SUBSCRIPTION AGREEMENT
dated as of April 3, 2001
by and among
VERTEX INTERACTIVE, INC.
and
FEDERAL PARTNERS, L.P.
TABLE OF CONTENTS
Page
No.
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ARTICLE I
PURCHASE AND SALE OF SHARES.......................................................................................1
1.01 Purchase and Sale...............................................................................1
1.02 Purchase Price..................................................................................1
1.03 Funding.........................................................................................1
1.04 Restrictive Legend..............................................................................1
1.05 Opinion of Counsel..............................................................................2
1.06 Use of Proceeds.................................................................................2
1.07 Compliance Certificate..........................................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................................................2
2.01 Organization and Qualification..................................................................2
2.02 Authority.......................................................................................3
2.03 Capital Stock...................................................................................3
2.04 No Conflicts; Approvals and Consents............................................................4
2.05 Governmental Approvals and Filings..............................................................4
2.06 SEC Reports and Financial Statements............................................................5
2.07 Absence of Certain Changes or Events............................................................5
2.08 Legal Proceedings...............................................................................5
2.09 Compliance with Laws and Orders.................................................................6
2.10 Compliance with Agreements; Certain Agreements..................................................6
2.11 Affiliate Transactions..........................................................................7
2.12 No Disclosure of Material Non-public Information................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................................................7
3.01 Organization....................................................................................7
3.02 Authority.......................................................................................7
3.03 No Conflicts; Approvals and Consents............................................................7
3.04 Legal Proceedings...............................................................................8
3.05 Purchase of Shares..............................................................................8
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Page
No.
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ARTICLE IV
DEFINITIONS ......................................................................................................9
4.01 Definitions.....................................................................................9
ARTICLE V
MISCELLANEOUS ...................................................................................................12
5.01 Survival of Representations, Warranties, Covenants and Agreements..............................12
5.02 Notices........................................................................................12
5.03 Entire Agreement...............................................................................13
5.04 Expenses.......................................................................................13
5.05 Public Announcements...........................................................................13
5.06 Confidentiality................................................................................13
5.07 Waiver.........................................................................................14
5.08 Amendment......................................................................................14
5.09 No Third Party Beneficiary.....................................................................14
5.10 No Assignment; Binding Effect..................................................................14
5.11 Headings.......................................................................................14
5.12 Invalid Provisions.............................................................................14
5.13 Governing Law..................................................................................15
5.14 Arbitration....................................................................................15
5.15 Counterparts...................................................................................15
Exhibit A Legal Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
Exhibit B Legal Opinion of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
ii
This SUBSCRIPTION AGREEMENT dated as of April 3, 2001 is made
and entered into by and between VERTEX INTERACTIVE, INC., a New Jersey
corporation (the "Company"), and Federal Partners, L.P. ( the "Purchaser").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 4.01.
WHEREAS, the Company desires to sell, and Purchaser desires to
purchase, 1,043,478 shares (the "Shares") of common stock, par value $.005 per
share of the Company (the "Common Stock") on the terms and subject to the
conditions set forth in this Agreement;
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
PURCHASE AND SALE OF SHARES
1.01 Purchase and Sale. The Company hereby agrees to sell to
Purchaser and Purchaser hereby agrees to purchase from the Company, the Shares
on the Funding Date, on the terms and subject to the conditions set forth in
this Agreement.
1.02 Purchase Price. The purchase price for the Shares is
$1,499,999.63 (the "Purchase Price"), payable in immediately available United
States funds on the Funding Date in the manner provided in Section 1.03.
1.03 Funding. Purchaser will pay the Purchase Price by wire
transfer of immediately available funds to such account as the Company may
reasonably direct by written notice delivered to Purchaser by the Company on or
before April 11, 2001, such date being referred to herein as the "Funding Date".
Simultaneously, the Company will deliver to Purchaser a certificate or
certificates representing the respective number of Shares purchased by the
Purchaser (the "Share Certificates").
