Exhibit 10.69
THIS NOTE PURCHASE AGREEMENT dated as of November 1, 2001 (the
"Agreement") is made and entered into by and between VERTEX INTERACTIVE, INC., a
New Jersey corporation (the "Company"), and MIDMARK CAPITAL II, L.P., a Delaware
limited partnership ("Purchaser"). Capitalized terms not otherwise defined
herein have the meanings set forth in Article I.
WHEREAS, the Purchaser desires to lend to the Company that
amount set forth next to such Purchaser's name on Exhibit A attached hereto, and
the Company desires to issue to the Purchaser a secured promissory note
substantially in the form set forth on Exhibit B attached hereto (the "Note")
and convertible, at the option of the Purchaser, into that number of shares of
Series C 10% Cumulative Convertible Preferred Stock, par value $.01 per share of
the Company (the "Series C Preferred Stock") as set forth in the Note (the
"Shares") upon the Company obtaining the requisite shareholder approval for the
issuance of such Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"AAA" has the meaning ascribed to it in Section 5.14.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of another
Person shall be deemed to control that Person.
"Agreement" means this Agreement and the company disclosure
schedule, as the same shall be amended from time to time.
"Allonge" is defined in Section 2.2.
"Amended and Restated Registration Rights Agreement" means the
Amended and Restated Registration Rights Agreement, dated the date hereof,
between the Company and the Purchaser and certain of the Purchaser's Affiliates.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.
"Board of Arbitration" has the meaning ascribed to it in
Section 5.14.
"Certificate of Amendment" means the Certificate of Amendment
with respect to the Series C Preferred Stock previously adopted by the Board of
Directors and duly filed with the Secretary of State of the State of New Jersey
on or about November 2, 2001, substantially in the form attached hereto as
Exhibit C.
"Claims" has the meaning set forth in Section 3.17 of this
Agreement.
"Closing Date" has the meaning ascribed to it in Section 2.2.
"Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.
"Common Stock" has the meaning ascribed to it in Section 3.7.
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Intellectual Property" has the meaning set forth in
Section 4.17 of this Agreement.
"Company Plans" means each Plan that the Company maintains or
to which the Company makes contributions.
"Company Stock Options" has the meaning set forth in Section
3.7 of this Agreement.
"Condition of the Company" means the assets, business,
properties, operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
"Condition of the Purchaser" means the assets, business,
properties, operations or condition (financial or otherwise) of the Purchaser
and its Subsidiaries taken as a whole.
"Corporation Law" has the meaning set forth in Section 3.21 of
this Agreement.
"Contractual Obligations" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Environmental Laws" means federal, state, local and foreign
laws, principles of common laws, civil laws, regulations, and codes, as well as
orders, decrees, judgments or
injunctions, issued, promulgated, approved or entered thereunder relating to
pollution, protection of the environment or public health and safety.
"Exchange Act" has the meaning ascribed to it in Section 3.9.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Intellectual Property" means all Patents, Trademarks,
Copyrights, technology, know-how and processes.
"Knowledge of the Company" means the actual knowledge of any
officer or director of the Company or any Subsidiary of the Company.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" has the meaning set forth in Section 3.16 of
this Agreement.
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"Material Adverse Effect" with respect to an entity means any
event, change or effect which is materially adverse to the business, financial
condition or results of operations of such entity (or of such group of entities
taken as a whole).
"MidMark Capital" shall mean MidMark Capital II, L.P.
"Note" has the meaning ascribed to it in the forepart of this
Agreement.
"Order(s)" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Preferred Stock" has the meaning ascribed to it in Section
3.7.
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
"Requirements of Law" means, as to any Person, any law,
statute, treaty, rule, regulation, right, privilege, qualification, license or
franchise or determination of an arbitrator or a court or other Governmental
Authority or stock exchange, in each case applicable or binding upon such Person
or any of its property or to which such Person or any of its property is subject
or pertaining to any or all of the transactions contemplated or referred to
herein.
"Rule 144" shall mean Rule 144 promulgated by the SEC under
the Securities Act (or any successor or similar rule then in force).
"SEC" shall mean the Securities and Exchange Commission
"SEC Reports" has the meaning ascribed to it in Section 3.9.
"Securities Act" has the meaning ascribed to it in Section
3.9.
"Security and Collateral Agency Agreement" is defined in
Section 2.2.
"Series A Preferred Stock" shall mean Series A Convertible
Preferred Stock, par value $.01 per share of the Company.
"Series B Preferred Stock" shall mean Series B Convertible
Preferred Stock, par value $.01 per share of the Company.
"Series C Preferred Stock" has the meaning ascribed to it in
the forepart of this Agreement.
"Stock Equivalents" means any security or obligation which is
by its terms convertible into or exchangeable or exercisable for shares of
common stock or other capital stock, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock.
"Shares" has the meaning ascribed to it in the forepart of
this Agreement.
"Subsidiary" means any Person in which the Company, directly
or indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such Person.
"Tax Returns" means all reports, estimates, information
returns, statements and other documents (including any related or supporting
information) filed or required to be filed with any Tax authority in connection
with the determination, assessment, collection, or administration of any Taxes.
"Transaction Documents" means, collectively, this Agreement,
the Certificate of Amendment, the Amended and Restated Registration Rights
Agreement, the Allonge, the Security and Collateral Agency Agreement, and the
Voting Agreement.
"Voting Agreement" is defined in Section 2.2.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) the phrase "ordinary course of business" refers to the
business of the Company or a Subsidiary. Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless business days
are specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. Any representation or warranty
contained herein as to the enforceability of a contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights generally and to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
ARTICLE II
NOTE PURCHASE
2.1 Purchase. The Purchaser hereby agrees to lend to the Company that
amount set forth next to such Purchaser's name on Exhibit A and the Company
hereby agrees to issue to the Purchaser a Note as described on Exhibit B with
respect to such Purchaser on the Closing Date, on the terms and subject to the
conditions set forth in this Agreement.
2.2 Closing. The Closing is taking place concurrently with the
execution and delivery of this Agreement at the offices of XxXxxxxx & English,
LLP, 4 Gateway Center, Newark, New Jersey, at 10:00 A.M. local time, on November
1, 2001 (the "Closing Date"). At the Closing, the Purchaser will wire transfer
the amount of immediately available funds as set forth next to such Purchaser's
name on Exhibit A to such account as the Company may reasonably direct by
written notice delivered to the Purchaser by the Company before the Closing
Date. Simultaneously, the Company will issue to the Purchaser a Note as
described on Exhibit B with respect to the Purchaser. In addition, in order to
induce the Purchaser to enter into the transactions contemplated hereby, (i) the
Company, on the one hand, and Purchaser and certain of Purchaser's Affiliates,
on the other hand, will each simultaneously enter into an Allonge ("Allonge") to
Convertible Promissory Notes, in an aggregate amount of $5,500,000, in the form
attached hereto as Exhibit E, which Notes were originally issued on June 19,
2001; (ii) the Company and MidMark Investments, Inc., as Collateral Agent, shall
enter into a Security and Collateral Agency Agreement in the form attached
hereto as Exhibit F (the "Security and Collateral Agency Agreement"); (iv) the
Purchaser and certain Affiliates of the Company who are listed on Schedule 2.3
attached hereto shall enter into a stockholder Voting Agreement (the "Voting
Agreement") in the form attached hereto as Exhibit G; and (v) the Company, the
Purchaser and certain Affiliates of the Purchaser shall enter into an Amended
and Restated Registration Rights Agreement in the form attached hereto as
Exhibit H.
2.3 Opinion of Counsel. The Purchaser shall receive an opinion, in the
form attached hereto as Exhibit D, from the Law Offices of Xxxxxxx Xxxxx, P.C.,
counsel to the Company, dated as of the Closing Date.
2.4 Use of Proceeds. The Company shall use the funds received from the
issuance of the Note for the purposes as set forth on Schedule 2.4 attached
hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Existence and Power. The Company and each of its
Subsidiaries (a) are corporations duly organized, validly existing and in good
standing under the laws of the jurisdiction of their incorporation; (b) have all
requisite power and authority to own and operate their property, to lease the
property they operate as lessee and to conduct the businesses in which they are
currently, or are proposed to be, engaged; (c) are duly qualified as foreign
corporations, licensed and in good standing under the laws of each jurisdiction
in which their ownership, lease or operation of property or the conduct of their
respective businesses requires such qualification, except to the extent such
failure would not reasonably be expected to have a material adverse effect on
the Condition of the Company; and (d) have the corporate power and authority to
execute, deliver and perform their respective obligations under this Agreement
and each of the other Transaction Documents. No jurisdiction, other than those
referred to in clause (c) above, has claimed, in writing or otherwise, that the
Company or any of its Subsidiaries is required to qualify as a foreign
corporation or other entity therein. Neither the Company nor any of its
Subsidiaries owns or leases property or is required to file any Tax Returns in
any jurisdiction other than their respective jurisdictions of incorporation and
the jurisdictions referred to in clause (c) above.
3.2 Authorization; No Contravention. Except for the requirement to
obtain Shareholder Approval of the issuance of the Shares upon conversion of the
Note, the execution, delivery and performance by the Company of this Agreement
and each of the other Transaction Documents and the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Note, the
Allonge, the Shares and the issuance of shares of Common Stock upon conversion
of the Shares) (a) have been duly authorized by all necessary corporate action
of the Company; (b) do not contravene the terms of the Certificate of
Incorporation, the Certificate of Amendment or the By-laws of the Company; (c)
do not violate, conflict with or result in any breach, default or contravention
of (or with due notice or lapse of time or both would result in any breach,
default or contravention of), or the creation of any Lien under, any Contractual
Obligation of the Company or any Requirement of Law applicable to the Company;
and (d) do not violate any judgment, injunction, writ, award, decree or order of
any nature (collectively, "Orders") of any Governmental Authority against, or
binding upon, the Company, excluding from the foregoing clauses (c) and (d)
violations, conflicts, breaches, defaults, contraventions and creation of Liens
which, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the Condition of the
Company or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
3.3 Governmental Authorization; Third Party Consents. No approval,
consent, compliance, exemption, authorization or other action by, notice to, or
filing with, any Governmental Authority or any other Person, and no lapse of a
waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Shares) by, or enforcement
against, the Company of this Agreement and the other Transaction Documents or
the transactions contemplated hereby and thereby.
3.4 Binding Effect. This Agreement and each of the other Transaction
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
3.5 Litigation. Except as disclosed in the SEC Reports, there are no
actions, suits, proceedings, claims, complaints, disputes, arbitrations or
investigations (collectively, "Claims") pending or, to the Knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries that,
individually or in the aggregate, has resulted or could reasonably be expected
to result in a material adverse change in the Condition of the Company. No Order
has been issued by any court or other Governmental Authority against the Company
or any of its Subsidiaries purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents.
3.6 Compliance with Laws.
(a) The Company and each of its Subsidiaries is in compliance
with all material Requirements of Law and all Orders issued by any court or
Governmental Authority against the Company or any of its Subsidiaries, as the
case may be, in all respects, except to the extent such failure to comply would
not reasonably be expected to have a material adverse effect on the Condition of
the Company. To the Company's Knowledge, there is no existing or proposed
Requirement of Law which could reasonably be expected to prohibit or restrict
the Company or any of its Subsidiaries from, or otherwise materially adversely
affect the Company or any of its Subsidiaries in, conducting its business in any
jurisdiction in which it now conducts or proposes to conduct its business,
except to the extent such prohibition or restriction would not reasonably be
expected to have a material adverse effect on the Condition of the Company.
(b) The Company and each of its Subsidiaries (i) has all
material licenses, permits and approvals of any Governmental Authority
(collectively, "Permits") that are necessary for the conduct of the business of
the Company and each of its Subsidiaries; (ii) such Permits are in full force
and effect; and (iii) no violations are or have been recorded in respect of
any Permit, except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company.
3.7 Capitalization.
(a) The authorized capital stock of the Company consists of
(x) seventy-five (75) million shares of common stock, par value $.005 per share
("Common Stock") and (y) two (2) million shares of preferred stock, par value
$.01 per share ("Preferred Stock") of which (i) 1,356,852 shares are designated
as Series A Preferred Stock, (ii) 1,000 shares are designated as Series B
Preferred Stock, and (iii) 10,000 shares are designated as Series C Preferred
Stock. After giving effect to the transactions contemplated by this Agreement,
(i) 35,312,147 shares of Common Stock are issued and outstanding, all of which
were validly issued and are fully paid, nonassessable and not subject to
preemptive rights, (ii) 40,055 shares of Common Stock are held in the treasury
of the Company or by the Company's Subsidiaries, (iii) 9,954,982 shares of
Common Stock are reserved for issuance upon exercise of outstanding Company
Stock Options, (iv)1,356,852 shares of Series A Preferred Stock are issued and
outstanding, all of which were validly issued, and are fully paid, nonassessable
and not subject to preemptive rights, (v) 1,356,852 shares of Common Stock are
reserved for issuance upon the conversion of the Series A Preferred Stock, (vi)
1,000 shares of Series B Preferred Stock are issued and outstanding, all of
which were validly issued, and are fully paid, nonassessable and not subject to
preemptive rights, (vii) 1,190,000 shares of Common Stock are reserved for
issuance upon the conversion of the Series B Preferred Stock, (viii) 3,000
shares of Series C Preferred Stock are reserved for issuance upon conversion of
the Note, (ix) 3,570,000 shares of Common Stock are reserved for issuance upon
the conversion of the Series C Preferred Stock, and (x) $5,500,000 of
Convertible Note Payable, which automatically convert into shares of Common
Stock or Series C Preferred Stock or any future Series of Preferred Stock as set
forth in the Allonge to the Notes. Except for agreements or arrangements in
connection with options to purchase an aggregate of 9,954,982 shares of Common
Stock (the "Company Stock Options"), there are no options, warrants, calls,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights or other rights, agreements, arrangements or commitments of any character
to which the Company is a party or by which the Company is bound obligating the
Company to issue or sell any shares of capital stock of, other equity interests
in, or securities exchangeable for or convertible into capital stock or other
equity interests in, the Company. The Shares, when issued upon conversion of the
Notes, and the shares of Common Stock when issued upon conversion of the Series
C Preferred Stock, will be duly authorized, validly issued, fully paid and
non-assessable, will be issued in compliance with the registration and
qualification requirements of all applicable federal, state and foreign
securities laws and will be free and clear of all other Liens. All of the issued
and outstanding shares of Common Stock and Preferred Stock are all duly
authorized, validly issued, fully paid and non-assessable, and were issued in
compliance with the registration and qualification requirements of all
applicable federal, state and foreign securities laws.
(b) Schedule 3.7(b) sets forth, as of the Closing Date, a true
and complete list of (x) each of the Subsidiaries of the Company, (y) the
aggregate number of authorized shares of capital stock of such Subsidiary and
(z) the stockholders of such Subsidiary and, opposite the name of each
stockholder, the amount of all outstanding capital stock and Stock Equivalents
owned by such stockholder. The Company owns all of the issued and outstanding
capital stock of the Subsidiaries of the Company, free and clear of all Liens.
