participating banks or other financial institutions shall not be a
lender hereunder for any purpose EXCEPT, if the participation agreement
so provides, for the purposes of Sections 3.6, 3.7, 11.11 and 11.22,
but only to the extent that the cost of such benefits to Borrower does
not exceed the cost which Borrower would have incurred in respect of
such participant absent the participation, (iv) Borrower and Lender
shall continue to deal solely and directly with each other in
connection with Lender's rights and obligations under this Agreement,
and (v) the consent of the holder of such participation interest shall
not be required for amendments or waivers of provisions of the Loan
Documents OTHER THAN those which (A) extend the Term Loan A Maturity
Date or the Term Loan B Maturity Date (other than in accordance with
Section 8.2 above) or any other date upon which any payment of money is
due to Lender, (B) reduce the rate of interest on the Notes, any fee or
any other monetary amount payable to Lender, (C) release any material
Subsidiary Guaranty, or (D) release any material Collateral from the
Lien of the Collateral Documents, except if such release of material
Collateral occurs in connection with a Disposition permitted under
Section 6.2, in which case such release shall not require the consent
of either Lender or any holder of a participation interest in the
Loans.
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11.9 RIGHT OF SETOFF. If an Event of Default has occurred and
is continuing, Lender may exercise its rights under Article 9 of the Uniform
Commercial Code and other applicable Laws and, to the extent permitted by
applicable Laws, apply any funds in any deposit account maintained with it by
Borrower and/or any Property of Borrower in its possession against the
Obligations.
11.10 INTENTIONALLY OMITTED.
11.11 INDEMNITY BY BORROWER. Borrower agrees to indemnify,
save and hold harmless Lender and its directors, officers, agents, attorneys and
employees (collectively the "INDEMNITEES") from and against: (a) any and all
claims, demands, actions or causes of action (EXCEPT a claim, demand, action, or
cause of action for any amount excluded from the definition of "Taxes" in
Section 3.12(d)) if the claim, demand, action or cause of action arises out of
or relates to any act or omission (or alleged act or omission) of Borrower, its
Affiliates or any of its officers, directors or stockholders relating to the
Loan or the use or contemplated use of proceeds of the Loans; (b) any
administrative or investigative proceeding by any Governmental Agency arising
out of or related to a claim, demand, action or cause of action described in
clause (a) above; and (c) any and all liabilities, losses, reasonable costs or
expenses (INCLUDING reasonable attorneys' fees and the reasonably allocated
costs of attorneys employed by any Indemnitee and disbursements of such
attorneys and other professional services) that any Indemnitee suffers or incurs
as a result of the assertion of any foregoing claim, demand, action or cause of
action; PROVIDED that no Indemnitee shall be entitled to indemnification for any
loss caused by its own gross negligence or willful misconduct or for any loss
asserted against it by another Indemnitee. If any claim, demand, action or cause
of action is asserted against any Indemnitee, such Indemnitee shall promptly
notify Borrower, but the failure to so promptly notify Borrower shall not affect
Borrower's obligations under this Section unless such failure materially
prejudices Borrower's right to participate in the contest of such claim, demand,
action or cause of action, as hereinafter provided. Such Indemnitee may (and
shall, if requested by Borrower in writing) contest the validity, applicability
and amount of such claim, demand, action or cause of action and shall permit
Borrower to participate in such contest. Any Indemnitee that proposes to settle
or compromise any claim or proceeding for which Borrower may be liable for
payment of indemnity hereunder shall give Borrower written notice of the terms
of such proposed settlement or compromise reasonably in advance of settling or
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compromising such claim or proceeding and shall obtain Borrower's prior consent
(which shall not be unreasonably withheld or delayed). In connection with any
claim, demand, action or cause of action covered by this Section 11.11 against
more than one Indemnitee, all such Indemnitees shall be represented by the same
legal counsel (which may be a law firm engaged by the Indemnitees or attorneys
employed by an Indemnitee or a combination of the fore going) selected by the
Indemnitees and reasonably acceptable to Borrower; PROVIDED, that if such legal
counsel determines in good faith that representing all such Indemnitees would or
could result in a conflict of interest under Laws or ethical principles
applicable to such legal counsel or that a defense or counterclaim is available
to an Indemnitee that is not available to all such Indemnitees, then to the
extent reasonably necessary to avoid such a conflict of interest or to permit
unqualified assertion of such a defense or counterclaim, each affected
Indemnitee shall be entitled to separate representation by legal counsel
selected by that Indemnitee and reasonably acceptable to Borrower, with all such
legal counsel using reasonable efforts to avoid unnecessary duplication of
effort by counsel for all Indemnitees; and FURTHER PROVIDED that (as an
Indemnitee) shall at all times be entitled to representation by separate legal
counsel (which may be a law firm or attorneys employed by Lender or a
combination of the foregoing). Any obligation or liability of Borrower to any
Indemnitee under this Section 11.11 shall survive the expiration or termination
of this Agreement and the repayment of all Loans and the payment and performance
of all other Obligations owed to Lender.
11.12 NONLIABILITY OF LENDER. Borrower acknowledges and agrees
that:
(a) Inspections of any Property of Borrower made by
or through Lender are for the purpose of administration of the Loans
only and Borrower is not entitled to rely upon the same (whether or not
such inspections are at the expense of Borrower);
(b) By accepting or approving anything required to be
observed, performed, fulfilled or given to Lender pursuant to the Loan
Documents, Lender shall not be deemed to have warranted or represented
the sufficiency, legality, effectiveness or legal effect of the same,
or of any term, provision or condition thereof, and such acceptance or
approval thereof shall not constitute a warranty or representation to
anyone with respect thereto by Lender;
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(c) The relationship between Borrower and Lenders is,
and shall at all times remain, solely that of borrower and lender;
Lender shall not under any circumstance be construed to be a partner or
joint venturer of Borrower or its Affiliates; Lender shall not under
any circumstance be deemed to be in a relationship of confidence or
trust or a fiduciary relationship with Borrower or its Affiliates, or
to owe any fiduciary duty to Borrower or its Affiliates; Lender does
not undertake or assume any responsibility or duty to Borrower or its
Affiliates to select, review, inspect, supervise, pass judgment upon or
inform Borrower or its Affiliates of any matter in connection with
their Property or the operations of Borrower or its Affiliates;
Borrower and its Affiliates shall rely entirely upon their own judgment
with respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information undertaken or assumed by
Lender in connection with such matters is solely for the protection of
Lender and neither Borrower nor any other Person is entitled to rely
thereon; and
(d) Lender shall not be responsible or liable to any
Person for any loss, damage, liability or claim of any kind relating to
injury or death to Persons or damage to Property caused by the actions,
inaction or negligence of Borrower and/or its Affiliates and Borrower
hereby indemnifies and holds Lender harmless on the terms set forth in
Section 11.11 from any such loss, damage, liability or claim.
11.13 NO THIRD PARTIES BENEFITTED. This Agreement is made for
the purpose of defining and setting forth certain obligations, rights and duties
of Borrower and Lender in connection with the Loan, and is made for the sole
benefit of Borrower, and Lender, and the Lender's successors and assigns. EXCEPT
as provided in Sections 11.8 and 11.11, no other Person shall have any rights of
any nature hereunder or by reason hereof.
11.14 CONFIDENTIALITY. Lender agrees to hold any confidential
information that it may receive from Borrower pursuant to this Agreement in
confidence, EXCEPT for disclosure: (a) to Affiliates of Lender; (b) to legal
counsel and accountants for Borrower or any Lender; (c) to other professional
advisors to Borrower or Lender, provided that the recipient has accepted such
information subject to a confidentiality agreement substantially similar to this
Section 11.14; (d) to regulatory officials having jurisdiction over Lender; (e)
as required by Law or legal process, provided that Lender agrees to notify
Borrower of any such disclosures unless prohibited by applicable Laws, or in
connection with any legal proceeding to which Lender and Borrower are adverse
parties; and (f) to another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or part
of Lender's interests hereunder or a participation interest in the Notes,
provided that the recipient has accepted such information subject to a
confidentiality agreement substantially similar to this Section 11.14. For the
purpose of the foregoing, "confidential information" shall mean any information
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respecting Borrower or its Subsidiaries reasonably considered by Borrower to be
confidential, OTHER THAN (i) information previously filed with any Governmental
Agency and available to the public, (ii) information previously published in any
public medium from a source other than, directly or indirectly, Lender, and
(iii) information previously disclosed by Borrower to any Person not associated
with Borrower which does not owe a professional duty of confidentiality to
Borrower or which has not executed an appropriate confidentiality agreement with
Borrower. Nothing in this Section shall be construed to create or give rise to
any fiduciary duty on the part of Lender to Borrower.
11.15 FURTHER ASSURANCES. Borrower shall, at its expense and
without expense to Lender take, execute and deliver such further acts and
documents as Lender from time to time reasonably requires for the assuring and
confirming unto Lender of the rights hereby created or intended now or hereafter
so to be, or for carrying out the intention or facilitating the performance of
the terms of any Loan Document.
11.16 INTEGRATION. This Agreement the other Loan Documents
comprise the complete and integrated agreement of the parties on the subject
matter hereof and supersede all prior agreements, written or oral, on the
subject matter hereof. In the event of any conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control and govern; PROVIDED that the inclusion of supplemental
rights or remedies in favor of Lender in any other Loan Document shall not be
deemed a conflict with this Agreement. Each Loan Document was drafted with the
joint participation of the respective parties thereto and shall be construed
neither against nor in favor of any party, but rather in accordance with the
fair meaning thereof.
11.17 GOVERNING LAW; JURISDICTION AND VENUE. EXCEPT to the
extent otherwise provided therein, each Loan Document shall be governed by, and
construed and enforced in accordance with, the Laws of California applicable to
contracts made and performed in California. THE PARTIES AGREE THAT ALL ACTIONS
OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN A CALIFORNIA STATE COURT IN LOS ANGELES OR SAN DIEGO OR THE
U.S. DISTRICT COURT (CENTRAL OR SOUTHERN DISTRICT OF CALIFORNIA). THE PARTIES
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED IN ANY SUCH COURT, AND THE PARTIES HEREBY WAIVE ANY
OBJECTION THEY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION AND HEREBY
CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY ANY SUCH COURT. FURTHERMORE, THE PARTIES HEREBY WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT THEY MAY HAVE TO ASSERT THE
DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.17.
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11.18 SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining provisions
or the operation, enforceability or validity of that provision as to any other
party or in any other jurisdiction, and to this end the provisions of all Loan
Documents are declared to be severable.
11.19 HEADINGS. Article and Section headings in this Agreement
and the other Loan Documents are included for convenience of reference only and
are not part of this Agreement or the other Loan Documents for any other
purpose.
11.20 TIME OF THE ESSENCE. Time is of the essence of the Loan
Documents.
11.21 INTENTIONALLY OMITTED.
11.22 HAZARDOUS MATERIAL INDEMNITY. Borrower hereby agrees to
indemnify, hold harmless and defend (by counsel reasonably satisfactory to
Lender and its directors, officers, employees, agents, successors and assigns
from and against any and all claims, losses, damages, liabilities, fines,
penalties, charges, administrative and judicial proceedings and orders,
judgments, remedial action requirements, enforcement actions of any kind, and
all reasonable costs and expenses incurred in connection therewith (including
but not limited to reasonable attorneys' fees and the reasonably allocated costs
of attorneys employed by Lender, and expenses to the extent that the defense of
any such action has not been assumed by Borrower), arising directly or
indirectly out of (i) the presence on, in, under or about any Real Property of
any Hazardous Materials, or any releases or discharges of any Hazardous
Materials on, under or from any Real Property and (ii) any activity carried on
or undertaken on or off any Real Property by Borrower or any of its predecessors
in title, whether prior to or during the term of this Agreement, and whether by
Borrower or any predecessor in title or any employees, agents, contractors or
subcontractors of Borrower or any predecessor in title, or any third persons at
any time occupying or present on any Real Property, in connection with the
handling, treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials at any time located or present on, in, under
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or about any Real Property. The foregoing indemnity shall further apply to any
residual contamination on, in, under or about any Real Property, or affecting
any natural resources, and to any contamination of any Property or natural
resources arising in connection with the generation, use, handling, storage,
transport or disposal of any such Hazardous Materials, and irrespective of
whether any of such activities were or will be undertaken in accordance with
applicable Laws, but the fore going indemnity shall not apply to Hazardous
Materials on any Real Property, the presence of which is caused by Lender.
Borrower hereby acknowledges and agrees that, notwithstanding any other
provision of this Agreement or any of the other Loan Documents to the contrary,
the obligations of Borrower under this Section shall be unlimited corporate
obligations of Borrower and shall NOT be secured by any Lien on any Real
Property. Any obligation or liability of Borrower to any Indemnitee under this
Section 11.22 shall survive the expiration or termination of this Agreement and
the repayment of all Loans and the payment and performance of all other
Obligations owed to Lender.
11.23 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR
ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
11.24 PURPORTED ORAL AMENDMENTS. BORROWER EXPRESSLY
ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE
AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED,
BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES
THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL
OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF LENDER THAT DOES NOT COMPLY WITH
SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
BORROWER:
SVI HOLDINGS, INC.
By:/S/ David L. Reese
-------------------------------------------
David L. Reese
Chief Financial Officer
Address:
SVI Holdings, Inc.
7979 Ivanhoe Avenue
Suite 500
La Jolla, California 92037
Attn: David L. Reese, Chief Financial Officer
Telecopier: (619) 551-5289
Telephone: (619) 551-2365
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LENDER:
UNION BANK OF CALIFORNIA, N.A.,
By:/S/ Douglas S. Lambell
-------------------------------------------
Douglas S. Lambell
Vice President
By:/S/ Linda L. Welker
-------------------------------------------
Linda L. Welker
Vice President
Address:
Union Bank of California, N.A.
San Diego Commercial Banking Office
530 "B" Street, 4th Floor, S-420
San Diego, California 92101-4407
Attn: Linda L. Welker, Vice President
Telecopier: (619) 230-3766
Telephone: (619) 230-3378
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TERM LOAN A NOTE
----------------
$15,000,000 June 3, 1999
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of UNION BANK OF CALIFORNIA, N.A. (the "Lender") the principal amount of
Fifteen Million Dollars ($15,000,000), payable as hereinafter set forth. The
undersigned promises to pay interest on the principal amount hereof remaining
unpaid from time to time from the date hereof until the date of payment in full,
payable as hereinafter set forth.
