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


 

















 


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.”


 

















 


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.


 

















 


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.


 

















 


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: