Exhibit 10.50.1

 

AMENDMENT NO. 1 TO SECURITY AGREEMENT

July 30, 2004

 

Reference is made to that certain Security Agreement dated August 14, 2003, made
by and between Artemis International Solutions Corporation, a Delaware
corporation (the “Borrower”) Artemis International Solutions Ltd. a United
Kingdom corporation (“Guarantor Subsidiary”) and LAURUS MASTER FUND, LTD., c/o
Ogier Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands (the “Laurus”“) (the “Security
Agreement”) pursuant to which, among other things, the Borrower issued a note in
the original principal amount of Five Million Dollars ($5,000,000) (the “Note”)
to Laurus.  Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement.

 

WHEREAS, the Borrower and Laurus have agreed, as part of the their Restructuring
Agreement executed contemporaneously herewith (the “Restructured Agreement”), to
amend the Security Agreement to reflect the terms of a Secured Revolving Note in
the original principal amount of Three Million Five Hundred Thousand Dollars
($3,500,000) (the Revolving Note”) and a Secured Convertible Minimum Borrowing
Note in the original principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) (the “MB Note”), each issued as of August 14, 2003 in
exchange for and in substitution of the Note and the Borrower desires to make
such changes and to effect such an exchange; and

 

WHEREAS the Borrower and Laurus agree that on the date hereof that an aggregate
amount of $1,500,000 is outstanding under the Revolving Note and MB Note, with
no monies being attributed and owed relating to the Revolving Note, while all of
the $1,500,000 that is outstanding is owed and relating to the MB Note.

 

NOW, THEREFORE, in consideration for the execution and delivery by the Borrower
of this amendment, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

1.                                       Section 2 (a)(i) of the Security
Agreement is hereby deleted in its entirety and the following inserted in its
stead:

 

“2. Loans.

 

(A) (I)  SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN AND IN THE
ANCILLARY AGREEMENTS, LAURUS MAY MAKE LOANS (THE “LOANS”)  TO THE COMPANY FROM
TIME TO TIME DURING THE TERM WHICH, IN THE AGGREGATE AT ANY TIME OUTSTANDING,
WILL NOT EXCEED THE LESSER OF (X) (I) THE CAPITAL AVAILABILITY AMOUNT MINUS
(II)  SUCH RESERVES AS LAURUS MAY REASONABLY IN ITS GOOD FAITH JUDGMENT DEEM
PROPER AND NECESSARY FROM TIME TO TIME TO PRESERVE AND PROTECT COLLATERAL (THE
“RESERVES”) OR (Y) AN AMOUNT EQUAL TO (I) THE ACCOUNTS AVAILABILITY MINUS (II)
THE RESERVES.  THE AMOUNT DERIVED AT ANY TIME FROM SECTION 2(A)(I)(Y)(I) MINUS

 

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2(A)(I)(Y)(II) SHALL BE REFERRED TO AS THE “FORMULA AMOUNT.” COMPANY SHALL
EXECUTE AND DELIVER TO LAURUS ON THE CLOSING DATE A MINIMUM BORROWING NOTE
EVIDENCING THE LOANS FUNDED ON THE CLOSING DATE AND A REVOLVING NOTE EVIDENCING
(WITHOUT DUPLICATION OF LOANS EVIDENCED BY ANY MINIMUM BORROWING NOTE) THE
CAPITAL AVAILABILITY AMOUNT.  FROM TIME TO TIME THEREAFTER, COMPANY SHALL
EXECUTE AND DELIVER TO LAURUS IMMEDIATELY PRIOR TO THE FINAL FUNDING OF EACH
ADDITIONAL $1,500,000 TRANCHE OF LOANS (CALCULATED ON A CUMULATIVE BASIS FOR
EACH SUCH TRANCHE) AN ADDITIONAL MINIMUM BORROWING NOTE EVIDENCING SUCH TRANCHE,
IN THE FORM OF MINIMUM BORROWING NOTE DELIVERED BY COMPANY TO LAURUS ON THE
CLOSING DATE. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, WHENEVER DURING
THE TERM THE OUTSTANDING BALANCE ON THE MINIMUM BORROWING NOTE SHOULD EQUAL $0,
SUCH PORTION OF THE BALANCE OF THE REVOLVING NOTE THAT EXCEEDS $1,000,000 SHALL
BE DEEMED TO BE SIMULTANEOUSLY EXTINGUISHED ON THE REVOLVING NOTE AND
TRANSFERRED TO, AND EVIDENCED BY, A NEW AND ADDITIONAL (SERIALIZED) MINIMUM
BORROWING NOTE.  ANY SUCH NEW ADDITIONAL MINIMUM BORROWING NOTE SHALL BE SUBJECT
TO THE PARTIES AGREEING TO AN ADJUSTED FIXED CONVERSION PRICE, PER SECTION 2.2
OF THE SECURED CONVERTIBLE MINIMUM BORROWING NOTE, EXECUTED CONTEMPORANEOUSLY
HEREWITH.”