Reference is made to the Term Loan Agreement, of even date
herewith, by and between the undersigned, as Borrower, and the Lender, as Lender
(as amended, extended, renewed, supplemented or otherwise modified from time to
time, the "Loan Agreement"). Terms defined in the Loan Agreement and not
otherwise defined herein are used herein with the respective meanings given
those terms in the Loan Agreement. This is the Term Note referred to in the Loan
Agreement, and the holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Loan Agreement as originally
executed or as it may from time to time be supplemented, modified or amended.
The Loan Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events upon the terms
and conditions therein specified.
The principal indebtedness evidenced by this Note shall be
fully due and payable in one lump sum payment on the Maturity Date, if not
sooner paid as permitted or required under the Loan Agreement.
Interest shall be payable on the outstanding daily unpaid
principal amount of the Loan from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
Agreement both before and after default and before and after maturity and
judgment, with interest on overdue principal and interest to bear interest at
the rate set forth in SECTION 3.7 of the Loan Agreement, to the fullest extent
permitted by applicable Law.
Each payment hereunder shall be made to Lender at Lender's
Office in immediately available funds not later than 11:00 a.m. (California
time) on the day of payment (which must be a Banking Day). All payments received
after 11:00 a.m. (California time) on any particular Banking Day shall be deemed
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
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Lender shall use its best efforts to keep a record of payments
of principal and interest received by it with respect to this Note, and such
record shall be presumptive evidence of the amounts owing under this Note.
The undersigned hereby promises to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements, whether or not an action is filed in connection therewith.
The undersigned hereby waives presentment, demand for payment,
dishonor, notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
THIS NOTE SHALL BE DELIVERED TO AND ACCEPTED BY LENDER IN THE
STATE OF CALIFORNIA, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LOCAL LAWS THEREOF.
SVI HOLDINGS, INC.,
a Nevada corporation
By:/s/ David Reese
-------------------------
Name: David Reese
Title:_________________________________
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SCHEDULE OF PAYMENTS
Date Interest Amount of Unpaid Notation
Period Principal Principal Made by
and Payment Paid Balance
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TERM LOAN B NOTE
----------------
$3,500,000 June 3, 1999
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the
order of UNION BANK OF CALIFORNIA, N.A. (the "Lender") the principal amount of
Three Million Five Hundred Thousand Dollars ($3,500,000), payable as hereinafter
set forth. The undersigned promises to pay interest on the principal amount
hereof remaining unpaid from time to time from the date hereof until the date of
payment in full, payable as hereinafter set forth.
Reference is made to the Term Loan Agreement, of even date
herewith, by and between the undersigned, as Borrower, and the Lender, as Lender
(as amended, extended, renewed, supplemented or otherwise modified from time to
time, the "Loan Agreement"). Terms defined in the Loan Agreement and not
otherwise defined herein are used herein with the respective meanings given
those terms in the Loan Agreement. This is the Term Loan B Note referred to in
the Loan Agreement, and the holder hereof is entitled to all of the rights,
remedies, benefits and privileges provided for in the Loan Agreement as
originally executed or as it may from time to time be supplemented, modified or
amended. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
upon the terms and conditions therein specified.
The principal indebtedness evidenced by this Note shall be
fully due and payable in 24 equal consecutive monthly payments of $145,833.33
each, commencing on July 1, 1999 and continuing on the first calendar day of
each month thereafter, through and including the Term Loan B Maturity Date.
Interest shall be payable on the outstanding daily unpaid
principal amount of the Loan from the date thereof until payment in full and
shall accrue and be payable at the rates and on the dates set forth in the Loan
Agreement both before and after default and before and after maturity and
judgment, with interest on overdue principal and interest to bear interest at
the rate set forth in SECTION 3.7 of the Loan Agreement, to the fullest extent
permitted by applicable Law.
Each payment hereunder shall be made to Lender at Lender's
Office in immediately available funds not later than 11:00 a.m. (California
time) on the day of payment (which must be a Banking Day). All payments received
after 11:00 a.m. (California time) on any particular Banking Day shall be deemed
received on the next succeeding Banking Day. All payments shall be made in
lawful money of the United States of America.
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Lender shall use its best efforts to keep a record of payments
of principal and interest received by it with respect to this Note, and such
record shall be presumptive evidence of the amounts owing under this Note.
The undersigned hereby promises to pay all costs and expenses
of any rightful holder hereof incurred in collecting the undersigned's
obligations hereunder or in enforcing or attempting to enforce any of such
holder's rights hereunder, including reasonable attorneys' fees and
disbursements, whether or not an action is filed in connection therewith.
The undersigned hereby waives presentment, demand for payment,
dishonor, notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.
THIS NOTE SHALL BE DELIVERED TO AND ACCEPTED BY LENDER IN THE
STATE OF CALIFORNIA, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LOCAL LAWS THEREOF.
SVI HOLDINGS, INC.,
a Nevada corporation
By:/S/ David L. Reese
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David L. Reese
Chief Financial Officer
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SCHEDULE OF PAYMENTS
Date Interest Amount of Unpaid Notation
Period Principal Principal Made by
and Payment Paid Balance
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PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT, dated as of June 3, 1999, is made by
SVI Holdings, Inc., a Nevada corporation ("Grantor"), in favor of and for the
benefit of Union Bank of California, N.A. ("Secured Party"), with reference to
the following facts:
RECITALS
--------
A. Pursuant to the Term Loan Agreement of even date herewith
by and between Grantor and Secured Party (as such agreement may from time to
time be extended, modified, renewed, restated, supplemented or amended, the
"Loan Agreement"), Secured Party has agreed to provide Grantor with certain term
loan financing.
B. The Loan Agreement provides, as a condition precedent to
Secured Party's obligation to provide such financing to Grantor, that Grantor
shall enter into this Agreement and pledge to Secured Party the Pledged
Collateral described below, all under the terms and conditions set forth in this
Agreement.
C. Grantor expects to realize direct and indirect benefits as
a result of the availability of the aforementioned financing.
AGREEMENT
---------
NOW, THEREFORE, in order to induce Secured Party to extend the
aforementioned financing to Grantor, and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged,
Grantor hereby represents, warrants, covenants, agrees, and pledges as follows:
1. DEFINITIONS. This Agreement is the Pledge Agreement
referred to in the Loan Agreement. Terms defined in the Loan Agreement and not
otherwise defined in this Agreement shall have the meanings given those terms in
the Loan Agreement as though set forth herein in full. The following terms shall
have the meanings respectively set forth after each:
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"AGREEMENT" means this Pledge Agreement, and any extensions,
modifications, renewals, restatements, supplements or amendments
hereof.
"CASH" means all monetary and non-monetary items owned by
Grantor that are treated as cash in accordance with GAAP, consistently
applied.
"CERTIFICATES" means all certificates, instruments or other
documents now or hereafter representing or evidencing any Pledged
Securities.
"PLEDGED COLLATERAL" means any and all property of Grantor now
or hereafter pledged and delivered to Secured Party, and includes,
without limitation, the Pledged Securities, any Certificates
representing or evidencing the same, any and all proceeds of any of the
foregoing, and any and all collections, dividends (whether in Cash,
stock or otherwise), distributions, redemption payments, liquidation
payments, interest or premiums with respect to any of the foregoing.