All of such shares of capital stock are duly authorized, validly issued, fully
paid and non-assessable, and were issued in compliance with the registration and
qualification requirements of all applicable federal, state and foreign
securities laws. Except as set forth on Schedule 3.7(b), there are no options,
warrants, conversion privileges, subscription or purchase rights or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued, unauthorized or treasury shares of capital stock or other securities
of, or any proprietary interest in, any of the Company's Subsidiaries, and there
is no outstanding security of any kind convertible into or exchangeable for such
shares or proprietary interest. Except as set forth on Schedule 3.7(b), neither
the Company nor any of its Subsidiaries owns any interest, or has a right to
acquire any interest, in any Person that is not a Subsidiary.
3.8 No Default or Breach; Contractual Obligations. Except as set forth
on Schedule 3.8, the Company has not received notice of a default and is not in
default under, or with respect to, any Contractual Obligation nor does any
condition exist that with notice or lapse of time or both would constitute a
default thereunder. All Contractual Obligations of the Company are valid and
legally binding obligations of the parties thereto, enforceable in accordance
with their terms, and are subsisting, in full force and effect and binding upon
the Company and the other parties thereto, and the Company has paid in full or
accrued all amounts due thereunder and has satisfied in full or provided for all
of its liabilities and obligations thereunder. To the Knowledge of the Company,
no other party to any such Contractual Obligation is in violation of or in
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute a default by such other party thereunder.
3.9 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, schedules,
statements and other documents (including all exhibits, annexes, supplements and
amendments to such documents) required to be filed by it under the Exchange Act
and the Securities Act since January 1, 1998 (the "SEC Reports"). The SEC
Reports, including any financial statements or schedules included or
incorporated therein by reference, at the time they were filed, (i) complied in
all material respects with the requirements of the Exchange Act or the
Securities Act or both, as the case may be, applicable to those SEC Reports and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary in order to make the statements
made in those SEC Reports, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the SEC Reports (including the related notes and
schedules) fairly presented, in all material respects, the consolidated
financial position of the Company as of the dates set forth in those
consolidated balance sheets. Each of the consolidated statements of income and
of cash flows included in or incorporated by reference into the SEC Reports
(including any related notes and schedules) fairly presented, in all material
respects, the consolidated results of operations and cash flows, as the case may
be, of the Company and the consolidated Subsidiaries of the Company for the
periods set forth in those consolidated statements of income and of cash flows
(subject, in the case of unaudited quarterly statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in conformity with GAAP (except, in the case of unaudited quarterly
statements, as permitted by Form 10-Q of the Commission) consistently applied
throughout the periods indicated. All of such balance sheets and statements
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Subsidiaries of the Company as
of June 30, 2001, including the related notes, neither the Company nor any
Subsidiary of the Company has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in the related notes prepared in accordance
with GAAP, except for liabilities or obligations that, individually or in the
aggregate, could not reasonably be expected to result in a material adverse
change in the Condition of the Company.
3.10 Taxes. To the best Knowledge of the Company (a) the Company has
paid or reserved for all Taxes shown on its Tax Returns that have come due and
are required to be paid by it on and through the date hereof, other than Taxes
being disputed by the Company in good faith for which adequate reserves have
been made in accordance with GAAP and which are shown on the financial
statements of the Company; (b) except for certain state or foreign filings which
have not been timely filed but for which there will be no material impact,
either individually or in the aggregate, on the Condition of the Company, the
Company has timely filed or caused to be filed all Tax Returns that it is
required to file on and through the date hereof (including all applicable
extensions), and all such Tax Returns are accurate and complete in all material
respects; (c) with respect to all Tax Returns of the Company, (i) there is no
unassessed Tax deficiency proposed or threatened against the Company that is
material in amount and has not been reserved for and (ii) no audit or other
administrative or judicial proceeding is in progress with respect to any Tax
Returns, no extension of time is in force with respect to any date on which any
Tax Return was or is to be filed and no waiver or agreement is in force for the
extension of time for the assessment or payment of any Tax; and (d) there are no
Liens for Taxes on the assets of the Company. For federal income tax purposes,
the Company is an association taxable as a corporation. The Company is not a
"collapsible corporation" within the meaning of Section 341(b) of the Code.
3.11 No Material Adverse Change; Ordinary Course of Business. Except as
publicly disclosed prior to the date hereof, since June 30, 2001, (a) there has
not been any material adverse change, nor any event or development which could
reasonably be expected to result in a material adverse change on the Condition
of the Company, (b) the Company has not participated in any transaction material
to the Condition of the Company or otherwise acted outside the ordinary course
of business, including, without limitation, declaring or paying any dividend or
declaring or making any distribution to its stockholders except out of the
earnings of the Company, (c) the Company has not increased the compensation of
any of its officers or the rate of pay of any of its employees, except as part
of regular compensation increases in the ordinary course of business, (d) the
Company has not created or assumed any Lien on a material asset of the Company,
(e) the Company has not entered into any Contractual Obligation, other than in
the
ordinary course of business and (f) there has not occurred a material change
in the Company's accounting principles or practice except as required by reason
of a change in GAAP.
3.12 Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection with
the offer or sale of the Shares. No registration of the Shares, pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
will be required by the offer, sale or issuance of the Shares. The Company
agrees that neither it, nor anyone acting on its behalf, shall offer to sell the
Note or the Shares or any other securities of the Company so as to require the
registration of the Shares pursuant to the provisions of the Securities Act or
any state securities or "blue sky" laws, unless such Note or the Shares or other
securities are so registered.
3.13 Labor Relations. (a) The Company is not engaged in any unfair
labor practice; (b) there is (i) no grievance or arbitration proceeding arising
out of or under collective bargaining agreements pending or, to the Knowledge of
the Company, threatened against the Company, and (ii) no strike, labor dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against the Company; (c) the Company is not a party to any collective bargaining
agreement or contract; (d) there is no union representation question existing
with respect to the employees of the Company; and (e) no union organizing
activities are taking place. To the Knowledge of the Company, no officer or key
employee, or any group of key employees, intends to terminate their employment
with the Company. The Company has not discussed or taken any steps to terminate
the employment of any officer, key employee or group of key employees. To the
knowledge of the Company, each of the Company's officers and key employees
spends all, or substantially all, of his business time on the Company's
business. None of the Company's employees is resident in the United States in
violation of any Requirement of Law.
3.14 Employee Benefit Plans. Except as would not have a material
adverse effect on the Company, each Company Plan (and related trust, insurance
contract or fund) has been established and administered in accordance with its
terms, and complies in form and in operation with the applicable requirements of
ERISA and the Code and other applicable Requirements of Law. Except as would not
have a material adverse effect on the Company, all contributions (including all
employer contributions and employee salary reduction contributions) which are
due have been paid to each Company Plan. Each Company Plan that is intended to
be qualified under Section 401(a) of the Code is so qualified and has been so
qualified during the period since its adoption; each trust created under any
such Company Plan is exempt from tax under Section 501(a) of the Code and has
been so exempt since its creation.
3.15 Title to Assets. The Company owns and has good, valid, and
marketable title to all of its properties and assets used in its business and
reflected as owned in the SEC Reports or in any financial statements or
schedules included or incorporated by reference therein or so described in any
Schedule hereto, in each case free and clear of all Liens.
3.16 Liabilities. The Company does not have any direct or indirect
obligation or liability ("Liabilities") other than (a) Liabilities fully and
adequately reflected or reserved against on any financial statements or
schedules included or incorporated by reference into the SEC
Reports and (b) Liabilities incurred since June 30, 2001 in the ordinary course
of business. The Company has no Knowledge of any circumstance, condition, event
or arrangement that could reasonably be expected to give rise hereafter to any
Liabilities of the Company except in the ordinary course of business.
3.17 Intellectual Property.
(a) (i) The Company and each Subsidiary of the Company is the
owner of all, or has the license or right to use, sell and license all of, the
material Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets,
Software and other proprietary rights (collectively, "Company Intellectual
Property") that are necessary for its business as presently conducted or
contemplated in its business plan, free and clear of all Liens.
(ii) None of the Company Intellectual Property is subject to
any outstanding Order, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or,
to the Knowledge of the Company, threatened, which challenges the
validity, enforceability, use or ownership of the item.
(iii) The Company and each Subsidiary of the Company have
substantially performed all obligations imposed upon it under all
Intellectual Property licenses, sublicenses, distributor
agreements and other agreements under which the Company or any of
its Subsidiaries is either a licensor, licensee or distributor,
and is not, nor to the Knowledge of the Company is any other party
thereto, in breach of or default thereunder in any respect, nor is
there any event which with notice or lapse of time or both would
constitute a default thereunder except as could not be expected to
have a material adverse effect on the Condition of the Company.
All of the material Intellectual Property licenses are valid,
enforceable and in full force and effect in all material respects,
and will continue to be so on identical terms immediately
following the Closing except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).
(iv) None of the Intellectual Property currently sold or
licensed by the Company or any of its Subsidiaries to any Person
or used by or licensed to the Company by any Person infringes upon
or otherwise violates in any material respect any Intellectual
Property rights of others.
(v) No litigation is pending and no Claim has been made
against the Company or any of its Subsidiaries or, to the
Knowledge of the Company, is threatened, contesting the right of
the Company or any of its Subsidiaries to sell or license to any
Person or use the Intellectual Property presently sold or licensed
to such Person or used by the Company or any of its Subsidiaries.
(b) To the Knowledge of the Company, no Person is infringing upon
or otherwise violating the Intellectual Property rights of the Company or any of
its Subsidiaries.
3.18 Insurance. The Company maintains insurance policies covering all
risks associated with the Company's business that are customarily insured
against in the Company's industry in such amounts as are customary in such
industry. Such policies and binders are valid and enforceable in accordance with
their terms and are in full force and effect. None of such policies will be
affected by, or terminate or lapse by reason of, any transaction contemplated by
this Agreement or any of the other Transaction Documents.
3.19 Environmental Matters. The Company is in compliance with all
applicable Environmental Laws. There is no civil, criminal or administrative
judgment, action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to the Knowledge
of the Company, threatened against the Company pursuant to Environmental Laws;
and, to the Knowledge of the Company, there are no past or present events,
conditions, circumstances, activities, practices, incidents, agreements, actions
or plans which could reasonably be expected to prevent compliance with, or which
have given rise to or will give rise to liability under, Environmental Laws.
3.20 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with the Company or any action taken by the Company.
3.21 New Jersey Business Combination. The Board of Directors has taken
all necessary actions to exempt (i) the transactions contemplated by this
Agreement and (ii) any future "business combination" (as such term is defined in
Section 14A:10A-3 of the New Jersey Business Corporation Act (the "Corporation
Law")) between the Purchaser and/or any of its "affiliates" (as such term is
defined in Section 14A:10A-3 of the Corporation Law) and the Company from the
New Jersey Shareholders Protection Act (Sections 14A:10A-1 to 14A:10A-9 of the
Corporation Law). Other than the New Jersey Shareholders Protection Act, no
other state takeover or similar statute or regulation applies or purports to
apply to the transactions contemplated by this Agreement or any future "business
combination" (as such term is defined in Section 14A:10A-3 of the Corporation
Law) between the Purchaser and/or any of its "affiliates" (as such term is
defined in Section 14A:10A-3 of the Corporation Law) and the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
4.1 Existence and Power. The Purchaser (a) is a limited partnership
duly organized and validly existing under the laws of the jurisdiction of its
formation and (b) has the requisite power and authority to execute, deliver and
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery and
performance by the Purchaser of this Agreement and each of the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby, (a) have been duly authorized by all necessary corporate action, (b) do
not contravene the terms of the Purchaser's organizational documents, or any
amendment thereof, (c) do not violate, conflict with or result in any breach or
contravention of, or the creation of any Lien under, any Contractual Obligation
of the Purchaser or any Requirement of Law applicable to the Purchaser and (d)
do not violate any Orders of any Governmental Authority against, or binding
upon, the Purchaser, excluding from the foregoing clauses (c) and (d)
violations, conflicts, breaches, defaults, contraventions and creation of Liens
that, individually or in the aggregate, could not reasonably be expected to have
a material adverse effect on the Condition of the Purchaser or on the ability of
the Purchaser to consummate the transactions contemplated by this Agreement.
4.3 Governmental Authorization; Third Party Consents. Except for
certain post-closing reports to the United States Small Business Administration,
no approval, consent, compliance, exemption, authorization or other action by,
or notice to, or filing with, any Governmental Authority or any other Person,
and no lapse of a waiting period under any Requirement of Law, is necessary or
required in connection with the execution, delivery or performance (including,
without limitation, the purchase of the Note) by, or enforcement against, the
Purchaser of this Agreement and each of the other Transaction Documents to which
it is a party or the transactions contemplated hereby and thereby.
4.4 Binding Effect. This Agreement and each of the other Transaction
Documents to which it is a party have been duly executed and delivered by the
Purchaser and constitute the legal, valid and binding obligations of the
Purchaser, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.5 Purchase for Own Account. The Shares to be acquired by the
Purchaser pursuant to this Agreement are being or will be acquired for its own
account and with no intention of distributing or reselling such Shares or any
part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to the rights of the Purchaser at all times to sell or otherwise dispose of all
or any part of such Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of the Purchaser's
property being at all times within its control. If the Purchaser should in the
future decide to dispose of any of such Shares, the Purchaser understands and
agrees that it may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. The Purchaser agrees to the
imprinting, so long as required by law, of a legend on certificates representing
all of the Shares to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
4.6 Restricted Securities. The Purchaser understands that the Shares
will not be registered at the time of their issuance under the Securities Act
for the reason that the sale provided for in this Agreement is exempt pursuant
to Section 4(2) of the Securities Act and that the reliance of the Company on
such exemption is predicated in part on the Purchaser's representations set
forth herein. In the event that the Purchaser desires to transfer the Shares to
a third party at any time that the foregoing legend is required, the Purchaser
shall provide the Company, prior to such transfer, with reasonable assurances
that such transfer can be made in a manner that would not violate the Securities
Act.
4.7 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar commissions payable by the Purchaser in
connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Purchaser or any action taken by the
Purchaser.
ARTICLE V
MISCELLANEOUS
5.1 Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing Date for a period of two years.
5.2 Stockholder Vote. The Company's Board of Directors shall recommend
that the stockholders of the Company vote in favor of the issuance of the Shares
upon conversion of the Note and the Allonge at the next meeting of stockholders
which is held by the Company, and shall take all lawful action to solicit such
approval.
5.3 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
(a) If to Purchaser: MidMark Capital II, L.P.
c/o MidMark Investments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
(b) with a copy to: XxXxxxxx & English, LLP
Four Gateway Center 000 Xxxxxxxx
Xxxxxx Xxxxxx, XX 00000 Attn: Xxxxx
X. Xxxxxxxxx, Esq. Facsimile No.:
(000) 000-0000
(c) If to the Company, to: Vertex Interactive, Inc.
00 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxx X.X. Xxxx
(d) with a copy to: Law Offices of Xxxxxxx Xxxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
5.4 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof.
5.5 Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated hereby
except that the Company shall pay the reasonable fees and expenses of counsel to
the Purchaser.
5.6 Public Announcements. Except as otherwise required by Law or the
rules of any applicable securities exchange or national market system, so long
as this Agreement is in effect, the Purchaser and the Company will not, and will
not permit any of their respective representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. The
Purchaser and the Company will cooperate with each other in the development and
distribution of all press releases and other public announcements with respect
to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such releases
and announcements as far in advance as practicable.