 

2.                                       Section 2(c) of the Security Agreement
is hereby added and in its entirety shall read as follows:

 

“2(C) MINIMUM BORROWING AMOUNT.  AFTER A REGISTRATION STATEMENT REGISTERING THE
REGISTRABLE SECURITIES (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) HAS
BEEN DECLARED EFFECTIVE BY THE SEC, CONVERSIONS OF THE MINIMUM BORROWING AMOUNT
INTO THE COMMON STOCK OF THE COMPANY MAY BE INITIATED AS SET FORTH IN THE
NOTES.  FROM AND AFTER THE DATE UPON WHICH THE ENTIRE OUTSTANDING PRINCIPAL OF
THE MINIMUM BORROWING AMOUNT (AS EVIDENCED BY THE FIRST MINIMUM BORROWING NOTE)
IS CONVERTED INTO COMMON STOCK (THE “FIRST CONVERSION DATE”), (I) CORRESPONDING
AMOUNTS OF ALL OUTSTANDING LOANS (NOT ATTRIBUTABLE TO THE THEN OUTSTANDING
MINIMUM BORROWING AMOUNT) EXISTING ON OR MADE AFTER THE FIRST CONVERSION DATE
WILL BE AGGREGATED (AND THE CORRESPONDING AMOUNT SHALL BE DEDUCTED FROM LOANS
UNDER THE REVOLVING NOTE) UNTIL THEY REACH THE SUM OF $1,500,000 AND (II) THE
COMPANY WILL ISSUE A NEW (SERIALIZED) MINIMUM BORROWING NOTE TO LAURUS IN
RESPECT OF SUCH $1,500,000 AGGREGATION, AND (III) THE COMPANY SHALL PREPARE AND
FILE A SUBSEQUENT REGISTRATION STATEMENT WITH THE SEC TO REGISTER SUCH
SUBSEQUENT MINIMUM BORROWING NOTE AS SET FORTH IN THE REGISTRATION RIGHTS
AGREEMENT.  ANY SUCH NEW MINIMUM BORROWING NOTE SHALL BE SUBJECT TO THE PARTIES
AGREEING TO AN ADJUSTED FIXED CONVERSION PRICE, PER SECTION 2.2 OF THE SECURED
CONVERTIBLE MINIMUM BORROWING NOTE, EXECUTED CONTEMPORANEOUSLY HEREWITH.”

 

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3.                                       Section 5(b)(iv) of the Security
Agreement is hereby deleted in its entirety and the following inserted in its
stead:

 

“(iv) Overadvance Payment.  Without affecting the Company’s obligation to
immediately repay any Loans which exceed the Formula Amount set forth in Section
2(a) hereof (“Overadvances”), in the event an Overadvance occurs or is made by
Laurus, all such Overadvances shall bear interest at a monthly rate equal to:
two percent (2.0%) of the amount of such Overadvances for each month or portion
thereof as such amounts shall be outstanding (if the Company has not registered
the shares of its Common Stock underlying the conversion of the Minimum
Borrowing Notes and the Warrant on a registration statement declared effective
by the SEC); and one percent (1.0%) of the amount of such Overadvances for each
month or portion thereof as such amounts shall be outstanding (if the Company
has registered the shares of its Common Stock underlying the conversion of the
Minimum Borrowing Notes and the Warrant on a registration statement declared
(and remaining) effective by the SEC).”  Notwithstanding anything herein to the
contrary, and for purposes of clarification, Overadvance Payments shall be
applicable only to those monies borrowed by the Company that exceed $1,500,000
and that are not secured by the Company’s Accounts Receivables as may apply
pursuant to the Restructured Agreement.

 

4.                                       Section 12(n) of the Security Agreement
is hereby amended by deleting its last three sentences beginning with
“Notwithstanding the immediately foregoing” and replacing them with the
following:

 

Notwithstanding anything to the contrary herein, Laurus acknowledges that while
the re-audit by Squar Milner of the Company’s December 31, 2001 consolidated
financial statements is now complete, the Company has decided not to file an
amendment to its December 31, 2002 Form 10-K as previously disclosed, which
would require obtaining the consents of certain predecessor auditors to re-issue
their audit reports on the Company’s financial statements for the year ended
December 31, 2000.  The Company has not obtained such consents, and instead, has
included all relevant 2001 financial information in the annual report on Form
10-K for the year ended December 31, 2003.

 

5.                                       Section 12(n) of the Security Agreement
is hereby amended by adding the following provision as its last sentence:

 

Notwithstanding anything to the contrary herein, Laurus acknowledges that on
June 16, 2004, the Company completed a private placement of $9.0 million of
convertibe preferred stock.

 

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6.                                       The following definitions shall be
inserted in Annex A to the Security Agreement in their correct alphabetical
order:

 

““Minimum Borrowing Amount” means $1,500,000, which such aggregate amount shall
be evidenced by Minimum Borrowing Notes.”

 

““Minimum Borrowing Notes” shall mean each secured convertible note, which shall
be issued in a series, made by the Company in favor of Laurus to evidence the
Minimum Borrowing Amount.”

 

““Notes” means each of the Minimum Borrowing Notes and the Revolving Note made
by Company in favor of Laurus in connection with the transactions contemplated
hereby, as the same may be amended, modified and supplemented from time to time,
as applicable.”

 

““Revolving Note” means that secured revolving note made by the Company in favor
of Laurus in the aggregate principal amount of Three Million Five Hundred
Thousand Dollars ($3,500,000).”

 

““Securities” means the Notes and the Warrants being issued by the Company to
Laurus pursuant to this Agreement and the Ancillary Agreements and the shares of
the common stock of the Company which may be issued pursuant to conversion of
such Notes in whole or in part or exercise of such Warrants.

 

““Warrants” has the meaning set forth in the Registration Rights Agreement.”

 

7.                                       The foregoing amendments shall be
effective as of August 14, 2003.

 

8.                                       There are no other amendments to the
Security Agreement, and all of the other forms, terms and provisions of the
Security Agreement remain in full force and effect.

 

9.                                       The Borrower hereby represents and
warrants to Laurus that as of the date hereof all representation, warranties and
covenants made by Borrower in connection with the Security Agreement are true
correct and complete and all of Borrower’s covenants requirements have been met.

 

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IN WITNESS WHEREOF, each of the Borrower the Guarantor Subsidiary and Laurus has
caused this Amendment No. 1 to Security Agreement to be signed in its name
effective as of this 14th day of August, 2003.

 

 

 

ARTEMIS INTERNATIONAL
SOLUTIONS CORPORATION

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

ARTEMIS INTERNATIONAL
SOLUTIONS LTD.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

LAURUS MASTER FUND, LTD.

 

 

 

 

 

By:

 

 

 

Name:

 

Title:

 

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