"PLEDGED SECURITIES" means (a) any and all shares of capital
stock of all existing and future Significant Domestic Subsidiaries of
Grantor, now or here after owned by Grantor (the existing Significant
Domestic Subsidiaries of Grantor are listed on Schedule 1 hereto), (b)
65% of the shares of capital stock of all existing and future
Significant Foreign Subsidiaries of Grantor, now or hereafter owned by
Grantor, except for IBIS Systems Limited ("IBIS") (the existing
Significant Foreign Subsidiaries of Grantor other than IBIS are listed
on Schedule 1 hereto) (c) any and all securities now or hereafter
issued in substitution, exchange or replacement for any of the
foregoing shares, or with respect thereto, (d) any and all warrants,
options or other rights to subscribe to or acquire any additional
capital stock of the existing Significant Subsidiaries listed on
SCHEDULE 1 hereto, PROVIDED that, in the case of any Significant
Foreign Subsidiary of Grantor, such warrants, options or other rights
would not cause more than 65% of the shares of capital stock of such
Significant Foreign Subsidiary to be Pledged Collateral, and (e)
subject to the percentage limitation applicable under clause (b) above
to the pledge and security interest granted hereunder in the shares of
capital stock of Significant Foreign Subsidiaries of Grantor, any and
all equity interests and the Certificates or other written evidences
representing such equity interests and any interest of Grantor in the
entries on the books of any financial intermediary pertaining thereto
now or hereafter acquired by Grantor in any existing or future
Significant Subsidiary of Grantor.
2. INCORPORATION OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
OTHER PROVISIONS OF TRANSACTION DOCUMENTS. This Agreement is one of the Loan
Documents referred to in the Loan Agreement. All representations, warranties,
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affirmative and negative covenants and other provisions contained in any Loan
Document that are applicable to Loan Documents generally are fully applicable to
this Agreement and are incorporated herein by this reference as though set forth
in full.
3. CREATION OF SECURITY INTEREST.
3.1 PLEDGE OF PLEDGED COLLATERAL. Grantor hereby pledges
and grants to Secured Party a continuing first-priority security interest in and
to all Pledged Collateral for the benefit of Secured Party, together with all
proceeds, dividends, redemption payments, liquidation payments, Cash,
instruments and other Property, and any and all rights, title, interests,
privileges, benefits and preferences appertaining or incidental to the Pledged
Collateral. The security interest and pledge created by this SECTION 3.1 shall
continue in effect so long as any Obligations are owed to Secured Party.
3.2 DELIVERY OF CERTAIN PLEDGED COLLATERAL. On or
before the Closing Date, Grantor shall cause to be pledged and delivered to
Secured Party the Certificates evidencing the capital stock of the existing
Subsidiaries listed on SCHEDULE 1 hereto. Following the Closing Date, Grantor
shall deliver, or cause to be delivered, Pledged Securities of each future
Significant Subsidiary within 30 days of such Person becoming a Significant
Subsidiary. All Certificates at any time delivered to Secured Party shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party. Secured Party shall hold all Certificates pledged
hereunder pursuant to this Agreement unless and until released in accordance
with SECTION 3.3 of this Agreement.
3.3 RELEASE OF PLEDGED COLLATERAL. Pledged Collateral that
is required to be released from the pledge and security interest created by this
Agreement in order to permit Grantor to consummate any disposition of stock or
assets, merger, consolidation, amalgamation, acquisition, or dividend payment or
distribution that Grantor is entitled to consummate pursuant to the Loan
Agreement, if any, shall be so released by Secured Party at such times and to
the extent necessary to permit Grantor to consummate such permitted transactions
promptly following Secured Party's receipt of written request therefor by
Grantor specifying the purpose for which release is requested and such further
certificates or other documents as Secured Party reasonably shall request in its
discretion to confirm that Grantor is permitted to consummate such permitted
transaction and to confirm Secured Party's replacement Liens on appropriate
collateral (unless replacement collateral is not required pursuant to the Loan
Agreement). Any request for any permitted release shall be transmitted to
Secured Party. Secured Party, at the expense of Grantor, promptly shall
redeliver all Certificates and shall execute and deliver to Grantor all
documents requested by Grantor that are reasonably necessary to release Pledged
Collateral of record whenever Grantor shall be entitled to the release thereof
in accordance with this SECTION 3.3. Upon payment in full of all Obligations,
Secured Party, at the expense of Grantor, shall promptly redeliver all
Certificates and shall execute and deliver to Grantor all documents requested by
Grantor that are reasonably necessary to release Pledged Collateral of record.
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4. SECURITY FOR OBLIGATIONS. This Agreement and the pledge and
security interests granted herein secure the prompt payment, in full in cash,
and full performance of, all Obligations, whether for principal, interest, fees,
expenses or otherwise, including, without limitation, all Obligations now or
hereafter existing under the Loan Documents, all Obligations of Grantor now or
hereafter existing under this Agreement, and all interest that accrues on all or
any part of any of the Obligations following the bankruptcy of Grantor or any
other Person.
5. FURTHER ASSURANCES. Grantor agrees that at any time, and
from time to time, at its own expense, Grantor will promptly execute, deliver
and file or record all further financing statements, instruments and documents,
and will take all further actions, including, without limitation, causing the
issuers of, or obligors on any of the Pledged Collateral to so execute, deliver,
file or take other actions, that may be necessary or desirable, or that Secured
Party reasonably may request, in order to perfect and protect any pledge or
security interest granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Pledged Collateral
and to preserve, protect and maintain the Pledged Collateral and the value
thereof, including, without limitation, payment of all taxes, assessments and
other charges imposed on or relating to the Pledged Collateral. Grantor hereby
consents and agrees that the issuers of, or obligors on, the Pledged Collateral,
or any registrar or transfer agent or trustee for any of the Pledged Collateral,
shall be entitled to accept the provisions of this Agreement as conclusive
evidence of the right of Secured Party to effect any transfer or exercise any
right hereunder, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by Grantor or any other Person to such issuers or
such obligors or to any such registrar or transfer agent or trustee.
6. VOTING RIGHTS; DIVIDENDS; ETC. So long as no Event of
Default under the Loan Agreement has occurred and is continuing:
6.1 VOTING RIGHTS. Grantor shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Pledged
Securities, or any part thereof, for any purpose not inconsistent with the terms
of this Agreement, the Loan Agreement or the other Loan Documents.
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6.2 INTEREST, DIVIDEND AND DISTRIBUTION RIGHTS. Grantor
shall be entitled to receive and to retain and use any and all interest,
premiums, dividends or distributions paid in respect of the Pledged Collateral;
PROVIDED, HOWEVER, that any and all such dividends or distributions received in
the form of capital stock shall be, and the Certificates representing such
capital stock forthwith shall be delivered to Secured Party to hold as Pledged
Collateral and shall, if received by Grantor, be received in trust for the
benefit of Secured Party, be segregated from the other property of Grantor, and
forthwith be delivered to Secured Party as Pledged Collateral in the same form
as so received (with any necessary endorsements or stock powers).
7. RIGHTS FOLLOWING OCCURRENCE OF TRIGGERING EVENT. Following
the occurrence and continuance of an Event of Default under the Loan Agreement:
7.1 VOTING AND DISTRIBUTION RIGHTS. At the option of
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to SECTION 6.1
above, and to receive the interest, premiums, dividends and distributions which
it would otherwise be authorized to receive and retain pursuant to SECTION 6.2
above, shall cease, and all such rights shall thereupon become vested solely in
Secured Party who shall thereupon have the sole right to exercise such voting
and other consensual rights and to receive and to hold as Pledged Collateral
such dividends and distributions. Secured Party shall give notice to Grantor of
Secured Party's election to exercise voting rights with respect to the Pledged
Collateral; PROVIDED, HOWEVER, that (i) neither the giving of such notice nor
the receipt thereof by Grantor shall be a condition to exercise of any rights of
Secured Party hereunder, and (ii) Secured Party shall not incur any liability
for failing to give such notice.
7.2 DISTRIBUTIONS HELD IN TRUST. All dividends and other
distributions which are received by Grantor contrary to the provisions of this
Agreement shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Grantor, and forthwith shall be paid over to
Secured Party as Pledged Collateral in the same form as so received (with any
necessary endorsements or stock powers).
7.3 IRREVOCABLE PROXY. Grantor hereby revokes all previous
proxies with regard to the Pledged Securities and, to the extent allowable under
applicable Law, appoints Secured Party as its proxyholder to attend and vote at
any and all meetings of the shareholders of the corporations which issued the
Pledged Securities, and any adjournments thereof, held on or after the date of
the giving of this proxy and prior to the termination of this proxy and to
execute any and all written consents of shareholders of such corporations
executed on or after the date of the giving of this proxy and prior to the
termination of this proxy, with the same effect as if Grantor had personally
attended the meetings or had personally voted its shares or had personally
signed the written consents; PROVIDED, HOWEVER, that the proxyholder shall
exercise rights hereunder only following the occurrence and during the
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<PAGE>
continuance of an Event of Default under the Loan Agreement. Grantor hereby
authorizes Secured Party to substitute another Person as the proxyholder and,
upon the occurrence and during the continuance of any Event of Default hereby
authorizes and directs the proxyholder to file this proxy and the substitution
instrument with the secretary of the appropriate corporation. This proxy is
coupled with an interest and is irrevocable until such time as all Obligations
have been paid and performed in full.
8. TRANSFERS AND OTHER LIENS. Grantor agrees that, except as
specifically permitted under the Loan Documents, it will not (i) sell, assign,
exchange, transfer or otherwise dispose of, or contract to sell, assign,
exchange, transfer or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral, (ii) create or permit to exist any Liens upon or
with respect to any of the Pledged Collateral other than those Liens permitted
under the Transactions Documents, or (iii) take any action with respect to the
Pledged Collateral which is inconsistent with the provisions or purposes of this
Agreement or any other Loan Document.
9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor, and in the name of Grantor, or
otherwise, from time to time, in Secured Party's sole and absolute discretion to
do any of the following acts or things: (a) to do all acts and things and to
execute all documents necessary or advisable to perfect and continue perfected
the security interests created by this Agreement and to preserve, maintain and
protect the Pledged Collateral; (b) to do any and every act which Grantor is
obligated to do under this Agreement; (c) to prepare, sign, file and record, in
Grantor's name, any financing statement covering the Pledged Collateral; and (d)
to endorse and transfer the Pledged Collateral upon foreclosure by Secured
Party; PROVIDED, HOWEVER, that Secured Party shall be under no obligation
whatsoever to take any of the foregoing actions, and Secured Party shall have no
liability or responsibility for any act (other than its own gross negligence or
willful misconduct) or omission taken with respect thereto. Grantor hereby
agrees to repay immediately upon demand all reasonable costs and expenses
incurred or expended by Secured Party in exercising any right or taking any
action under this Agreement, together with interest as provided for in the Loan
Agreement.
10. SECURED PARTY MAY PERFORM OBLIGATIONS. If Grantor fails to
perform any Obligation contained herein, Secured Party may, but without any
obligation to do so and without notice to or demand upon Grantor, perform the
same and take such other action as Secured Party may deem necessary or desirable
to protect the Pledged Collateral or Secured Party's security interests therein,
Secured Party being hereby authorized (without limiting the general nature of
the authority hereinabove conferred) to pay, purchase, contest and compromise
any Liens which in the reason able judgment of Secured Party appear to be prior
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<PAGE>
or superior to Secured Party's security interests, and in exercising any such
powers and authority to pay necessary expenses, employ counsel and pay
reasonable attorneys' fees. Grantor hereby agrees to repay immediately upon
demand all sums so expended by Secured Party, together with interest from the
date of expenditure at the rates provided for in the Loan Agreement. Secured
Party shall be under no duty or obligation to (i) preserve, maintain or protect
the Pledged Collateral or any of Grantor's rights or interest therein, (ii)
exercise any voting rights with respect to the Pledged Collateral, or (iii) make
or give any notices of default, presentments, demands for performance, notices
of nonperformance or dishonor, protests, notices of protest or notice of any
other nature whatsoever in connection with the Pledged Collateral on behalf of
Grantor or any other Person having any interest therein; and Secured Party
assumes no liability for and shall not be obligated to perform the obligations
of Grantor, if any, with respect to the Pledged Collateral.
11. REASONABLE CARE. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially similar to that which Secured Party accords its own property, it
being understood that Secured Party shall not have any responsibility for (i)
ascertaining or taking action with respect to maturities, calls, conversions,
exchanges, tenders or other matters relative to any Pledged Collateral, whether
or not Secured Party has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any Person with respect to
any Pledged Collateral.
12. DEFAULT REMEDIES.
12.1 RIGHTS UPON EVENT OF DEFAULT. Following the
occurrence and during the continuance of an Event of Default under the Loan
Agreement, Grantor shall be in default hereunder and Secured Party shall have in
any jurisdiction where enforcement is sought, in addition to all other rights
and remedies that Secured Party may have under this Agreement and under
applicable Law or in equity, all of its rights and remedies as a secured party
under the Uniform Commercial Code as enacted in any such jurisdiction, and in
addition the following rights and remedies, all of which may be exercised with
or without further notice to Grantor:
(a) to notify any issuer of any Pledged Collateral
that the same has been pledged to Secured Party and that all dividends and other
payments thereon are to be made directly and exclusively to Secured Party; to
renew, extend, modify, amend, accelerate, accept partial payments on, make
allowances and adjustments and issue credits with respect to, release, settle,
compromise, compound, collect or otherwise liquidate, on terms acceptable to
Secured Party, in whole or in part, the Pledged Collateral and any amounts owing
thereon; to enter into any other agreement relating to or affecting the Pledged
Collateral; and to give all consents, waivers and ratifications with respect to
the Pledged Collateral and exercise all other rights (including voting rights),
powers and remedies and otherwise act with respect thereto as if Secured Party
were the owner thereof;
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(b) to enforce payment and prosecute any action or
proceeding with respect to any and all of the Pledged Collateral and take or
bring, in Secured Party's name(s) or in the name of Grantor, all steps, actions,
suits or proceedings deemed by Secured Party necessary or desirable to effect
collection of or to realize upon the Pledged Collateral;
(c) in accordance with applicable Law, to take
possession of the Pledged Collateral with or without judicial process;
(d) to endorse, in the name of Grantor, all checks,
notes, drafts, money orders, instruments and other evidences of payment relating
to the Pledged Collateral;
(e) subject to compliance with paragraph 12.2 below,
to transfer any or all of the Pledged Collateral into the name of Secured Party
or its nominee or nominees; and
(f) in accordance with applicable Law, to foreclose
the Liens and security interests created under this Agreement or under any other
agreement relating to the Pledged Collateral by any available judicial procedure
or without judicial process, and to sell, assign or otherwise dispose of the
Pledged Collateral or any part thereof, either at public or private sale or at
any broker's board or securities exchange, in lots or in bulk, for cash, on
credit or on future delivery, or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to Secured Party;
all at the sole option of and in the sole discretion of Secured Party.