5.7 Confidentiality. Each party hereto will hold, and will use its best
efforts to cause its Affiliates, and in the case of the Purchaser, any Person
who has provided, or who is considering providing, financing to the Purchaser to
finance all or any portion of its amount payable to the Company on the Closing
Date, and their respective representatives to hold, in strict confidence from
any Person (other than any such Affiliate, or any Person who has provided, or
who is considering providing, financing or representative), unless (i) compelled
to disclose by judicial or administrative process (including without limitation
in connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory Authorities) or
by other requirements of Law or (ii) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the exercise of its
remedies hereunder, all documents and information concerning the other party or
any of its Affiliates furnished to it by the other party or such other party's
representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential.
5.8 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
5.9 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
5.10 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
5.11 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that any of the Purchaser may assign any or all of their rights,
interests and obligations hereunder to a wholly-owned subsidiary, provided that
any such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein, but no such assignment referred to
in clause (b) shall relieve such Purchaser of its obligations hereunder. Subject
to the preceding sentence, this Agreement is binding upon, inures
to the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
5.12 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
5.13 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
5.14 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of New Jersey applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
5.15 Arbitration. The parties to this Agreement agree that any disputes
arising out of, or in connection with, the execution, interpretation,
performance or non-performance of this Agreement (including the validity, scope
and enforceability of this arbitration provision) shall be settled by
arbitration, which shall be conducted in Newark, New Jersey pursuant to the then
prevailing rules of the American Arbitration Association ("AAA") by a panel of
three arbitrators of the AAA (the "Board of Arbitration") acceptable to the
Company, on the one hand, and the Purchaser, on the other hand. Each of the
Company, on the one hand, and the Purchaser, on the other hand, shall select one
(1) member and the third member shall be selected by mutual agreement of the
other members. If the other members fail to reach agreement on a third member
within thirty (30) days after their selection, the parties shall jointly request
the AAA to designate, in accordance with AAA rules, a third member experienced
in industries in which the Company does business. The parties agree to
facilitate the arbitration by (a) making available to one another and to the
Board of Arbitration for inspection and extraction all documents, books,
records, and personnel under their control or under the control of a person
controlling or controlled by such party if determined by the Board of
Arbitration to be relevant to the dispute, (b) conducting arbitration hearings
to the greatest extent possible on successive business days and (c) using their
best efforts to observe the time periods established by the rules of the AAA or
by the Board of Arbitration for the submission of evidence and briefs. The
decision of the Board of Arbitration shall be final, binding and not subject to
further review, and judgment on the award of the Board of Arbitration may be
entered in and enforced by any court having jurisdiction over the parties or
their assets. Any costs incurred in conducting the arbitration shall be borne by
the non-prevailing (as determined by the Board of Arbitration) party.
5.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by or on behalf of each of the parties hereto as of the date first
above written.
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-----------------------------------------------
Name:
Title:
MIDMARK CAPITAL II, L.P.,
By MidMark Associates II, L.L.C.,
its General Partner
By /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
Signature Page to the Note Purchase Agreement
EXHIBIT A
List of Purchasers
MidMark Capital II, L.P. $3,000,000 3,000 Shares*
*Represents the number of Shares issuable upon conversion of the Note
issued to such Purchaser in connection herewith.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE
LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
VERTEX INTERACTIVE, INC.
CONVERTIBLE PROMISSORY NOTE
$3,000,000.00 Fairfield, New Jersey
November 1, 2001
VERTEX INTERACTIVE, INC., a New Jersey corporation (the "Company"), for
value received hereby promises to pay to the order of MidMark Capital, II (the
"Lender"), in lawful money of the United States, the principal sum of THREE
MILLION DOLLARS ($3,000,000.00), plus any unpaid accrued interest thereon as
determined in accordance with Section 2 below, on the Maturity Date. The
"Maturity Date" means the earliest of: (1) November 1, 2002, (2) the Shareholder
Rejection Date, or (3) the CSI Sale Date. The "Shareholder Rejection Date" is
the date on which a Shareholder Rejection shall have occurred. A "Shareholder
Rejection" shall have occurred if the shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
The "CSI Sale Date" is the closing date on which the Company sells all or
substantially all the assets which comprise the Company's line of business known
as its CSI division. Notwithstanding the foregoing, in the event that the CSI
Sale Date shall precede the date of Shareholder Approval or the Shareholder
Rejection Date, then the "Maturity Date" of this Note shall be postponed until
such date and the Lender shall have the right to require that the proceeds from
the sale of the CSI division be held as cash collateral by the Collateral Agent.
This Convertible Promissory Note (this "Note") is issued in connection with the
transactions described in Article I of the Note Purchase Agreement, dated as of
November 1, 2001, between the Company and the Purchaser named therein, as the
same may from time to time be amended, modified or supplemented (the
"Agreement"). All capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Agreement.
1. Conversion. At the option and sole discretion of the Lender, any
amounts (including principal and interest) outstanding under this Note may be
converted into Series C Preferred Shares at a conversion price of $1,000 per
share at any time after the Company obtains the requisite shareholder approval
as determined in accordance with the Laws of the State of New Jersey and the
Nasdaq National Market ("Shareholder Approval") for the issuance of the Series C
Preferred Shares to Lender upon the exercise by Lender of its right to convert
as contemplated by this Note. Upon surrender of this Note to the Company for
cancellation the Company shall promptly issue to Lender a share certificate or
certificates representing the Shares
bearing the legend described in the Agreement. The Lender's conversion rights
with respect to any amounts outstanding under this Note shall continue for five
days after any payment or prepayment under this Note, during which time the
Lender shall have the right to return any such payment or prepayment as part of
any such conversion.
2. Interest. Unless earlier converted in accordance with the provisions
hereof, the principal amount of this Note plus any unpaid accrued interest
hereon shall be paid on the Maturity Date. Interest shall accrue each day at a
per annum rate of 10% and shall be computed on the basis of a 360-day year
applied to actual days elapsed. Beginning on December 3, 2001 and continuing on
the first business day of each month, any accrued interest shall be added to the
principal amount of this Note. In the event of a Shareholder Rejection or
payment under this Note prior to the receipt of Shareholder Approval, the
Company shall, in addition to any other interest payable under this Note, pay to
the Lender an amount equal to the Additional Rejection Interest. The "Additional
Rejection Interest" is an amount equal to the aggregate interest on the
principal amounts outstanding under this Note which would have accrued each at a
per annum rate of 4% computed on the basis of a 360-day year applied to actual
days elapsed. Promptly following payment in full of the principal and any
accrued interest payable in accordance with the terms of this Note, Lender shall
surrender this Note to the Company for cancellation.
3. Prepayment. Before Shareholder Approval or Shareholder Rejection,
this Note shall not be prepaid without the prior written consent of Lender.
Thereafter this Note may be prepaid at the option of the Company.
4. Payments. All payments to be made by the Company in respect of this
Note shall be made by wire transfer to an account designated by Lender by
written notice to the Company. If the due date of any payment in respect of this
Note would otherwise fall on a day that is not a business day, such due date
shall be extended to the next succeeding business day. All amounts payable under
this Note shall be paid free and clear of, and without reduction by reason of,
any deduction, setoff, or counterclaim.
5. Assignment. Except for assignments and transfers by the Lender to
any direct or indirect partner of the Lender, neither this Note nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other party hereto and any attempt to do so will be
void, except for assignments and transfers by operation of Law. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
6. Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
7. Collateral Security. The obligations of the Company of this Note to
the Lender are secured by a lien on all of the tangible and intangible assets of
the Company under the terms of that certain Security and Collateral Agency
Agreement dated October __, 2001 between the Company and MidMark Investments,
Inc. as collateral agent (the "Security and Collateral Agency Agreement").
2
8. Subordination. Without any further consent by the Lender or the
Company, the obligations of the Company of this Note to the Lender, and the
priority of the lien of the Collateral Agent in the assets of the Company, may
become subordinated to the obligations of the Company and any lien on the assets
of the Company in favor of any "Senior Lender" as that term is defined in the
Security and Collateral Agency Agreement. The Lender hereby agrees that payment
of this Note shall be subject to the terms of any Subordination Agreement
entered into by the Collateral Agent and the Senior Lender under the terms of
the Security and Collateral Agency Agreement.
9. Transfer of This Note or Securities Issuable upon Conversion. With
respect to any offer, sale or other disposition of this Note or securities into
which such Note may be directly or indirectly converted, Lender shall give
written notice to the Company prior to such offer, sale or other disposition,
describing briefly the manner thereof, together with a written opinion
reasonably satisfactory to the Company of Lender's counsel, to the effect that
such offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify Lender that it
may sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 9 that the opinion of counsel for Lender is
not reasonably satisfactory to the Company, the Company shall so notify Lender
promptly after such determination has been made. Each Note thus transferred and
each certificate representing the securities thus transferred shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Securities Act, unless in the opinion of counsel for the
Company such legend is not required. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
10. Notices. Any notice, request or other communication required or
permitted hereunder shall be made in accordance with the Agreement.
11. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon Lender or any other person the right to vote or to
consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company; and no dividends shall
be payable or accrued in respect of this Note or the interest represented hereby
or the Shares obtainable hereunder until, and only to the extent that, this Note
shall have been converted.
12. Governing Law. This Note shall be governed by and construed in
accordance with the Laws of the State of New York applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
13. Headings. The headings used in this Note have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
14. Invalid Provisions. If any provision of this Note is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party
3
hereto under this Note will not be materially and adversely affected thereby,
(a) such provision will be fully severable, (b) this Note will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (c) the remaining provisions of this Note will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
1st day of November, 2001.
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-----------------------------
Name:
Title:
4
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as
of November 1, 2001, between Vertex Interactive, Inc., a New Jersey corporation
(the "Company"), MidMark Capital II, L.P., a Delaware limited partnership
("MidMark") and the original purchasers listed on the signature page hereto
(each an "Original Purchaser", and collectively the "Original Purchasers").
Capitalized terms used herein but not otherwise defined shall have the meaning
ascribed to them in the Note Purchase Agreement (defined below).
W I T N E S S E T H:
WHEREAS, the Company and the Original Purchasers have
previously entered into that certain Registration Rights Agreement, dated June
19th, 2001 (the "Original Agreement") with respect to the shares of Common Stock
issuable upon conversion of the Convertible Promissory Notes held by the
Original Purchasers;
WHEREAS, an Allonge to the Convertible Promissory Note is
being entered into by and between the Company and each Original Purchaser on and
as of the date hereof, which Allonge, among other things, alters the class of
stock into which the Convertible Promissory Notes are convertible into upon
Shareholder Approval (as defined in the Note);
WHEREAS, the Company and MidMark have entered into a Note
Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"),
pursuant to which MidMark shall purchase a note in the amount of $3,000,000.00
(the "Note") convertible into 3,000 shares of Series C 10% Cumulative
Convertible Preferred Stock, par value $.01 per share of the Company upon
Shareholder Approval (as defined in the Note); and
WHEREAS, the Original Purchasers and MidMark (each a
"Purchaser" and collectively the "Purchasers") and the Company desire to amend
and restate in its entirety the Original Agreement. The Shares of Common Stock
issuable upon conversion of any of the securities issuable upon conversion of
the Notes are hereinafter referred to as "Registrable Stock";
NOW, THEREFORE, in consideration of the respective covenants
and conditions of the parties set forth herein and in the Note Purchase
Agreement, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Registration of Registrable Stock.
(a) Filing of Registration Statement. Provided that
Shareholder Approval has been obtained, the Company shall use its reasonable
best efforts to prepare and file within one hundred twenty (120) days hereof or
if later within thirty (30) days of the date that Shareholder Approval is
obtained, a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended, and the
rules and regulations promulgated thereunder (collectively, the "Securities
Act") covering the offering and sale of the Registrable Stock by the Purchasers
in privately negotiated transactions, "brokers' transactions" or in transactions
directly with a "market maker," as such terms are defined in paragraphs (f) and
(g) of Rule 144 under the Securities Act ("Brokers' Transactions").
(b) Effectiveness; Amendments. The Company will use its
reasonable best efforts to cause to be declared effective as soon as possible
after filing and, except as set forth below, to remain effective under the
Securities Act, the Registration Statement and will prepare and file with the
SEC any amendments or post-effective amendments as may be necessary to keep the
Registration Statement effective under the Securities Act. The Company will
promptly notify the Purchasers in writing of the date on which the Registration
Statement is declared effective. Notwithstanding the foregoing, (i) the Company
shall not be required to keep the Registration Statement effective for purposes
of the sale of Registrable Stock thereunder at any time after the earlier of (A)
the date on which all shares of Registrable Stock have been sold or are no
longer outstanding, and (B) the date which is two years (plus any time for
delays arising from events described in clause (ii) below or Section 3(g) )
following the acquisition from the Company of the Registrable Stock, or such
earlier date as of which the Purchasers shall be able to make use of the
safe-harbor provisions of Rule 144(k) under the Act (or any successor rule) with
respect to sales of Registrable Stock, and (ii) the Company shall not be
obligated to keep the Registration Statement or the prospectus included therein
(the "Prospectus") current during any period (A) of up to 60 days per calendar
year if the Company's chief executive officer advises the Purchasers that he has
determined in good faith that valid business reasons concerning a potential
corporate transaction make doing so inadvisable, or (B) when financial
statements do not satisfy the requirements of the last sentence of paragraph (b)
of Rule 3-12 of Regulation S-X (or any successor rule) to the extent, and only
to the extent, that the SEC interprets such sentence as being applicable to the
continued effectiveness of the Registration Statement.
(c) Copies of Documents. During the period that the Company
has agreed to use its reasonable best efforts to cause the Registration
Statement to remain effective (the "Effectiveness Period"), the Company shall
furnish to Purchasers such number of copies of the Registration Statement, the
Prospectus and any amendments and supplements thereto and any documents
incorporated by reference in the Registration Statement as Purchasers shall
reasonably request.
(d) Blue Sky Compliance. The Company shall register or qualify
or cooperate with the Purchasers in connection with the notification,
coordination, registration or qualification (or obtain exemption from such
registration or qualification) of the Registrable Stock under such other
securities or blue sky laws of such jurisdictions in the United States as the
Purchasers reasonably shall request and do any and all other acts and things
which may be reasonably necessary to enable the Purchasers to consummate the
disposition of the Registrable Stock by them under the Registration Statement in
such jurisdictions during the Effectiveness Period; provided, however, that in
no event shall the Company be required to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified, to subject itself
to taxation in any jurisdiction where it has not theretofore done so or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject.
-2-
(e) Notification. During the Effectiveness Period, the Company
shall notify the Purchasers promptly, and (if requested by Purchasers) confirm
such notice in writing, (i) of any request by the SEC or any other regulatory
authority for amendments or supplements to the Registration Statement or the
Prospectus or for additional information relating thereto, (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (iii) of the
receipt by the Company of any notification or stop order with respect to the
suspension of the registration, qualification or exemption from registration or
qualification of any of the shares of Registrable Stock covered by the
Registration Statement for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (iv) of the happening of any
event which makes any statement made in such Registration Statement or in the
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in such Registration Statement or Prospectus so that such documents will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) Supplements and Post-Effective Amendments. Subject to the
provisions of clause (ii) of the third sentence of Section 1(b) above, during
the Effectiveness Period, upon the occurrence of any event contemplated by
clause (i) or (iv) of paragraph (e) above, the Company will prepare a supplement
or post-effective amendment to the Registration Statement or a supplement to the
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the Purchasers of the
Registrable Stock being sold thereunder, the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Listing. The Company shall cause the Registrable Stock
covered by the Registration Statement to be listed on each securities exchange
or securities quotation system, if any, on which similar securities issued by
the Company are then listed.