12.2 NOTICE OF SALE. Secured Party shall give Grantor not
less than fourteen (14) days' written notice of sale of all or any part of the
Pledged Collateral. Any sale of the Pledged Collateral shall be held at such
time or times and at such place or places in California as Secured Party may
determine in the exercise of its sole and absolute discretion. Secured Party may
bid (which bid may be, in whole or in part, in the form of cancellation of
Obligations) for and purchase for the account of Secured Party or any nominee of
Secured Party the whole or any part of the Pledged Collateral. Secured Party
shall not be obligated to make any sale of the Pledged Collateral if it shall
determine not to do so regardless of the fact that notice of sale of the Pledged
Collateral may have been given. Secured Party may, without notice or
publication, adjourn the sale from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned.
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12.3 PRIVATE SALES. Following the occurrence and during
the continuance of an Event of Default under the Loan Agreement, whether or not
any of the Pledged Collateral has been effectively registered under the
Securities Act of 1933, as amended, or other applicable Laws, Secured Party may,
in its sole and absolute discretion, sell all or any part of the Pledged
Collateral at private sale in such manner and under such circumstances as
Secured Party may deem necessary or advisable in order that the sale may be
lawfully conducted. Without limiting the foregoing, Secured Party may (i)
approach and negotiate with a limited number of potential purchasers, and (ii)
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Pledged Collateral for their own account for
investment and not with a view to the distribution or resale thereof. Grantor
recognizes that a ready market may not exist for Pledged Securities which are
not regularly traded on a recognized securities exchange or in another
recognized market, and that a sale by Secured Party of any such Pledged
Securities for an amount substantially less than a pro rata share of the fair
market value of the issuer's assets minus liabilities may be commercially
reasonable in view of the difficulties that may be encountered in attempting to
sell a large amount of Pledged Securities or Pledged Securities that are
privately traded.
12.4 TITLE OF PURCHASERS. Subject to applicable
requirements of Law, upon consummation of any sale of Pledged Collateral
pursuant to this SECTION 12, Secured Party shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Pledged
Collateral so sold. Each such purchaser at any such sale shall hold the Pledged
Collateral sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable Law) all rights
of redemption, stay and appraisal which it now has or may at any time in the
future have under any rule of Law or statute now existing or hereafter enacted.
If the sale of all or any part of the Pledged Collateral is made on credit or
for future delivery, Secured Party shall not be required to apply any portion of
the sale price to the Obligations until such amount actually is received by
Secured Party, and any Pledged Collateral so sold may be retained by Secured
Party until the sale price is paid in full by the purchaser or purchasers
thereof. Secured Party shall not incur any liability in case any such purchaser
or purchasers shall fail to pay for the Pledged Collateral so sold, and, in case
of any such failure, the Pledged Collateral may be sold again upon like notice.
12.5 DISPOSITION OF PROCEEDS OF SALE. The net cash
proceeds resulting from the collection, liquidation, sale or other disposition
of the Pledged Collateral shall be applied, FIRST, to the reasonable costs and
expenses (including reasonable attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting and liquidating the
Pledged Collateral, and the like; SECOND, to the satisfaction of all
Obligations, with application as to any particular Obligations to be in the
order set forth in the Loan Agreement or other Loan Documents; and, THIRD, to
all other indebtedness secured hereby in such order and manner as Secured Party
in its sole and absolute discretion may determine.
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13. CONTINUING EFFECT. This Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Obligations, or any part thereof,
is, pursuant to applicable Law, rescinded or reduced in amount, or must
otherwise be restored or returned by Secured Party or any Lender, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made. In the event that any payment or any
part thereof is rescinded, reduced, restored or returned, the Obligations shall
be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
14. COVENANT NOT TO ISSUE UNCERTIFICATED SECURITIES. Grantor
represents and warrants to Secured Party that all of the capital stock of each
of the corporations that issued the Pledged Securities is in certificated form
(as contemplated by Division 8 of the California Uniform Commercial Code), and
covenants to Secured Party that it will not cause or permit such corporations to
issue any capital stock in uncertificated form or seek to convert all or any
part of its existing capital stock into uncertificated form (as contemplated by
Division 8 of the California Uniform Commercial Code). The foregoing
representations, warranties and covenants shall survive the execution and
delivery of this Agreement.
15. COVENANT NOT TO DILUTE INTERESTS OF SECURED PARTY IN
PLEDGED SECURITIES. Grantor represents, warrants and covenants to Secured Party
that it will not at any time cause or permit the corporations that issued the
Pledged Securities to issue any additional capital stock, or any warrants,
options or other rights to acquire any additional capital stock (unless such
securities are also pledged to Secured Party), if the effect thereof would be to
dilute in any way the interests of Secured Party in any Pledged Securities or
any corporation whose securities constitute Pledged Securities unless such
action is permitted at such time under the Loan Agreement.
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16. INDEMNITY. Grantor agrees to indemnify and hold harmless
Secured Party from and against any and all claims, demands, losses, judgments
and liabilities (including without limitation liabilities for penalties) of
whatsoever kind or nature, and to reimburse Secured Party for all reasonable
costs and expenses, including without limitation reasonable attorneys' fees and
expenses and/or costs and expenses associated with, arising out of or in
connection with this Agreement or the exercise by Secured Party of any right or
remedy granted to it hereunder, or under the Loan Documents other than arising
from the gross negligence or willful misconduct of Secured Party. In no event
shall Secured Party be liable for any matter or thing in connection with this
Agreement other than to account for monies actually received by it in accordance
with the terms hereof. If and to the extent that the agreements of Grantor under
this SECTION 16 are unenforceable for any reason, Grantor hereby agrees to make
the maximum contribution to the payment and satisfaction as such obligations
which is permissible under applicable Law.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
18. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which,
taken together, shall constitute one and the same agreement.
19. ADDITIONAL POWERS AND AUTHORIZATION. Secured Party shall
be entitled to the benefits accruing to it as Lender under the Loan Agreement.
Notwithstanding anything contained herein to the contrary, Secured Party may
employ agents, trustees, or attorneys-in-fact and may vest any of them with any
property (including, without limitation, the Pledged Collateral), title, right
or power deemed necessary for the purposes of such appointment.
20. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY EXPRESSLY
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. GRANTOR AND SECURED PARTY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, THE LOAN AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
-11-
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Agreement to be
duly executed as of the date first above written.
"Grantor"
SVI HOLDINGS, INC.,
a Nevada corporation
By: /S/ David L. Reese
--------------------------------------
David L. Reese
Chief Financial Officer
ACCEPTED AND AGREED TO:
UNION BANK OF CALIFORNIA, N.A.
By: /S/ Douglas S. Lambell
--------------------------------------
Douglas S. Lambell
Vice President
By: /S/ Linda L. Welker
--------------------------------------
Linda L. Welker
Vice President
-12-
<PAGE>
<TABLE>
SCHEDULE 1
----------
PLEDGED SECURITIES
------------------
<CAPTION>
GRANTOR: SVI HOLDINGS, INC.
- --------
Class Stock Number Percentage
Stock of Certificate of of
Issuer Stock No(s). Shares Ownership
- ------ ----- ----------- ------ ----------
<S> <C> <C> <C> <C>
Applied Retail Solutions, Inc. Common 1 1,500 100%
Island Pacific Systems Corporation Common 855 100%
Divergent Technologies Pty., Ltd. Ordinary 6 1 .0001%
Ordinary 16 86,249 6%
Ordinary 22 90,000 6%
Ordinary 24 90,000 6%
Ordinary 25 120,000 8%
Ordinary 9 3 .0002%
Ordinary 13 5 .0003%
Ordinary 18 258,747 17%
Ordinary 21 341,245 23%
------- ------
986,250 66%
</TABLE>
Schedule 1
<PAGE>
Bank of SECURITY AGREEMENT
California
This Agreement executed at SAN DIEGO, CALIFORNIA, on June 3, 1999 ______________
by SVI HOLDINGS, INC. ________________________________ (therein called "Debtor")
As security for the payment and performance of all of Debtor's obligations to
UNION BANK OF CALIFORNIA, N.A., (therein called "Bank") irrespectively of the
manner in which or the time of which such obligation arose or shall arise, and
whether direct or indirect, alone or with others, absolute or contingent, Debtor
does hereby grant a continuing security interest to Bank in all personal
property (therein called "Collateral"), whether now or hereafter owned or in
existence described as
<TABLE>
A. MOTOR VEHICLES:
<CAPTION>
- ----------------------------------------------------------------------------------------
NEW NUMBER
YEAR TRADE NAME BODY TYPE SERIAL NUMBER OR OF
USED CYLINDERS
- -----------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------
</TABLE>
B. OTHER:
ALL ACCOUNTS, DEPOSIT ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, DOCUMENTS, GENERAL
INTANGIBLES, INVENTORY, EQUIPMENT, FURNITURE, AND FIXTURES, NOW OR HEREAFTER
OWNED OR ACQUIRED BY DEBTOR, ALL PROCEEDS AND INSURANCE PROCEEDS OF THE
FOREGOING, ALL GUARANTEES AND OTHER SECURITY THEREFOR, AND ALL OF DEBTOR'S
PRESENT AND FUTURE BOOKS AND RECORDS RELATING THERETO (INCLUDING COMPUTER-STORED
INFORMATION AND ALL SOFTWARE RELATING THERETO) AND ALL CONTRACT RIGHTS WITH
THIRD PARTIES RELATING TO THE MAINTENANCE OF ANY SUCH BOOKS, RECORDS AND
INFORMATION.
The Collateral described above will be maintained at 7979 IVANHOE AVENUE, LA
JOLLA, CA 92037 ________________________________________________________________
and any other locations.
C. ALL PERSONAL PROPERTY OF ANY KIND WHICH IS DELIVERED TO OR IN THE POSSESSION
OR CONTROL OF BANK OR ITS AGENTS:
D. PROCEEDS OF ANY OF THE ABOVE-DESCRIBED PROPERTY. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described therein without the express consent in writing by Bank.
The maximum amount of indebtedness to be secured as any one time is unlimited
unless an amount is inserted N/A _____________________________ $ _______________
MAXIMUM AMOUNT N/A
(To be completed only if an accommodation) N/A ________________________________
Is executing the Agreement as an Accommodation Debtor only and his liability to
the security interest created in Collateral described herein.
The Debtor being accommodated is N/A ___________________________________________
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
SVI HOLDINGS. INC.
By: /s/ David L. Reese
-----------------------------------------------------------------------------
DAVID L. REESE, C.F.O.
<PAGE>
Bank of SECURITY AGREEMENT
California
This Agreement executed at SAN DIEGO, CALIFORNIA, on June 3, 1999 ______________
by APPLIED RETAIL SOLUTIONS, INC._____________________ (therein called "Debtor")
As security for the payment and performance of all of Debtor's obligations to
UNION BANK OF CALIFORNIA, N.A., (therein called "Bank") irrespectively of the
manner in which or the time of which such obligation arose or shall arise, and
whether direct or indirect, alone or with others, absolute or contingent, Debtor
does hereby grant a continuing security interest to Bank in all personal
property (therein called "Collateral"), whether now or hereafter owned or in
existence described as
<TABLE>
A. MOTOR VEHICLES:
<CAPTION>
- ----------------------------------------------------------------------------------------
NEW NUMBER
YEAR TRADE NAME BODY TYPE SERIAL NUMBER OR OF
USED CYLINDERS
- -----------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------
</TABLE>
B. OTHER:
ALL ACCOUNTS, DEPOSIT ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, DOCUMENTS, GENERAL
INTANGIBLES, INVENTORY, EQUIPMENT, FURNITURE, AND FIXTURES, NOW OR HEREAFTER
OWNED OR ACQUIRED BY DEBTOR, ALL PROCEEDS AND INSURANCE PROCEEDS OF THE
FOREGOING, ALL GUARANTEES AND OTHER SECURITY THEREFOR, AND ALL OF DEBTOR'S
PRESENT AND FUTURE BOOKS AND RECORDS RELATING THERETO (INCLUDING COMPUTER-STORED
INFORMATION AND ALL SOFTWARE RELATING THERETO) AND ALL CONTRACT RIGHTS WITH
THIRD PARTIES RELATING TO THE MAINTENANCE OF ANY SUCH BOOKS, RECORDS AND
INFORMATION.
The Collateral described above will be maintained at 12707 HIGH BLUFF DRIVE SAN
DIEGO, CA 92130 ________________________________________________________________
and any other locations.
C. ALL PERSONAL PROPERTY OF ANY KIND WHICH IS DELIVERED TO OR IN THE POSSESSION
OR CONTROL OF BANK OR ITS AGENTS:
D. PROCEEDS OF ANY OF THE ABOVE-DESCRIBED PROPERTY. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described therein without the express consent in writing by Bank.
The maximum amount of indebtedness to be secured as any one time is unlimited
unless an amount is inserted N/A _____________________________ $ _______________
MAXIMUM AMOUNT N/A
(To be completed only if an accommodation) N/A ________________________________
Is executing the Agreement as an Accommodation Debtor only and his liability to
the security interest created in Collateral described herein.
The Debtor being accommodated is N/A ___________________________________________
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
APPLIED RETAIL SOLUTIONS, INC.
By: /s/ David L. Reese
-----------------------------------------------------------------------------
David L. Reese, Chief Financial Officer
<PAGE>
Bank of SECURITY AGREEMENT
California
This Agreement executed at SAN DIEGO, CALIFORNIA, on June 3, 1999 ______________
by ISLAND PACIFIC SYSTEMS CORPORATION_________________ (therein called "Debtor")
As security for the payment and performance of all of Debtor's obligations to
UNION BANK OF CALIFORNIA, N.A., (therein called "Bank") irrespectively of the
manner in which or the time of which such obligation arose or shall arise, and
whether direct or indirect, alone or with others, absolute or contingent, Debtor
does hereby grant a continuing security interest to Bank in all personal
property (therein called "Collateral"), whether now or hereafter owned or in
existence described as
<TABLE>
A. MOTOR VEHICLES:
<CAPTION>
- ----------------------------------------------------------------------------------------
NEW NUMBER
YEAR TRADE NAME BODY TYPE SERIAL NUMBER OR OF
USED CYLINDERS
- -----------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------
</TABLE>
B. OTHER:
ALL ACCOUNTS, DEPOSIT ACCOUNTS, INSTRUMENTS, CHATTEL PAPER, DOCUMENTS, GENERAL
INTANGIBLES, INVENTORY, EQUIPMENT, FURNITURE, AND FIXTURES, NOW OR HEREAFTER
OWNED OR ACQUIRED BY DEBTOR, ALL PROCEEDS AND INSURANCE PROCEEDS OF THE
FOREGOING, ALL GUARANTEES AND OTHER SECURITY THEREFOR, AND ALL OF DEBTOR'S
PRESENT AND FUTURE BOOKS AND RECORDS RELATING THERETO (INCLUDING COMPUTER-STORED
INFORMATION AND ALL SOFTWARE RELATING THERETO) AND ALL CONTRACT RIGHTS WITH
THIRD PARTIES RELATING TO THE MAINTENANCE OF ANY SUCH BOOKS, RECORDS AND
INFORMATION.