(h) Correspondence with the SEC. The Company shall, upon
request from Purchasers, deliver promptly to Purchasers copies of all
correspondence between the SEC and the Company, its counsel or auditors.
(i) Stock Certificates. The Company will cooperate with the
Purchasers to facilitate the timely preparation and delivery of certificates
representing Registrable Stock sold under the Registration Statement, which
certificates shall not have any restrictive legends.
2. Piggyback Registration. If at any time prior to the second
anniversary of the date hereof the Company proposes to file a registration
statement under the Securities Act with respect to an offering of Common Stock
(except on Form S-4 or Form S-8 or any successor forms thereto), for its own
account, then the Company shall give written notice of such proposed filing to
the holders of Registrable Stock as far in advance of the anticipated filing
date as is practicable (the "Piggyback Notice"). The Piggyback Notice shall
offer such holders the opportunity to register such amount of Registrable Stock
as each such holder may request (a
-3-
"Piggyback Registration"); subject in all events to the agreement of the
underwriter or underwriters of the offering contemplated by such registration
statement that such shares of Registrable Stock can be included in such
registration statement without adversely affecting such offering. Any reduction
in the number of securities to be so offered shall be (i) first, pro-rata among
all security holders who are exercising "piggyback" registration rights, based
on the number of registrable securities originally proposed to be sold by each
of them, and (ii) second, pro-rata among all security holders who are exercising
"demand" registration rights pursuant to a registration rights agreement with
the Company, based on the number of registrable securities originally proposed
to be sold by each of them.
3. Obligations of the Purchasers. Following the filing of the
Registration Statement and during any period that the Registration Statement is
effective, the Purchasers shall:
(a) not effect any stabilization transactions or engage in any
stabilization activity in connection with the Company common shares in
contravention of Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) furnish each broker through whom the Purchasers offer
Registrable Stock such number of copies of the Prospectus as the broker may
require and otherwise comply with prospectus delivery requirements under the
Securities Act;
(c) not (and shall not permit any Affiliated Purchasers (as
defined in Rule 10b-6 under the Exchange Act) to) bid for or purchase for any
account in which any Purchasers have a beneficial interest, or attempt to induce
any other person to purchase, any Company common shares in contravention of
Regulation M under the Exchange Act;
(d) cooperate with the Company as the Company fulfills its
obligations under Section 1(d) hereof;
(e) furnish such information concerning the Purchasers as the
Company may from time to time reasonably request;
(f) sell Registrable Stock only in privately negotiated
transactions or Brokers' Transactions; and
(g) not sell under the Registration Statement during any
period after the Company has provided notice to the Purchasers pursuant to
Section 1(e)(iv) above and until the Company provides to the Purchasers notice
that the Registration Statement no longer fails to state a material fact
required to be stated therein, misstates a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made not misleading.
4. Expenses. The Company shall be responsible for the payment
of (x) all registration and filing fees relating to registration of the offering
by the Purchasers of the Registrable Stock, including, without limitation,
registration and filing fees (A) with respect to
-4-
filings required to be made with the SEC or the National Association of
Securities Dealers and (B) with respect to registrations and filings made under
state securities or blue sky laws and (y) any expenses incurred by the Company
in connection with the preparation of the Registration Statement and the
Prospectus. The Purchasers shall be responsible for payment of the fees and
disbursements of their respective counsel in connection with the preparation of
the Registration Statement and the Prospectus and their respective proportion of
any fees paid to brokers in connection with the sale of any of the Registrable
Stock.
5. Indemnification.
(a) Indemnity by the Company. The Company shall (i) indemnify
and hold harmless the Purchasers and each person who controls the Purchasers,
within the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities ("Losses"), to which each such indemnified party
may become subject, under the Securities Act or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or Prospectus, as amended or supplemented if the Company
has furnished any supplements or amendments thereto (if used during the period
the Company is required to keep the Registration Statement and Prospectus
current), or any document filed under a state securities or blue sky law
(collectively, "Registration Documents") or insofar as any Losses (or actions in
respect thereof) arise out of or are based upon the omission or alleged omission
to state in any Registration Document a material fact required to be stated
therein or necessary to make the statements made therein (in the case of a
prospectus, in the light of the circumstances under which they were made), not
misleading, and (ii) reimburse each indemnified party for all legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such Losses or actions, including any amounts paid in settlement of any
litigation, commenced or threatened, if such settlement is effected with the
prior written consent of the Company; provided, however, that the Company shall
not be liable for any Losses arising out of or based upon any untrue statement
or omission made in any Registration Document in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Purchasers expressly for use in the preparation of the Registration Document;
and provided, further, that the Company shall not be liable to a particular
indemnified party under the indemnity agreement in this Section 5(a) with
respect to the Prospectus, as amended or supplemented, to the extent that the
Loss arises from the sale of any shares of Registrable Stock by such indemnified
party to the person asserting Loss and to which there was not sent or given,
within the time required by the Securities Act, a copy of the Prospectus as then
amended or supplemented, if the Company has previously furnished copies thereof
to such indemnified party and such Prospectus as then amended or supplemented
has corrected the misstatement or omission at issue.
(b) Indemnity by Purchasers. The Purchasers shall, severally
and not jointly, (i) indemnify and hold harmless the Company, any officer,
director, employee or agent of the Company, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
against any Losses to which each such indemnified party may become subject under
the Securities Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement
-5-
of any material fact contained in any Registration Document, or arise out of or
are based upon the omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or necessary to make the
statements made therein (in the case of a prospectus, in the light of the
circumstances under which they were made,) not misleading, and (ii) reimburse
each indemnified party for all legal or other expenses reasonably incurred by it
in connection with investigating or defending any such Losses or action,
including any amounts paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the prior written consent of
such Purchasers; provided, however, that such indemnification or reimbursement
shall be payable only if, and to the extent that, any Losses arise out of or are
based upon an untrue statement or omission made in any Registration Document in
reliance upon and in conformity with written information furnished to the
Company by the Purchasers expressly for use in the preparation thereof.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party, under Section 5(a) or 5(b), of notice of the commencement
of any action, the indemnified party shall notify the indemnifying party in
writing of the commencement thereof, if a claim in respect thereof is to be made
against an indemnifying party under any of these Sections; but the omission of
such notice shall not relieve the indemnifying party from liability which it may
have to the indemnified party under this Section 5, except to the extent that
the indemnifying party is actually prejudiced in any material respect by such
failure to give notice, and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under this
Section 5. In the event that an action is brought against the indemnified party
and such indemnified party notifies the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and to the
extent that it chooses, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party that it so chooses, the indemnifying party shall
not be liable for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof; provided however, that
(i) if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim within 20 days after receiving notice from the indemnified
party that the indemnified party believes it has failed to do so, or (ii) if the
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there are legal defenses available to the indemnified party which are not
available to the indemnifying party, or (iii) if representation of both parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct, the indemnified party shall have the right to assume or
continue its own defense as set forth above. In no event shall the indemnifying
party be responsible for more than one firm of counsel for all indemnified
parties.
(d) Non-Exclusive Indemnity. Any indemnity agreements
contained herein shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless of any
investigation made or omitted by or on behalf of any indemnified party.
(e) Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims,
-6-
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and the
indemnified party on the other (determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission), or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or provides a lesser sum
to the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative fault of the
indemnifying party and the indemnified party, but also the relative benefits
received by the indemnifying party on the one hand (taking into consideration
the fact that the provision of the registration rights hereunder served as an
inducement to the Purchasers to enter into the Subscription Agreement) and the
indemnified party on the other, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
6. Miscellaneous.
(a) Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New Jersey without
giving effect to the choice of law principles thereof.
(b) Entire Agreement; Amendment; Waiver. This Agreement: (i)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof, (ii) supersedes all prior written agreements and
negotiations and oral understandings, if any, with respect thereto, (including,
without limitation the Original Agreement) and (iii) may not be amended or
supplemented except by an instrument or counterparts thereof in writing signed
by the Company and each of the Purchasers. No waiver of any term or provision of
this Agreement shall be effective unless in writing signed by the party to be
charged. The waiver by any party of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach.
(c) Binding Effect. This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that no party hereto
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of the other parties
hereto.
(d) Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
-7-
(e) Notices. All notices, requests, consents and other
communications to any party hereunder shall be in writing and shall be given
either by personal service, certified mail, return receipt requested, overnight
courier or telecopy, addressed as follows:
(i) if to the Company, to:
Vertex Interactive, Inc.
00 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxxx X.X. Xxxx
Facsimile No.: (000) 000-0000
(ii) with a copy to:
Law Offices of Xxxxxxx Xxxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
(iii) if to Purchasers:
MidMark Capital II, L.P.
c/o MidMark Investments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
Facsimile No.: (000) 000-0000
(iv) with a copy to:
XxXxxxxx & English, LLP
Four Gateway Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other address as any party may hereafter specify to the other parties
hereto by notice sent in accordance with this Section 6(e). Each such notice,
request or other communication shall be effective when delivered at the address
specified in this Section 6(e).
(f) Headings; Execution in Counterparts. The headings and
captions contained herein are for convenience of reference only and shall not
control or affect the meaning or construction of any provision hereof. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
-8-
IN WITNESS WHEREOF, this Agreement has been executed by or on
behalf of each of the parties hereto as of the date first above written.
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-----------------------------------
Name:
Title:
MIDMARK CAPITAL II, L.P.,
By MidMark Associates II, L.L.C., its General Partner
By /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
ORIGINAL PURCHASERS
MIDMARK CAPITAL, L.P.,
By MidMark Associates, Inc., its General Partner
By /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
O'BRIEN LIMITED PARTNERSHIP
By: Xxxxx Xxxxxx, General Partner
/s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx
PAINEWEBBER CUSTODIAN
F/B/O XXXXX XXXX XXXXXXXXX
By /s/ Xxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Trustee, SEP Plan
XXXXXXX XXXXXX/XXXXXX XXXXXX,
AS JOINT TENANTS
By /s/ Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
By /s/ Xxxxxx Xxxxxx
--------------------------------------
Xxxxxx Xxxxxx
-2-
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") is
entered into as of November 1, 2001, by and among MidMark Capital II, L.P.
("MidMark") and the stockholders of Vertex Interactive, Inc., a Delaware
corporation (the "Company") which are listed on Exhibit A attached hereto (each
a "Stockholder and collectively "the "Stockholders"). Capitalized terms used but
not defined herein shall have the meanings set forth in the Note Purchase
Agreement (as defined below).
WHEREAS, MidMark and the Company have entered into that
certain Note Purchase Agreement dated as of November 1, 2001 (the "Note Purchase
Agreement"), providing for the purchase of a $3,000,000 secured promissory note
(the "New Note") which is convertible at the option of MidMark into that number
of shares of Series C Preferred Stock as set forth in the Note (the "Series C
Shares") upon the Company obtaining the requisite shareholder approval for the
issuance of such Series C Shares (the "Purchase") upon the terms and subject to
conditions of the Note Purchase Agreement, and setting forth certain
representations, warranties, covenants and agreements of the parties thereto in
connection with the Purchase; and
WHEREAS, the Company, MidMark and certain of MidMark's
Affiliates are simultaneously entering into an Allonge to certain convertible
promissory notes totaling $5,500,000 dated June 19, 2001 (the "Original Notes";
together with the New Note, the "Notes"), which Allonge, among other things,
alters the type of shares of capital stock into which the Original Notes are
automatically convertible upon obtaining the requisite shareholder approval; and
WHEREAS, as an inducement and a condition to MidMark entering
into the Note Purchase Agreement, each Stockholder has agreed by entering into
this Agreement, to cause its Stockholder's Securities (as defined below) to be
voted in favor of the issuance of the shares of the Company's capital stock upon
conversion of the Notes.
NOW, THEREFORE, for good and valuable consideration, the
receipt, sufficiency and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
1. Representations of Stockholders. Each of the Stockholders severally
represents as to himself, herself or itself that:
(a) such Stockholder is the beneficial owner with the sole
power to vote that number of Company securities as set forth opposite such
Stockholder's name on Exhibit A attached hereto (in each case, such
"Stockholder's Securities" and collectively, the "Securities") in favor of the
issuance of shares of Company capital stock upon conversion of the Notes; and
(b) such Stockholder does not beneficially own (as such term
is defined in the Securities Exchange Act of 1934, as amended (the "1934 Act"))
any Company securities other than such Stockholder's Securities, and any shares
of Company stock which such Stockholder has the right to obtain upon the
exercise of employee stock options outstanding on the date hereof;
(c) such Stockholder has good and valid title to such
Stockholder's Securities free and clear of all pledges, liens, proxies, claims,
charges, security interests, preemptive rights and any other encumbrances
whatsoever with respect to the ownership, transfer or voting of such Securities
(other than restrictions on transfer under applicable Federal and state
securities laws);
(d) if such Stockholder is a corporation, partnership or other
similar business entity, such Stockholder is a duly organized and validly
existing corporation, partnership or other similar business entity, as the case
may be, in good standing under the laws of its jurisdiction of organization;
(e) such Stockholder has all requisite power and authority and
has taken all action necessary in order to execute, deliver and perform its
obligations under this Agreement and to take all actions required and to
consummate all of the transactions contemplated by this Agreement. This
Agreement is a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(f) other than the filings required pursuant to applicable
Federal and state securities laws, no notices, reports or other filings are
required to be made by such Stockholder with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
such Stockholder from, any Governmental Authority, in connection with the
execution and delivery of this Agreement by such Stockholder, the performance of
its obligations hereunder or the consummation by such Stockholder of the
transactions contemplated hereby;
(g) the execution and delivery of this Agreement by such
Stockholder does not, and the performance of such Stockholder's obligations
hereunder and the consummation by such Stockholder of the transactions
contemplated hereby will not, constitute or result in:
(A) if the Stockholder is a corporation, partnership
or other similar business entity, a breach or violation of, or a default under,
the certificate or by-laws or the comparable governing instruments of such
Stockholder or
(B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets or any Company Securities of such
Stockholder (with or without notice, lapse of time or both) pursuant to, any
Contract (as defined below) binding upon such Stockholder or any Law or
governmental or non-governmental permit or license to which such Stockholder is
subject or by which such Stockholder or its assets are bound;
(h) such Stockholder will take all necessary action to ensure
that such Stockholder's Securities will at all times during the term of this
Agreement be held by such Stockholder, or by a nominee or custodian for the
account of such Stockholder, free and clear of all pledges, liens, proxies,
claims, charges, security interests, preemptive rights and any other
2
encumbrances whatsoever with respect to the ownership, transfer or voting of
such Stockholder's Securities or any Company Securities issuable upon exercise,
conversion or exchange of such Securities; and there are no outstanding options,
warrants or rights to purchase or acquire, or other agreements relating to, such
Securities, as the case may be, other than this Agreement; and
(i) such Stockholder understands and acknowledges that MidMark
and the Company are each entering into the Note Purchase Agreement in reliance
upon such Stockholder's execution and delivery of this Agreement; and the
representations and warranties of each Stockholder contained herein are for the
benefit of MidMark and its permitted assigns and shall be deemed made as of the
date hereof and as of each date from the date hereof through and including the
earlier of the date that the approval of the Stockholders of the Company for the
issuance of Company capital stock upon conversion of the Notes is obtained or
this Agreement is terminated in accordance with its terms.
2. Agreement to Vote Securities. (a) Each of the Stockholders severally
agrees to vote its Stockholder's Securities, and shall cause any holder of
record of such Stockholder's Securities to vote such Stockholder's Securities,
with respect to the approval of the issuance of Company capital stock upon
conversion of the Notes:
(i) in favor of the issuance of Company capital stock
upon conversion of the Notes at every meeting of the Stockholders of the Company
at which such matters are considered and at every adjournment thereof, and
(ii) against any action or proposal that would
compete with or could serve to materially compete or interfere with, delay,
discourage, adversely affect or inhibit the timely issuance of Company capital
stock upon conversion of the Notes. Any vote shall be cast or consent shall be
given in accordance with procedures relating thereto as shall ensure that it is
duly counted for purposes of determining that a quorum is present and for
purposes of recording the results of such vote or consent. Each Stockholder also
agrees to use all reasonable efforts to take, or cause to be taken, all action,
and do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.
3. No Voting Trusts. After the date hereof, the Stockholders severally
agree that they will not, nor will they permit any entity under their control
to, deposit any of their Securities in a voting trust or subject any of their
Company Securities into which they can be converted to any arrangement with
respect to the voting of such Company Securities other than this Agreement.
4. No Proxy Solicitations. Each of the Stockholders severally agrees
that such Stockholder will not, nor will such Stockholder permit any entity
under their control to:
(a) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act) in opposition to the issuance of Company capital stock upon conversion of
the Notes or otherwise encourage or assist any party in taking or planning any
action which otherwise could serve to materially interfere with, delay,
discourage, adversely affect or inhibit the timely approval of the issuance of
Company capital stock upon
3
conversion of the Notes in accordance with the terms of the Note Purchase
Agreement and the Allonge,
(b) directly or indirectly encourage, initiate or cooperate in
a Stockholders' vote or action by consent of the Company's Stockholders in
opposition to the issuance of Company capital stock upon conversion of the
Notes, or
(c) become a member of a "group" (as such term is used in
Section 13(d) of the Exchange Act) with respect to any voting securities of the
Company for the purpose of opposing the issuance of Company capital stock upon
conversion of the Notes; provided that the foregoing shall not restrict any
director of the Company from taking any action such director believes in good
faith, after consultation with outside counsel, is necessary to satisfy such
director's fiduciary duty to Stockholders of the Company.
5. Transfer and Encumbrance. On or after the date hereof, each of the
Stockholders severally agrees not to voluntarily transfer, sell, offer, pledge
or otherwise dispose of or encumber ("Transfer") any of his, her or its
Securities prior to the earlier of (a) immediately following approval of the
issuance of Company capital stock upon conversion of the Notes by the
stockholders of the Company, or (b) the date this Agreement shall be terminated
in accordance with its terms (provided, however, that notwithstanding the
foregoing, sales of Securities which aggregate less than five percent (5%) of
the total Securities held by the Stockholder on the date hereof shall be
allowed).
6. Specific Performance. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other party if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other party will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall not be assignable without the written consent of all other
parties hereto; provided however, that MidMark may assign all of its rights
pursuant to this Agreement to any other direct or indirect wholly owned
subsidiary of MidMark.
8. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by MidMark on the one hand and the relevant
Stockholder(s) whose rights and/or obligations are thereby amended, supplement
or modified on
4
the other. No waiver of any provisions hereof by any party shall be deemed a
waiver of any other provisions hereof by any such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
9. Miscellaneous. (a) This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the State of New Jersey.
(b) If any provision of this Agreement or the application of
such provision to any person or circumstances shall be held invalid by a court
of competent jurisdiction, the remainder of the provision held invalid and the
application of such provision to persons or circumstances, other than the party
as to which it is held invalid, shall not be affected.
(c) This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) This Agreement shall terminate upon the earliest to occur
of:
(i) the obtaining of the requisite Company
stockholder approval, or
(ii) termination of the Note Purchase Agreement in
accordance with its terms.
(e) All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
(f) The parties agree that there is not and has not been any
other agreement, arrangement or understanding between the parties hereto with
respect to the matters set forth herein.
(g) Each of the Stockholders are acting hereunder in their
capacities as holders of Securities only, and make no agreement or understanding
herein in any capacities as directors or officers of the Company. Nothing herein
shall limit or affect any actions which the Stockholders and/or their Affiliates
may take in their capacities as officers and/or directors of the Company.
[SIGNATURE PAGE TO FOLLOW]
5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
MIDMARK CAPITAL II, L.P.,
By MidMark Associates II, L.L.C., its General Partner
By /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
SHAREHOLDER:
Name:
-------------------------------------------
No. and Type of Securities:
Type: No.:
-------------------------- -----------------
-------------------------- -----------------
-------------------------- -----------------
-------------------------- -----------------
By:
---------------------------------------------
Name:
Title:
/s/ Xxxxxxxx Xxxx
--------------------------------------------------
Xxxxxxxx Xxxx
--------------------------------------------------
Xxxx Xxxxxxxx
Signature Page to the Stockholder Voting Agreement
6
Exhibit A
List of Stockholders
Name Number of Shares
---- ----------------
Bunter BVI Limited 388,010 Shares of
c/o Ansbacher BVI Limited Common Stock
International Trust Building
Wickhams Cay, Road Town BVI
BV
Xxxx Xxxxxxxx 522.875 Shares of
Xxxxxxxxxxx Xxxxxxx 00 Common Stock
D-65760 Eschborn/Ts.
Germany
Partas AG 65.350 Shares of
Xxxxxxxxxxxxxxx 00 Common Stock
4501 Solothurn
Switzerland
Exhibit A to the Stockholder Voting Agreement
7
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
PAINEWEBBER CUSTODIAN, F/B/O XXXXX X. XXXXXXXXX ("Lender").
WHEREAS:
A. On June 19, 2001 Company executed and delivered to the order of
Lender its Convertible Promissory Note (the "Note") in the principal amount of
Fifty Thousand Six Hundred Sixty-Six and 67/100ths Dollars ($50,666.67); and
B. The Note matured on October 17, 2001; and
C. The Lender and the Company have agreed to modify the terms of the
Note by, among other things, extending the maturity of the Note and modifying
its conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by
-1-
Pitney Xxxxx Inc. for such shares of capital stock, warrants or other
convertible securities.
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation.
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
-2-
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
-3-
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
---------------------------
Name:
Title:
AGREED TO:
Lender:
PAINEWEBBER CUSTODIAN
F/B/O XXXXX XXXX XXXXXXXXX
By /s/ Xxxxx X. Xxxxxxxxx
----------------------------
Name:
Title:
Signature Page to Allonge to Convertible Promissory Note
-4-
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
XXXXXXX XXXXXX/XXXXXX XXXXXX AS JOINT TENANTS ("Lender")
WHEREAS:
A. On June 19, 2001 Company executed and delivered to the order of
Lender its Convertible Promissory Note (the "Note") in the principal amount of
Eight Thousand Dollars ($8,000); and
B. The Note matured on October 17, 2001; and
C. The Lender and the Company have agreed to modify the terms of the
Note by, among other things, extending the maturity of the Note and modifying
its conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by
-1-
Pitney Xxxxx Inc. for such shares of capital stock, warrants or other
convertible securities.
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
-2-
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
-3-
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
----------------------------------
Name:
Title:
AGREED TO:
Lender:
XXXXXXX XXXXXX/XXXXXX XXXXXX
AS JOINT TENANTS
By /s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
By /s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
Signature Page to Allonge to Convertible Promissory Note
-4-
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
MIDMARK CAPITAL, L.P. ("Lender").
WHEREAS:
A. On June 19, 2001 Company executed and delivered to the order of
Lender its Convertible Promissory Note (the "Note") in the principal amount of
Three Hundred Forty Thousand Dollars ($340,000); and
B. The Note matured on October 17, 2001; and
C. The Lender and the Company have agreed to modify the terms of the
Note by, among other things, extending the maturity of the Note and modifying
its conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by
-1-
Pitney Xxxxx Inc. for such shares of capital stock, warrants or other
convertible securities.
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
-2-
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
-3-
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-------------------------------
Name:
Title:
AGREED TO:
Lender:
MIDMARK CAPITAL, L.P.
By: MidMark Associates, L.L.P.
By /s/ Xxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
Signature Page to Allonge to Convertible Promissory Note
-4-
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
XXXXXX XXXXXXXX ("Lender").
WHEREAS:
A. On June 19, 2001 Company executed and delivered to the order of
Lender its Convertible Promissory Note (the "Note") in the principal amount of
Fifty Thousand Six Hundred Sixty-Six and 67/100ths Dollars ($50,666.67); and
B. The Note matured on October 17, 2001; and
C. The Lender and the Company have agreed to modify the terms of the
Note by, among other things, extending the maturity of the Note and modifying
its conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by
-1-
Pitney Xxxxx Inc. for such shares of capital stock, warrants or other
convertible securities.
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation.
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
-2-
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
-3-
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
----------------------------------
Name:
Title:
AGREED TO:
Lender:
XXXXXX XXXXXXXX
By /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxx
Signature Page to Allonge to Convertible Promissory Note
-4-
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
O'BRIEN LIMITED PARTNERSHIP ("Lender").
WHEREAS:
A. On June 19, 2001 Company executed and delivered to the order of
Lender its Convertible Promissory Note (the "Note") in the principal amount of
Fifty Thousand Six Hundred Sixty-Six and 67/100ths Dollar ($50,666.67); and
B. The Note matured on October 17, 2001; and
C. The Lender and the Company have agreed to modify the terms of the
Note by, among other things, extending the maturity of the Note and modifying
its conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by
-1-
Pitney Xxxxx Inc. for such shares of capital stock, warrants or other
convertible securities.
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation.
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
-2-
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
-3-
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-------------------------------------
Name:
Title:
AGREED TO:
Lender:
O'BRIEN LIMITED PARTNERSHIP.
By: Xxxxx Xxxxxx, General Partner
By /s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
Signature Page to Allonge to Convertible Promissory Note
-4-
ALLONGE TO CONVERTIBLE PROMISSORY NOTE
THIS ALLONGE TO CONVERTIBLE PROMISSORY NOTE ("Allonge") is made as of
November 1, 2001 by and between VERTEX INTERACTIVE, INC. (the "Company"), and
MIDMARK CAPITAL II, L.P. ("Lender").
WHEREAS:
1. On June 19, 2001 Company executed and delivered to the order of Lender its
Convertible Promissory Note (the "Note") in the principal amount of Five
Million Dollars ($5,000,000); and
2. The Note matured on October 17, 2001; and
3. The Lender and the Company have agreed to modify the terms of the Note by,
among other things, extending the maturity of the Note and modifying its
conversion terms.
NOW, THEREFORE, WITNESSETH: that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Note is amended
and revised as follows (all capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Note).
1. The first sentence of the first paragraph of the Note is modified to
delete all the words in the first sentence after the word "below" and replace
them with the following:
"on the Maturity Date. The "Maturity Date" means the earlier of: (1)
March 31, 2002 or (2) the Shareholder Rejection Date. The "Shareholder Rejection
Date" is the date on which a Shareholder Rejection shall have occurred. A
"Shareholder Rejection" occurs if the Shareholders of the Company reject a
resolution to approve the conversion of the Note as contemplated by its terms.
2. Section 1 of the Note, which section has the title "Conversion", is
hereby modified in its entirety to read as follows:
Upon obtaining Shareholder Approval, this Note shall automatically be
converted into the Conversion Shares at the Applicable Conversion Price. The
"Conversion Shares" and the "Applicable Conversion Price" shall be determined as
follows:
(a) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an average effective price per Common
Share (assuming conversion of all convertible securities and the exercise of all
warrants received by Pitney Xxxxx Inc. in connection with such purchase) equal
to or less than $1.31 per share, then the "Conversion Shares" shall be the same
class of capital stock and/or warrants or other related convertible securities
as purchased by Pitney Xxxxx Inc. and this Note shall convert into such shares
of capital stock, warrants or other convertible securities at an "Applicable
Conversion Price" equal to the average price paid by Pitney Xxxxx Inc. for such
shares of capital stock, warrants or other convertible securities.
1
(b) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall have purchased additional capital stock and/or
related warrants or other convertible securities of the Company for an aggregate
purchase price of at least $9,000,000 at an effective price per Common Share
(assuming conversion of all convertible securities and the exercise of all
warrants purchased by Pitney Xxxxx Inc.) greater than $1.31 per share, then the
"Conversion Shares" shall be the Company's Common Stock, and this Note shall
convert into such shares of Common Stock at an "Applicable Conversion Price"
equal to $1.31 per share.
(c) If after the date hereof but prior to the obtaining of Shareholder
Approval, Pitney Xxxxx Inc. shall not have purchased additional capital stock
and/or related warrants or other convertible securities of the Company for an
aggregate purchase price of at least $9,000,000, then the "Conversion Shares"
shall be the Company's Series C Convertible Preferred Stock, and this Note shall
convert into the Conversion Shares at an "Applicable Conversion Price" of $1,000
for each such share.
"Shareholder Approval" means the requisite shareholder approval for the
conversion of this Note into the Conversion Shares as determined in accordance
with the Laws of the State of New Jersey and Nasdaq National Market."
3. Section 2 of the Note, which section has the title "Interest", is
hereby modified in its entirety to read as follows:
"Unless earlier converted in accordance with the provisions hereof, the
original principal amount of this Note plus any unpaid accrued interest hereon
shall be paid on the Maturity Date. Interest shall accrue at the prime borrowing
rate as quoted in the Wall Street Journal and shall be computed on the basis of
a 360-day year applied to actual days elapsed. In the event of a Shareholder
Rejection or payment under this Note prior to the receipt of Shareholder
Approval, the Company shall, in addition to any other interest payable under
this Note, pay to the Lender an amount equal to the Additional Rejection
Interest. The "Additional Rejection Interest" is an amount equal to the
difference between (1) the aggregate interest on the principal amounts
outstanding under this Note which would have accrued each at a per annum rate of
14% computed on the basis of a 360-day year applied to actual days elapsed, and
(2) the actual interest that has accrued under this Note. Promptly following
payment in full of the principal and any accrued interest payable in accordance
with the terms of this Note, Lender shall surrender this Note to the Company for
cancellation
4. The obligations of the Company under this Note to the Lender are
secured by a lien on all of the tangible and intangible assets of the Company
under the terms of that certain Security and Collateral Agency Agreement dated
the date hereof between the Company and MidMark Investments, Inc. as collateral
agent (the "Security and Collateral Agency Agreement").
5. Without any further consent by the Lender or the Company, the
obligations of the Company under this Note to the Lender, and the priority of
the lien of the Collateral Agent in the assets of the Company, may become
subordinated to the obligations of the Company and any
2
lien on the assets of the Company in favor of any "Senior Lender" as that term
is defined in the Security and Collateral Agency Agreement. The Lender hereby
agrees that payment of this Note shall be subject to the terms of any
Subordination Agreement entered into by the Collateral Agent and the Senior
Lender under the terms of the Security and Collateral Agency Agreement.
6. Company represents and warrants to Lender that there exist no
defenses, offsets or counterclaims with respect to Company's obligations under
the Note.
7. This Allonge may be executed in counterparts, such counterparts
together constituting but one and the same agreement.
8. In the event of any conflict or inconsistency between the Note and
this Allonge, this Allonge shall control.
9. This Allonge may not be changed or terminated except by an agreement
in writing signed by Company and Lender.
10. This Allonge shall be binding upon the parties hereto and their
respective successors and assigns.
11. If any term, covenant or condition of this Allonge shall be held to
be invalid, illegal or unenforceable in any respect, this Allonge shall be
construed without such provision.
12. This Allonge shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.
13. Except as provided herein, the terms and provisions and covenants
of the Note are in all other respects hereby ratified and confirmed and shall
remain in full force and effect.
[SIGNATURE PAGE TO FOLLOW]
3
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By:
---------------------------------------
Name:
Title:
AGREED TO:
Lender:
MIDMARK CAPITAL II, L.P.
By: MidMark Associates II, LLC General Partner
By
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
4
IN WITNESS WHEREOF, the Company and the Lender have executed this
Allonge as of the day and year first above written.
Company:
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
---------------------------------------
Name:
Title:
AGREED TO:
Lender:
MIDMARK CAPITAL II, L.P.
By: MidMark Associates II, LLC, General Partner
By /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
5
SECURITY AND COLLATERAL AGENCY AGREEMENT
This is a security and collateral agency agreement dated November 1,
2001 between Vertex Interactive, Inc. with an address at 00 Xxxxxx Xxxxx,
Xxxxxxxxx, XX 00000 (the "Debtor"), MidMark Investments, Inc. with an address at
000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 (the "Collateral Agent") and the
holders of the notes issued by the Debtor listed on Addendum A to this agreement
(the "Noteholders").
WITNESSETH
A. Under the terms of that certain Note Purchase Agreement dated as of
June 19, 2001 by and among the Debtor and MidMark Capital II, L.P. the Debtor
has issued its convertible promissory note in favor of MidMark Capital II, L.P.
That note matured on October 17, 2001 and the Debtor has requested that MidMark
Capital II, L.P., among other things, extend the maturity date of the note under
the terms of an Allonge to Convertible Promissory Note of even date.
B. Under the terms of that certain Note Purchase Agreement dated as of
June 19, 2001 by and among the Debtor and the purchasers named therein the
Debtor has issued its promissory notes in favor of the purchasers name therein.
Those notes matured on October 17, 2001 and the Debtor has requested that the
holders of those notes, among other things, extend the maturity date of the
notes under the terms of an Allonge to Convertible Promissory Note of even date.
C. The Debtor has requested that the MidMark Capital II, L.P. purchase
from it an additional $3,000,0000 convertible promissory note (the "New Note")
under the terms and conditions set forth in that certain Note Purchase Agreement
dated as of the date hereof.
D. MidMark Capital II, L.P. has agreed to purchase the New Note and
each of the other holders of the notes have agreed to enter into the applicable
allonge to their existing note provided that the Debtor, the Collateral Agent
and each of the Noteholders enter into this Security and Collateral Agency
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
SECTION I. DEFINITIONS AND OTHER PROVISIONS
1.01 Certain Defined Terms.
The following terms have the following meanings:
"Accounts" means all rights to the payment of a monetary obligation,
whether or not earned by performance, (i) for property that has been or is to be
sold, leased, licensed, assigned or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of insurance issued or to be
issued, (iv) for a secondary obligation incurred or to be incurred, (v) for
energy provided or to be provided, (vi) for use or hire of a vessel under a
charter or other
-1-
contract, (vii) arising out of the use of a credit card or charge card or
information contained on of for used with the card, or (viii) as winnings in a
lottery or other game of chance, in each case whether in form of accounts
receivable, contract rights, chattel paper, instruments, notes, bills,
acceptances, general intangibles and other forms of obligations relating to such
rights, together with any property evidencing or relating to such rights,
including, without limitation, all books, records, invoices, magnetic tapes,
processing software, processing contracts (such as contracts for computer time
and services) and any other rights or property of the Debtor that is an
"account" within the meaning of the UCC.
"Chattel Paper" means all chattel paper, as that term is defined in the
UCC, including without limitation any writings which evidence both a monetary
obligation and a security interest in or a lease of specific goods.
"Collateral" means all tangible and intangible property of the Debtor
including without limitation all Accounts, Chattel Paper, Commercial Tort
Claims, Deposit Accounts, Documents, Fixtures, General Intangibles, Goods
(including, without limitation, Inventory and Equipment), Instruments,
Investment Property and Letter of Credit Rights, money and oil, gas or other
mineral rights before extraction whether presently owned or hereafter acquired
together with all Proceeds thereof.
"Commercial Tort Claims" means tort claims of the Debtor arising from
time to time including the commercial tort claims listed on Schedule 4.11.
"Copyrights" means all copyrights, all registrations thereof, and
applications in connection therewith pending with the United States Copyright
Office or similar office in any other jurisdiction.
"Deposit Accounts" means all demand, time, savings, passbook or like
accounts maintained with a bank, savings and loan association, credit union or
like organization.
"Documents" means all documents, as that term is defined in the UCC,
including but not limited to documents of title (as that term is defined in the
UCC) and any and all receipts of the kind described in Article 7 of the UCC.
"Equipment" means all machinery, apparatus, equipment, fittings and
other tangible personal property (other than Inventory) of every kind and
description used in the Debtor's operations or owned by the Debtor in which
Debtor has an interest, whether or not affixed to realty, including without
limitation, all motor vehicles, trucks, trailers, handling and delivery
equipment, cranes, hoisting equipment, fixtures, office machines and furniture,
together with all accessions, replacements, rights under any manufacturer's
warranties relating to the foregoing and any other rights or property of the
Debtor that is equipment within the meaning of the UCC.
"Fixtures" means Goods that have become so related to particular real
property that an interest in them arises under real property law.
"GAAP" means generally accepted accounting principles in the United
States of America
-2-
in effect from time to time.
"General Intangibles" means all general intangibles, as that term is
defined in the UCC, including, without limitation, all choses in action, causes
in action, designs, plans, goodwill, tax refunds, Patents, Copyrights,
Trademarks, licenses, franchises and all rights under license agreements for use
of the same.
"Goods" means all things that are moveable when a security interest
attaches.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Instruments" means instruments, as that term is defined in the UCC,
including without limitation bills of exchange, notes and all negotiable
instruments, all certificated securities, all certificates of deposit and any
other writing which evidences a right to payment of money and is a type which is
in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment.
"Inventory" means all goods intended for sale or lease by the Debtor,
of every nature, kind and description wherever located, including without
limitation raw materials, goods, work in process and finished goods and all
goods returned or reclaimed from customers, together with any other rights or
property of the Debtor that is inventory within the meaning of the UCC.
"Investment Property" means (i) all securities, or securities
certificates or uncertificated securities representing the securities, (ii)
security entitlements, (iii) securities accounts, (iv) commodity contracts, or
(v) commodity accounts.
"Letter of Credit Right" means any right to payment or performance
under a letter of credit, whether or not the beneficiary has demanded or is
entitled to demand payment or performance.
"Liens" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the filing of any financing statement
under the UCC or comparable law of any jurisdiction in respect of any of the
foregoing).
"Majority Holders" means at any time, the Noteholders holding Notes
with more than 50% of the aggregate principal amounts then outstanding under all
the Notes.
"Notes" means the notes issued by the Debtor which are referred to in
Recitals A, B and C of this Agreement as such notes may be modified or amended.
"Patents" means all letters patent, reissues and extensions thereof,
applications for letters patent and all divisions, continuations and
continuations-in-part thereof of the United States or
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any other jurisdiction.
"Proceeds" means all proceeds as that term is defined in the UCC
including without limitation whatever is received upon the use, lease, sale,
exchange, collection, any other utilization of any disposition of any property
whether or not in cash, all rental or lease payments, accounts, chattel paper,
instruments, documents, general intangibles, equipment, inventory,
substitutions, additions, accessions, replacements, products and renewals of,
for, or to such property and all insurance therefor.
"Secured Obligations" means all present and future obligations of the
Debtor to the Noteholders under the Notes and to the Collateral Agent under this
agreement, whether such obligations are direct or indirect, joint or several,
secured or unsecured, primary or secondary, absolute or contingent, which are
due or that may become due whether contracted, acquired or arising by operation
of law including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding.
"Security Documents" means this agreement or any other agreement
providing for collateral security for the Secured Obligations.
"Senior Lender" means a financial institution providing working capital
or other credit on customary terms and conditions to the Debtor.
"Trademarks" means all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, and all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
jurisdiction.
"UCC" means the Uniform Commercial Code as approved by The American Law
Institute and the National Conference of Commissioners on Uniform State Laws
with such revisions or modification as approved from time to time.
1.02 Other Definitional Provisions.
a. As used herein and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not
defined in Subsection 1.01 shall have the respective meanings given to
them under GAAP.
b. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this agreement shall refer to this
agreement as a whole and not to any particular provision of this
agreement, and section, subsection schedule and exhibit references are
to this agreement unless otherwise specified. The meaning of defined
terms shall be equally applicable to the singular and plural forms of
the defined terms.
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SECTION II. SECURITY INTERESTS
2.01 Grant of Security Interest.
The Debtor hereby grants to the Collateral Agent a lien on and a
security interest in the Collateral to secure the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations.
2.02 Failure to Perform Agreements.
If the Debtor fails to perform or comply with any of its agreements
contained herein and the Collateral Agent, as provided for by the terms of this
agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of the Collateral Agent
incurred in connection with such performance or compliance, together with
interest thereon at a rate equal to fifteen percent (15%) per annum, such
interest to be calculated from the date of such advance to the date of repayment
thereof, shall be payable by the Debtor to the Collateral Agent five days
following written demand for payment by the Collateral Agent accompanied by an
itemization of such expenses.
2.03 Collateral Agent's Appointment as Attorney-in-Fact.
The Debtor hereby irrevocably constitutes and appoints the Collateral
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Debtor and in the name of the Debtor or in its own
name, from time to time in the Collateral Agent's discretion, for the purpose of
carrying out the terms of this agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this agreement, and, without limiting
the generality of the foregoing, the Debtor hereby gives the Collateral Agent
the power and right, on behalf of the Debtor without notice to or assent by the
Debtor, to do the following:
a. to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable;
b. to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this agreement and to pay all or
any part of the premiums therefor and the costs thereof;
c. to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent;
d. to ask or demand for, or collect, receive payment of and
receipt for, any and
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all moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral;
e. to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection
with any of the Collateral;
f. to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect
the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral;
g. to defend any suit, action or proceeding brought against
the Debtor with respect to any Collateral;
h. to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Collateral Agent may deem appropriate;
i. generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent's option
and the Debtor's expense, at any time, or from time to time, all acts
and things which the Collateral Agent deems necessary to protect,
preserve or realize upon the Collateral and the Security Interests
thereon in order to effect the intent of this agreement, all as fully
and effectively as the Debtor might do; and
j. in connection with the sale of Collateral provided for
herein, execute any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the Secured Obligations are indefeasibly
paid in full. The powers conferred on the Collateral Agent hereunder are solely
to protect the Collateral Agent's interest in the Collateral and shall not
impose any duty upon the Collateral Agent to exercise any such powers. The
Collateral Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Debtor for
any act or failure to act hereunder, except for its own gross negligence or
willful misconduct. The Collateral Agent shall only exercise the foregoing power
of attorney if an Event of Default shall have occurred and is continuing;
provided that any person relying on the authority of the Collateral Agent under
this power of attorney may rely exclusively upon the representation of the
Collateral Agent as to its authority hereunder and with respect to the
Collateral Agent's right to exercise the powers granted above, shall not be
under any obligation to determine whether an Event of Default has occurred and
is continuing, and may disregard any claim by the Debtor or any Person that an
Event of Default has not occurred or is not continuing.
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SECTION III. SUBORDINATION
Each of the Noteholders and the Collateral Agent agrees to excute and
deliver in favor of a Senior Lender a subordination of their right of payment
under the Notes and the priority of any liens under the Security Documents in
reasonable and customary form. All of the Noteholders shall be bound by the
terms of any such subordination agreement which has been executed by the
Majority Holders.
SECTION IV. REPRESENTATIONS AND WARRANTIES
4.01 Power and Authority.
The Debtor has the corporate power and authority to execute and
deliver, to perform its obligations under, and to grant the security interest in
and lien on all the Collateral pursuant to, this agreement. The Debtor has taken
all necessary corporate action to authorize its execution, delivery and
performance of this agreement, and the grant of the security interest in the
Collateral pursuant to this agreement.
4.02 Title; No Other Liens.
Except for the Liens listed on Schedule 4.02, the Debtor owns each item
of Collateral free and clear of any and all Liens or claims of others. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office
except as may have been filed in favor of the Collateral Agent.
4.03 Perfected First Security Interest.
a. Except for the items of Collateral listed on Schedule
4.03a, the security interests granted herein will constitute a first
priority perfected security interest on the Collateral in favor of the
Collateral Agent enforceable against all creditors of the Debtor.
b. All Instruments, Chattel Paper, certificated securities and
other items for which a security interest can be perfected by
possession have been delivered by the Debtor to the Collateral Agent.
4.04 Names.
a. The Debtor's correct corporate name, as registered with
appropriate government authority in the Debtor's state of incorporation
is listed on Schedule 4.04a.
b. During the preceding seven-year period the Debtor has used
only the names listed on Schedule 4.04b and no other names or
tradenames.
4.05 Chief Executive Office.
The Debtor's chief executive office and chief place of business is
located at the place
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listed on Schedule 4.05.
4.06 Type and Place of Debtor's Organization.
The Debtor is a corporation organized solely under the laws of the
state of New Jersey.
4.07 Location of Books and Records.
The books and records of the Debtor including the books and records
regarding the Collateral are located at the places listed in Schedule 4.07.
4.08 Location of Goods.
All Goods owned by the Debtor are located at the places listed in
Schedule 4.08.
4.09 Accounts.
Each Account (a) is genuine and in all respects what it purports to be,
(b) arises out of a completed bona fide transaction arising in the ordinary
course of Debtor's business, (c) is for a liquidated amount maturing as stated
in the invoice, purchase order or other agreement covering such transaction, (d)
is not the subject of an agreement not to assign or grant of a security interest
in such Account, and (e) is in compliance with all applicable federal, state and
local laws and applicable laws of any relevant foreign jurisdiction.
4.10 Intellectual Property.
a. All the Patents, if any, owned or licensed by the Debtor
are listed on Schedule 4.10a.
b. All Trademarks, if any, owned or licensed by the Debtor are
listed on Schedule 4.10b.
c. All Copyrights, if any, owned or licensed by the Debtor are
listed on Schedule 4.10c.
d. Each Patent, Trademark and Copyright owned by the Debtor is
(i) valid, subsisting, existing, unexpired, enforceable and has not
been abandoned, (ii) not the subject of any licensing or franchise
agreement, (iii) not the subject of any holding, decision or judgment
by any Governmental Authority which would limit, cancel or question its
validity, (iv) not the subject of any action or proceeding (A) seeking
to limit, cancel or question its validity, or (B) which, if adversely
determined, would have a material adverse effect on its value, (v) not
subject to any existing infringing uses, and (vi) does not infringe
upon the rights of any Person.
4.11 Commercial Tort Claims.
All of the Commercial Tort Claims in which the Debtor has any interest
are listed on
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Schedule 4.11.
4.12 Deposit Accounts
All of Debtor's Deposit Accounts are listed on Schedule 4.12.
SECTION V. COVENANTS
5.01 Further Documentation; Financing Statements
At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of the Debtor, the Debtor will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Collateral Agent may reasonably request for the
purpose of obtaining or preserving the full benefits of this agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the law of any jurisdiction
with respect to the Liens created hereby. The Debtor hereby authorizes the
Collateral Agent to file any such financing or continuation statement without
the signature of the Debtor to the extent permitted by applicable law. The
Debtor authorizes the Collateral Agent to execute and file, in the name of the
Debtor or otherwise, UCC-1 financing statements which the Collateral Agent in
its sole discretion may deem necessary or appropriate to further perfect its
security interest. The Debtor agrees and authorizes that a carbon, photographic
or other reproduction of this agreement may be used as a financing statement for
filing in any jurisdiction.
5.02 Possessory Pledge of Instruments and Chattel Paper.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any instrument or chattel paper, such instrument
or chattel paper shall be immediately delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this agreement.
5.03 Maintenance.
The Debtor will keep and maintain at its own cost and expense
satisfactory and complete records of the Collateral, including, without
limitation, a record of all payments received and all credits granted with
respect to the Accounts. The Debtor will xxxx its books and records pertaining
to the Collateral to evidence this agreement and the security interests granted
hereby. The Debtor will maintain each item of Equipment in good operating
condition, ordinary wear and tear excepted, and will provide all maintenance,
service and repairs necessary for such purpose.
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5.04 Right of Inspection and Verification.
The Collateral Agent shall at all times have full and free access
during normal business hours to all the books, correspondence and records of the
Debtor, and its representatives may examine the same, take extracts therefrom
and make photocopies thereof, and the Debtor agrees to render to the Collateral
Agent such clerical and other assistance as may be reasonably requested with
regard thereto, all at the Debtor's cost and expense. The Collateral Agent and
its representative shall also have the right to enter into and upon any premises
where any of the Collateral is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein. The Collateral
Agent shall have the right to verify the validity, amount or any other matter
relating to any Collateral, including Accounts, by contacting the Account Debtor
or other party by mail, telephone or otherwise. The Borrower shall cooperate
fully with the Collateral Agent to facilitate any such verification process.
5.05 Compliance with Laws, etc.
The Debtor will comply in all material respects with all requirements
of law applicable to the Collateral or any part thereof or to the operation of
the Debtor's business.
5.06 Payment of Obligations.
The Debtor will pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to the Collateral, except that no such charge need be paid if (a) the
validity thereof is being contested in good faith by appropriate proceedings,
(b) such proceedings do not involve any material danger of the sale, forfeiture
or loss of any of the Collateral or any interest therein and (c) such charge is
adequately reserved against on the Debtor's books in accordance with GAAP.
5.07 Limitation on Liens.
The Debtor will not create, incur or permit to exist, will defend the
Collateral against, and will take such other action as is necessary to remove,
any Lien or claim on or to the Collateral other than the Lien granted to the
Collateral Agent herein, and will defend the right, title and interest of the
Collateral Agent in and to any of the Collateral against the claims and demands
of all Persons whomsoever.
5.08 Limitations on Disposition of Collateral.
The Debtor will not sell, transfer, lease or otherwise dispose of any
of the Collateral, without the prior written consent of the Collateral Agent
except for (a) collection of Accounts in the ordinary course of business, (b)
sales of Inventory in the ordinary course of its business, or (c) sale of
Equipment which is obsolete and not of material value.
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5.09 Limitations on Modifications to Accounts.
The Debtor will not (a) amend, modify, terminate or waive any provision
of any agreement giving rise to an Account in any manner which could reasonably
be expected to materially adversely affect the value of the Collateral as a
whole, (b) fail to exercise promptly and diligently material rights giving rise
to Accounts (other than any right of termination) or (c) fail to deliver to the
Collateral Agent a copy of each material demand, notice or document received by
it relating in any way to any agreement giving rise to an Account.
5.10 Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business, the Debtor will not
grant any extension of time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
5.11 Insurance.
a. The Debtor will maintain, with financially sound and
reputable companies satisfactory to the Collateral Agent, insurance
policies (i) insuring any tangible Collateral against loss by fire,
explosion, theft and such other casualties as may be reasonably
satisfactory to the Collateral Agent, and (ii) insuring the Debtor and
the Collateral Agent against liability for personal injury and property
damage relating to the Collateral. All such policies shall be in such
form and in such amounts and having such coverage as may be reasonably
satisfactory to the Collateral Agent.
b. All such policies of casualty insurance shall (i) name the
Collateral Agent as the loss payee, (ii) provide that the right of the
Collateral Agent to recover for any insured loss shall not be
invalidated by an act or neglect of the Debtor or other Person, (iii)
provide that no cancellation, material reduction in amount or material
change in coverage thereof shall be effective until at least 30 days
after receipt by the Collateral Agent of written notice thereof, (iv)
name the Collateral Agent as an insured party, and (v) be reasonably
satisfactory in all other respects to the Collateral Agent.
c. The Debtor hereby authorizes and directs payment directly
and solely to the Collateral Agent of any proceeds of any such policy
of insurance. The Collateral Agent is hereby authorized to adjust and
compromise any loss under any such policies and to collect and receive
all such proceeds. The Collateral Agent is hereby authorized to execute
and endorse in the Debtor's name all proofs of loss, drafts, checks and
other documents necessary to accomplish such collection and any person
making payment to Collateral Agent is hereby relieved from obligation
to see to the application of the sums so paid.
d. After deduction from any proceeds of any such insurance of
all costs and expenses incurred by the Collateral Agent in collection
and handling of such proceeds the net proceeds may be applied, at the
Collateral Agent's option, either toward replacing or
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restoring the Collateral or as a credit against the Secured
Obligations, whether matured or unmatured.
e. The Debtor shall deliver to the Collateral Agent such
reports of a reputable insurance broker with respect to such insurance
as the Collateral Agent may from time to time reasonably request.
5.12 Further Identification of Collateral.
The Debtor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
5.13 Notices.
The Debtor will advise the Collateral Agent promptly, in reasonable
detail, (a) of any Lien on, or claim asserted against, any of the Collateral and
(b) of the occurrence of any other event which could reasonably be expected to
have a material adverse effect on the aggregate value of the Collateral or on
the Liens created hereunder.
5.14 Changes in Locations, Name, Organization, etc.
The Debtor will not unless it shall have given the Collateral Agent at
least 30 days written notice thereof: (a) change the location of its chief
executive office/chief place of business from that specified in this agreement
or remove its books and records from the location specified in this agreement,
(b) permit any tangible Collateral including Inventory and Equipment to be kept
at a location other than those listed in this agreement, (c) change its name,
identity or corporate structure to such an extent that any financing statement
filed by the Collateral Agent in connection with this agreement would become
seriously misleading, (d) take any action which results in it becoming a
different type of organization, or (e) take any action which results in a change
in the jurisdiction whose laws it is organized under.
5.15 Intellectual Property.
a. Whenever the Debtor or any agent shall file an application
for the registration of any Patent, Trademark or Copyright with any
office or agency in any country or any political subdivision thereof,
the Debtor shall report such filing to the Collateral Agent within five
Business Days after such filing occurs. Upon request of the Collateral
Agent, the Debtor shall execute and deliver any and all agreements,
instruments, documents, and papers as the Collateral Agent may request
to evidence the Collateral Agent's Security Interests in any Patent,
Trademark or Copyright and any goodwill and general intangibles of the
Debtor relating thereto or represented thereby. The agreements
evidencing the Collateral Agent's Security Interest in such Patents,
Trademark or Copyrights will contain terms satisfactory to the
Collateral Agent.
b. The Debtor shall, consistent with its past practices, take
whatever action is
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necessary to protect its rights in any Patents, Trademarks or
Copyrights. The Debtor (either itself or through licensees) will not
allow any third party to infringe on any of its Patents, Trademarks or
Copyrights. In the event that any Patent, Trademark or Copyright is
infringed by a third party, the Debtor shall promptly notify the
Collateral Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine that such Patent, Trademark or Copyright is
of negligible economic value to the Debtor which determination the
Debtor shall promptly report to the Collateral Agent, promptly xxx for
infringement to seek injunctive relief where appropriate and to recover
any and all damages for such infringement or take such other actions as
the Debtor shall reasonably deem appropriate under the circumstances.
5.16 Commercial Tort Claims.
The Debtor shall notify the Collateral Agent of any Commercial Tort
Claim that may arise from time to time and execute documents, including a
supplementary security agreement and additional financing statements as the
Collateral Agent may request so that the Collateral Agent is at all times the
holder of a first priority perfected security interest in such claims.
5.17 Deposit Accounts.
The Debtor will cooperate with the Collateral Agent in obtaining
control agreements satisfactory to the Collateral Agent with respect to any
Deposit Accounts.
SECTION VI. EVENT OF DEFAULT AND REMEDIES
6.01 Events of Default.
Each of the following shall constitute a default (each, an "Event of
Default") hereunder:
a. Non-payment when due of any sum required to be paid to the
Collateral Agent by the Debtor with respect to any Secured Obligation;
b. A breach of any term, covenant, condition, obligation or
agreement contained in this agreement;
c. Any representation or warranty made by the Debtor in this
agreement shall prove to be false, incorrect or misleading in any
material respect as of the date when made; or
d. An "Event of Default" under any of the documents evidencing
the Secured Obligations shall occur.
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6.02 General.
If an Event of Default shall occur, the Collateral Agent may by notice
to the Debtor declare all of the Secured Obligations to be due and payable and
may exercise, in addition to all other rights and remedies granted in this
agreement and in any other instrument or agreement securing, evidencing or
relating to the obligations of the Debtor, all rights and remedies of a
Collateral Agent under the UCC.
6.03 With respect to Accounts and General Intangibles.
Upon the occurrence of an Event of Default:
a. if the Collateral Agent shall so request, the Debtor shall
forthwith do one or more of the following: (i) legend, in form and
manner acceptable to the Collateral Agent, its books, records and
documents evidencing or pertaining to its Accounts and General
Intangibles with an appropriate reference to the fact that such
Collateral has been assigned to the Collateral Agent and that the
Collateral Agent has a security interest therein and notify any person
with an obligation with respect to such Collateral of the Collateral
Agent's security interest therein, (ii) account for and transmit to the
Collateral Agent, in the same form as received, all proceeds of
collection of such Collateral received by the Debtor and, until so
transmitted, hold the same in trust for the Collateral Agent and not
commingle such proceeds with any other of its funds, (iii) deliver, at
its own expense, any or all books, record or other documents relating
to such Collateral to the Collateral Agent at a place designated by the
Collateral Agent and (iv) notify the obligors on such Collateral that
the Accounts and General Intangibles of the Debtor have been assigned
to the Collateral Agent and that payments in respect thereof shall be
made directly to the Collateral Agent.
b. the Collateral Agent, without notice to, or assent by, the
Debtor and in the name of the Debtor or its own name, or otherwise, may
(but need not) (i) notify the obligors of any of the Debtor's Accounts
or General Intangibles to make payments thereon directly to the
Collateral Agent; (ii) ask for, demand, collect, receive, compound and
give acquittance for such Collateral or any part thereof; (iii) extend
the time of payment for such collateral or compromise or settle any
such collateral for cash, credit or otherwise, and upon any terms and
conditions; (iv) endorse the name of the Debtor on any check, draft or
other order or instrument for the payment of moneys payable to the
Debtor which has been issued in respect of such Collateral; (v) file
any claims and commence, maintain or discontinue any action, suits or
other proceedings deemed by the Collateral Agent necessary or advisable
for the purpose of collecting or enforcing payment of any such
Collateral; (vi) at the Collateral Agent's sole discretion make test
verifications of such Collateral or any portion thereof; (vii) execute
any instrument and do any and all other things necessary and proper to
protect and preserve and realize upon such Collateral and other rights
contemplated hereby; and (viii) without obligation to resort to other
security, at any time and from time to time, sell, re-sell, assign and
deliver all or any of such Collateral, in one or more parcels at the
same or different times, and all
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right, title and interest, claim and demand therein and any right of
redemption thereof, at public or private sale, for cash, upon credit
or for future delivery and at such price or prices and on such terms
as the Collateral Agent may determine, with the proceeds thereof to be
applied in the manner provided herein.
The Debtor hereby agrees that the Collateral Agent may exercise the rights and
remedies provided herein and that the exercise of such rights and remedies by
the Collateral Agent, including, without limitation, the sale of Accounts or
General Intangibles, may be accomplished without demand, advertisement or notice
(except as required by law) all of which (to the extent permitted by law) are
hereby expressly waived. If any notice of a proposed sale or other disposition
of such Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Collateral Agent shall not be obligated to make any sale
regardless of notice of sale having been given. The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. The Collateral Agent shall not be
obligated to take any action authorized by this section, but in the event that
the Collateral Agent elects to take any such action, it shall not be responsible
to the Debtor except for its gross negligence or willful misconduct.
6.04 As to Inventory and Equipment.
Upon the occurrence of an Event of Default:
a. upon notice to such effect, the Debtor shall deliver, at
Debtor's own expense, any or all Inventory and Equipment to the
Collateral Agent at a place designated by the Collateral Agent;
b. the Collateral Agent may take possession of any or all
Inventory and Equipment and, for that purpose, enter, with the aid and
assistance of any person or persons, any premises where the Collateral,
or any part thereof, is, or may be, placed or assembled, and remove any
of the same;
c. the Collateral Agent may execute any instrument and do all
other things necessary and proper to protect and preserve and realize
upon such Collateral and other rights contemplated hereby; and
d. without obligation to resort to other security, at any time
and from time to time, the Collateral Agent may sell, assign and
deliver at the same or different times, all right, title, interest or
claim of the Debtor in such Collateral, and any right of redemption
thereof, at public or private sale, in one or more parcels, for cash,
upon credit or for future delivery, and at such price or prices and on
such terms as the Collateral Agent may determine.
The Debtor hereby agrees that the exercise by the Collateral Agent of the rights
and remedies under this section, including, without limitation, sale of
Inventory or Equipment may be
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accomplished without demand, advertisement or notice (except as required by
law), all of which (to the extent permitted by law) are hereby expressly waived.
If any notice of a proposed sale or other disposition shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. The Collateral Agent shall not be
obligated to make any sale regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Collateral Agent may offer any Inventory or Equipment for sale in its then
present condition and has no duty to repair or clean the Collateral prior to
sale and the failure to make such repairs or clean the Collateral shall not
effect the commercial reasonableness of the sale. The Collateral Agent may
disclaim all warranties including warranties of title, possession, quiet
enjoyment, merchantability, fitness for a particular and any such disclaimer
shall not effect the commercial reasonableness of the sale. The Collateral Agent
shall not be obligated to take any of the action authorized by this section, but
in the event that the Collateral Agent elects to take any such action, it shall
not be responsible to the Debtor except for its gross negligence or willful
misconduct.
6.05 As to Instruments, Chattel Paper and Investment Property.
Upon the occurrence of an Event of Default:
a. if the Collateral Agent shall so request, the Debtor shall
forthwith do one or more of the following: (i) legend, in form and
manner acceptable to the Collateral Agent, the Debtor's books, records
and documents evidencing or pertaining to any Instruments, Chattel
Paper or Investment Property with an appropriate reference to the fact
that such assets have been assigned to the Collateral Agent and that
the Collateral Agent has a security interest therein and notify any
person with an obligation with respect to such Collateral of the
Collateral Agent's security interest therein, (ii) account for and
transmit to the Collateral Agent, in the same form as received, all
proceeds of collection of such Collateral received by it and, until so
transmitted, to hold the same in trust for the Collateral Agent and not
commingle such proceeds with any other of its funds, (iii) deliver, at
its own expense, any or all books, records or other documents relating
to such Collateral to the Collateral Agent at a place designated by the
Collateral Agent, and (iv) notify the obligors on such Collateral that
such assets have been assigned to the Collateral Agent and that
payments in respect thereof shall be made directly to the Collateral
Agent.
b. the Collateral Agent, without notice to, or assent by, the
Debtor and in the name of the Debtor or its own name, or otherwise, may
(but need not) (i) notify the obligors of any of the Debtor's
Instruments, Chattel Paper or Investment Property to make payments
thereon directly to the Collateral Agent; (ii) ask for, demand,
collect, receive, compound and give acceptance for the such Collateral
or any part thereof; (iii) extend the time of payment for such
Collateral or compromise or settle any such Collateral for cash, credit
or otherwise, and upon any terms and conditions; (iv) endorse the name
of the Debtor on any check, draft or other order or instrument for the
payment of moneys payable to the Debtor which has been issued in
respect of such Collateral; (v)
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file any claims and commence, maintain or discontinue any action, suits
or other proceedings deemed by the Collateral Agent necessary or
advisable for the purpose of collecting or enforcing payment of any
such Collateral; (vi) at the Collateral Agent's sole discretion make
test verifications of such Collateral or any portion thereof; (vii)
execute any instrument and do any and all other things necessary and
proper to protect and preserve and realize upon such Collateral and
other rights contemplated hereby; and (viii) without obligation to
resort to other security, at any time and from time to time, sell,
re-sell, assign and deliver all or any such Collateral, in one or more
parcels at the same or different times, and all right, title and
interest, claim and demand therein and any right of redemption thereof,
at public or private sale, for cash, upon credit or for future delivery
and at such price or prices and on such terms as the Collateral Agent
may determine, with the proceeds thereof to be applied in the manner
provided herein.
The Debtor hereby agrees that the Collateral Agent may sell such Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Collateral Agent may deem satisfactory. The Collateral
Agent may be the purchaser of any or all of the Collateral so sold at any public
sale. The Debtor covenants and agrees that it will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Debtor which may be waived, and the Debtor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The Debtor
further acknowledges that the Collateral Agent may deem it impracticable to
effect a public sale of any part of the securities included in the Collateral,
and therefore authorizes the Collateral Agent in connection with any such
private sale, if the Collateral Agent deems it advisable to do so, (i) to
restrict the prospective bidders on or purchasers of any of the Collateral to a
limited number of sophisticated investors who will represent and agree that they
are purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, (ii) to cause to be placed on
certificates for any or all of the Collateral or on any other securities pledged
hereunder a legend to the effect that such security has not been registered
under the Securities Act of 1933 and may not be disposed of in violation of the
provision of said Act, and (iii) to impose such other limitations or conditions
in connection with any such sale as the Collateral Agent deems necessary or
advisable in order to comply with said Act or any other law. The notice (if any)
of such sale shall (1) in case of a public sale, state the time and place fixed
for such sale, (2) in case of sale at a broker's board or on a securities
exchange, state the board or exchange at which such sale is to be made and the
day on which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix in the notice of such sale.
At any such sale, the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such
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sale pursuant to any such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Collateral
Agent until the selling price is paid by the purchaser thereof, but the
Collateral Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice.
6.06 Application of Proceeds; Deficiency.
a. The Collateral Agent shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of
the Collateral Agent hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole
or in part of the Secured Obligations, and only after such application
and after the payment by the Collateral Agent of any other amount
required by any provision of law, need the Collateral Agent account for
the surplus, if any, to the Debtor.
b. The Debtor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Secured Obligations and the reasonable fees and
disbursements of any attorneys employed by the Collateral Agent to
collect such deficiency.
SECTION VII. COLLATERAL AGENCY PROVISIONS
7.01 Collateral Agent
a. MidMark Investments, Inc. shall act as Collateral Agent as
contemplated herein and in the Security Documents.
b. The Majority Holders shall have the right to direct the
Collateral Agent, from time to time, to consent to any amendment,
modification or supplement to or waiver of any provision of any
Security Document and to release any Collateral from any lien or
security interest held by the Collateral Agent; provided, however, that
(i) no such direction shall require the Collateral Agent to consent
to the modification of any provision or portion thereof which (in the
sole judgment of the Collateral Agent) is intended to benefit the
Collateral Agent, (ii) the Collateral Agent shall have the right to
decline to follow any such direction if the Collateral Agent shall
determine in good faith that the directed action is not permitted by
the terms of any Security Document or may not lawfully be taken, and
(iii) no such direction shall waive or modify any provision of any
Security Document the waiver or modification of which requires the
consent of all Noteholders. The Collateral Agent may rely on any such
direction given to it by the Majority Holders and shall be fully
protected in relying thereon, and shall under no
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circumstances be liable to any Noteholder or any other Person for
taking or refraining from taking action in accordance with any
direction or otherwise in accordance with any of the Security
Documents.
7.02 Pro Rata Distribution of Proceeds
Any proceeds from the Collateral shall be applied first to the fees and
expenses of the Collateral Agent and thereafter distributed pro rata to the
Noteholders in accordance with the amounts of the Note then outstanding.
7.03 Duties of Collateral Agent
a. The Collateral Agent shall have and may exercise such
powers under the Security Documents as are specifically delegated to
the Collateral Agent by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto. The Collateral Agent
shall not have any implied duties or any obligations to take any action
under the Security Documents.
b. The Collateral Agent shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining
from acting) upon the written instructions, and the furnishing of a
deposit in accordance with Section 7.07 hereof, of the Majority Holders
and such instructions shall be binding upon all the Holders; provided
that the Collateral Agent shall not be required to take any action
which the Collateral Agent in good faith believes (i) could reasonably
be expected to expose it to personal liability, or (ii) is contrary to
applicable law.
c. Absent written instructions from Majority Holders to the
contrary at a time when an Event of Default shall have occurred and be
continuing, the Collateral Agent may take, but shall have no obligation
to take, any and all actions under the Security Documents or otherwise
as it shall deem to be in the best interests of the Holders.
d. The relationship between the Collateral Agent and the
Noteholders is and shall be only to the extent explicitly provided for
herein that of agent and principal and nothing herein contained shall
be construed to constitute the Collateral Agent a trustee for any
Noteholder or to impose on the Collateral Agent duties and obligations
other than those expressly provided for herein. Without limiting the
generality of the foregoing, neither the Collateral Agent nor any of
its directors, officers, employees, partners or agents shall
(i) be responsible to the Noteholders for any
recitals, representations or warranties
contained in, or for the execution, validity,
genuineness, perfection, effectiveness or
enforceability of, the Security Documents (it
being expressly understood that any
determination of the foregoing is the
responsibility of each Noteholder),
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(ii) be responsible to the Noteholders for the
validity, genuineness, perfection,
effectiveness, enforceability, existence, value
or enforcement of any security interest in the
Collateral (it being expressly understood that
any determination of the foregoing is the
responsibility of each Noteholder),
(iii) be under any duty to inquire into or pass upon
any of the foregoing matters, or to make any
inquiry concerning the performance by any Person
of its or their obligations under any Security
Document (it being expressly understood that any
determination of the foregoing is the
responsibility of each Noteholder),
(iv) be deemed to have knowledge of the occurrence of
a Default or an Event of Default, unless it
shall have received written notice thereof from
either a Noteholder or the Debtor,
(v) be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any
part of the Collateral wherever the same may be
located regardless of the cause thereof unless
the same shall happen solely through the gross
negligence or willful misconduct of the
Collateral Agent as shall have been determined
in a final nonappealable judgment of a court of
competent jurisdiction,
(vi) have any liability for any error or omission or
action or failure to act of any kind made in the
settlement, collection or payment in connection
with any of the Security Documents or any of the
Collateral or any instrument received in payment
therefor or for any damage resulting therefrom
other than as a sole result of its own gross
negligence or willful misconduct as shall have
been determined in a final nonappealable
judgment of a court of competent jurisdiction,
and
(vii) in any event, be liable as such for any action
taken or omitted by it, absent, in each case
described in this Section, its gross negligence
or willful misconduct as shall have been
determined in a final nonappealable judgment of
a court of competent jurisdiction.
7.04 Agents, Officers and Employees of Collateral Agent.
The Collateral Agent may execute any of its duties under the Security
Documents by or through its agents, officers or employees. Neither the
Collateral Agent nor any of its agents, officers or employees shall be liable
for any action taken or omitted to be taken by it or them in good faith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss unless any of the foregoing shall happen through its or
their gross negligence or willful misconduct as shall have been determined in a
final nonappealable judgment of a court of competent jurisdiction.
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7.05 Reliance on Certain Documents.
The Collateral Agent shall be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons, and with respect to all legal
matters shall be entitled to rely on the advice of legal advisors selected by it
concerning all matters relating to the Security Documents and its duties
hereunder and thereunder and otherwise shall rely on such experts as it deems
necessary or desirable, and shall not be liable to any Noteholder or any other
Person for the consequences of such reliance.
7.06 Collateral Agent May Have Separate Relationship with Obligation
Parties.
The Collateral Agent (or any Affiliate of the Collateral Agent) may,
notwithstanding the fact that it is the Collateral Agent, generally engage in
any kind of business with any such party in the same manner and to the same
effect as though it were not the Collateral Agent; and such business shall not
constitute a breach of any obligation of the Collateral Agent to the other
Noteholders.
7.07 Indemnification of Collateral Agent.
Each of the Noteholders, ratably on the basis of the respective
principal amounts of the Notes outstanding at the time of the occurrence giving
rise to the below liabilities, losses, etc., agree to indemnify the Collateral
Agent for any and all liabilities, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Collateral Agent in its capacity as the Collateral Agent, in any way relating to
or arising out of the Security Documents or the transactions contemplated hereby
or thereby or the enforcement of any of the terms hereof or thereof or of any
such other documents, provided that neither no Noteholder shall be liable for
any of the foregoing to the extent they arise from gross negligence or willful
misconduct on the part of the Collateral Agent as shall have been determined in
a final nonappealable judgment of a court of competent jurisdiction. This
Paragraph 7.07 shall survive the termination of this Agreement. Prior to taking
any action hereunder as Collateral Agent, the Collateral Agent may require each
Noteholder to deposit with it sufficient sums as it determines in good faith is
necessary to protect the Collateral Agent for cost and expenses associated with
taking of action, and the Collateral Agent shall have no liability hereunder for
failure to take such action unless the Noteholders promptly deposit such sums.
SECTION VIII. MISCELLANEOUS
8.01 Amendments and Waivers.
The Debtor and the Collateral Agent (with the approval of the Majority
Holders) may, from time to time, enter into written waivers, amendments,
supplements or modifications hereto for the purpose of adding any provision to
this agreement or enter into written instruments waiving any of the requirements
of this agreement or any Event of Default and its consequences. In the case of
any waiver, the Debtor shall be restored to its former positions and rights
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hereunder and any Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Event of
Default, or impair any right consequent thereon.
8.02 Notices.
Unless this agreement specifically provides otherwise, all notices and
communications under this agreement shall be in writing and shall be given by
either (a) hand-delivery, (b) first class mail (postage prepaid), or (c)
reliable overnight commercial courier (charges prepaid), to the addresses listed
in the preamble to this agreement. Notice shall be deemed to have been given and
received: (x) if by hand delivery, upon delivery; (y) if by mail, three (3)
calendar days after the date first deposited in the United States mail; and (z)
if by overnight courier, on the date scheduled for delivery. A party may change
its address by giving written notice to the other party as specified herein.
8.03 No Waiver; Cumulative Remedies.
No failure to exercise or delay in exercising, on the part of the
Collateral Agent, any right, remedy, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided to the Collateral Agent
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided to the Collateral Agent by law. In accordance with this section, the
Collateral Agent may exercise its rights, remedies, powers or privileges
hereunder in any order it deems appropriate.
8.04 Indemnification.
The Debtor agrees to pay, and to hold the Collateral Agent harmless
from, any and all liabilities, costs and expenses (including, without
limitation, reasonable legal fees and expenses) (a) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (b) with respect to, or resulting from, any delay in complying with
any requirement of law applicable to any of the Collateral or (c) in connection
with any of the transactions contemplated by this agreement, except to the
extent arising from the gross negligence or willful misconduct of the Collateral
Agent. In any suit, proceeding or action brought by the Collateral Agent under
any Account for any sum owing thereunder, or to enforce any provisions of any
Account, the Debtor will save, indemnify and keep the Collateral Agent harmless
from and against all expense, loss or damage suffered by reason of any defense,
set-off, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor or obligor thereunder, arising out of a breach by the Debtor of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor or such account debtor or obligor or
its successors.
8.05 Governing Law.
This agreement shall be governed by, and construed and interpreted in
accordance with
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the law of the State of New Jersey.
8.06 Section Headings.
The section headings herein are intended for convenience only and shall
be ignored in construing this agreement.
8.07 Entire Agreement.
All understandings and agreements heretofore made or exchanged between
the Debtor and the Collateral Agent with respect to the subject matter hereof
are merged into this agreement, which fully, completely, and integrally
expresses the understanding of the Debtor and the Collateral Agent concerning
the subject matter hereof.
8.08 Severability.
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (b) the invalidity or enforceability of
any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
8.09 WAIVER OF TRIAL BY JURY.
THE DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATED TO THIS AGREEMENT.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VERTEX INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxx
-------------------------------------
Name:
Title:
MIDMARK INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Managing Director
Title: Xxxxx X. Xxxxxxxxx
MIDMARK CAPITAL II, L.P.,
By: MidMark Associates II, L.L.C.,
its General Partner
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
MIDMARK CAPITAL, L.P.,
By MidMark Associates, Inc.,
its General Partner
By /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
O'BRIEN LIMITED PARTNERSHIP
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By: Xxxxx Xxxxxx, General Partner
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxxx
PAINEWEBBER CUSTODIAN
F/B/O XXXXX XXXX XXXXXXXXX
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
XXXXXXX XXXXXX/XXXXXX XXXXXX,
AS JOINT TENANTS
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Signature Page to the Security and Collateral Agency Agreement
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