The Collateral described above will be maintained at 19800 MACARTHUR BLVD. 12TH
FLOOR, IRVINE, CA 92715-2441 ___________________________________________________
and any other locations.
C. ALL PERSONAL PROPERTY OF ANY KIND WHICH IS DELIVERED TO OR IN THE POSSESSION
OR CONTROL OF BANK OR ITS AGENTS:
D. PROCEEDS OF ANY OF THE ABOVE-DESCRIBED PROPERTY. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described therein without the express consent in writing by Bank.
The maximum amount of indebtedness to be secured as any one time is unlimited
unless an amount is inserted N/A _____________________________ $ _______________
MAXIMUM AMOUNT N/A
(To be completed only if an accommodation) N/A ________________________________
Is executing the Agreement as an Accommodation Debtor only and his liability to
the security interest created in Collateral described herein.
The Debtor being accommodated is N/A ___________________________________________
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
ISLAND PACIFIC SYSTEMS CORPORATION
By: /s/ David L. Reese
-----------------------------------------------------------------------------
DAVID L. REESE, / Chief Financial Officer
Contact: Barry Schechter
Chief Executive Officer
David Reese
Chief Financial Officer
619.551.2365
E-mail: [email protected]
Roger Pondel/Michael Pollock/E.E. Wang
Pondel Parsons & Wilkinson
310.207.9300
E-mail: [email protected]
FOR IMMEDIATE RELEASE
SVI HOLDINGS ACQUIRES SOFTWARE PROVIDER ISLAND PACIFIC SYSTEMS
-- EXPANDS POSITION IN RETAIL SOFTWARE INDUSTRY --
La Jolla, California- June 7, 1999 - In a move to significantly broaden
and strengthen its position in the retail software industry, SVI Holdings, Inc.
(AMEX: SVI) today announced the acquisition of privately-held Island Pacific
Systems Corporation (IPS) in Irvine, California. Terms of the transaction were
not disclosed.
Commenting on the acquisition, Barry Schechter, chief executive officer
of SVI, said, "IPS is one of the world's leading retail software companies with
a strong client base, a talented management team and state-of-the-art
technology. With a home office in Irvine, California, and a branch office in the
United Kingdom, IPS employs 130 people. This acquisition is a significant
strategic step toward our goal of becoming a leading global provider of software
solutions for the retail industry. The combination of our current
state-of-the-art point of sale (SVI-POST) system and IPS' state-of-the-art
merchandising and retail back office systems will allow us to offer on a
worldwide basis one of the retail industry's most complete, flexible and
comprehensive software packages. Capitalizing on this combined technical
strength and a large foreign and domestic premier client base, the opportunity
for significant growth and expansion is clearly present."
-more-
<PAGE>
SVI recently announced the sale of its U.K. based subsidiary, IBIS
Systems Ltd., for $18 million in order to further concentrate its resources on
retail software solutions. The addition of IPS demonstrates this new focus.
Schechter added: "During 1998, IPS generated nearly $17 million in
revenues from its customer base of more than 240 retailers who currently license
their products. Based on IPS' internal projections, and our assessments of the
impact of the combination, we are optimistic that IPS' revenues and profits have
the potential to grow substantially during the current fiscal year and well into
the future. Applied Retail Solutions (ARS), a company we acquired in July 1998,
and IPS presently service some of the same clients. Since our systems easily
complement each other, we anticipate being able to cross-market software to our
expanded client base as well as pursue a wider range of Tier 1 and 2 retailers
with a total software solution."
Shaun Rosen, chief executive officer of SVI Retail Operations, who will
head the combined operations of ARS and IPS, said, "SVI has now consolidated its
position as an end-to-end retail solution provider, offering any retail
organization a total solution encompassing POS, back office, merchandising,
supply chain management, planning, and accounting.
IPS' software automates the full scope of a retailer's operations from
the planning and purchasing functions through the distribution and final sale of
goods. The company has a premier client base that includes The Limited, Polo
Ralph Lauren, Nike, J.C.
Penney, The Disney Stores, Timberland, Bugle Boy, and Liz Claiborne.
Building on more than 22 years in retail software development, IPS'
I3(TM) family of products combines comprehensive, integrated merchandise
management with supporting retail business functions.
-more-
<PAGE>
IPS' I3(TM) Merchandising product defines the core of the IPS software
solution. I3(TM) Merchandising meets the needs of retailers, from small to
large, providing a functionality that includes Management Planning and Open to
Buy Forecasting; Physical Inventory; Price Management; Competitor Pricing, and
Merchandise Stock Ledger. Like all the I3(TM) modules, I3(TM) Merchandising can
be used internationally, having multiple language and currency capabilities.
IPS' other I3(TM) products include I3(TM) Financials, which provides
software functionality for Accounts Payable, General Ledger, aNd Fixed Assets;
I3(TM) Sales Audit, guaranteeing accurate data at any point in the audit cycle,
and I3(TM) Warehouse, a user-definable locator system, which controls the
physical flow of merchandise.
IPS has developed strategic partnerships with several highly respected
organizations, including International Business Machines (IBM), Sun
Microsystems, Tamalpais Group, Inc., Computech Resources, Kurt Salmon
Associates, Inc., Balance Point Systems, Applied Intelligence Group, Inc., and
Retail Aspect. For additional product information, please visit IPS' website at
www.islandpacific.com.
SVI Holdings is focused on becoming a leading global provider of
enterprise software solutions for the retail industry. These solutions include
point of sale, retail marketing and merchandising, training, and retail
financial systems. SVI maintains offices and subsidiaries in the United States,
United Kingdom, Australia and South Africa. The company has a worldwide base of
more than 83,000 terminals among such major clients as OfficeMax, Crate &
Barrel, the U.S. Postal Service, Musicland, Charming Stores and others.
CERTAIN STATEMENTS CONTAINED IN THIS NEWS RELEASE REGARDING MATTERS
THAT ARE NOT HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS. BECAUSE SUCH
FORWARD-LOOKING STATEMENTS INCLUDE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
INCLUDE, BUT ARE NOT LIMITED TO, COMPETITION, THE COMPANY'S ABILITY TO
CONSUMMATE ACQUISITIONS AND DEVELOP ADVANCED TECHNOLOGIES, FLUCTUATIONS IN
CURRENCY EXCHANGE RATES, THE DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES
INTERNATIONALLY, ESPECIALLY IN THE UNITED KINGDOM, AUSTRALIA AND SOUTH AFRICA,
AND OTHER RISK FACTORS IDENTIFIED FROM TIME TO TIME IN THE COMPANY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION. OTHER RISK FACTORS ARE LISTED IN
THE COMPANY'S TRANSITION REPORT ON FORM 10-KSB FOR THE SIX MONTHS ENDED MARCH
31, 1998. SVI UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF
THIS NEWS RELEASE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
# # #