1.04 Restrictive Legend. Each certificate evidencing the
Shares on the Funding Date will bear a legend in the following terms:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE OR FOREIGN SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL, STATE AND FOREIGN SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM."
All of the restrictions imposed by this Section 1.04 upon the transferability of
the Shares shall cease and terminate as to any particular Share when such Share
shall have been effectively registered under the Securities Act and applicable
state securities laws and sold by the holder
thereof in accordance with such registration or sold under and pursuant to Rule
144 or is eligible to be sold under and pursuant to paragraph (k) of Rule 144.
Whenever the restrictions imposed by this Section 1.04 shall terminate as to any
Share as hereinabove provided, the holder thereof shall be entitled to receive
from the Company, without expense, a new certificate evidencing such Share not
bearing the restrictive legend otherwise required to be borne by a certificate
evidencing such Share; provided that the Company may require an opinion of
counsel reasonably satisfactory to it to the effect that no legend is required
under the Securities Act and applicable state securities laws or foreign
securities laws.
1.05 Opinion of Counsel. The Purchaser shall receive an
opinion, in the form attached hereto as Exhibit A, from the Law Offices of
▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C., counsel to the Company, dated as of the Funding Date, and
an opinion in the form attached hereto as Exhibit B from Milbank, Tweed, ▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP dated as of the Funding Date.
1.06 Use of Proceeds. The Company shall use the net proceeds
received from the sale of the Shares for working capital purposes.
1.07 Compliance Certificate. The Purchaser shall receive a
certificate of the Company dated as of the Funding Date stating that
representations and warranties of the Company in this Agreement are true and
correct in all material respects on the Funding Date as if made on such date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser on the
date hereof and on the Funding Date as follows:
2.01 Organization and Qualification. Each of the Company and
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the Laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets and Properties, except
for such failures to be in good standing or to have such power and authority
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole. Each of the Company and its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Except for interests in the Subsidiaries of the Company as disclosed on Schedule
21 of the Company's Annual Report on Form 10-K filed with the SEC on December
19, 2000 or Section 2.01 of the Company Disclosure Schedule, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or
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exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
2.02 Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and the Registration Rights
Agreement and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and the Registration
Rights Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of the Company. No other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution, delivery
and performance by the Company of this Agreement and the Registration Rights
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Registration Rights Agreement have
been duly and validly executed and delivered by the Company and constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at Law). The Shares, when issued in accordance with
this Agreement, and any shares of Common Stock issued pursuant to the
Registration Rights Agreement when issued, will be duly authorized, validly
issued, fully paid and non-assessable. The Company has reserved for issuance out
of its authorized but unissued shares the number of shares of Common Stock
issuable pursuant to the Registration Rights Agreement.
2.03 Capital Stock. (a) The authorized capital stock of the
Company consists solely of 75,000,000 shares of Common Stock and 2,000,000
shares of Preferred Stock, par value $.005 per share ("Preferred Stock"). As of
March 29, 2001, 31,412,095 shares of Common Stock were issued and outstanding,
of which 10,000 shares were held in the treasury of the Company and 7,780,658
shares were reserved for issuance of outstanding stock options and warrants. As
of the date hereof, 1,356,852 shares of Preferred Stock are issued and
outstanding. . Except for the exercise of options in the ordinary course, since
March 29, 2001, there has been no change in the number of issued and outstanding
shares of Common Stock or shares of Common Stock held in treasury. All of the
issued and outstanding shares of Common Stock and all shares of Common Stock
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are issuable,
duly authorized, validly issued, fully paid and nonassessable. Except pursuant
to this Agreement or in the Company SEC Reports filed prior to the date of this
Agreement, there are no outstanding subscriptions, options, warrants, rights
(including "phantom" stock rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating the Company or any of its Subsidiaries to issue or sell
any shares of capital stock of the Company or of any Subsidiary or to grant,
extend or enter into any Option with respect thereto.
(b) Except as disclosed in Section 2.03(b) of the Company
Disclosure Schedule, all of the outstanding shares of capital stock of each
Subsidiary of the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of
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record, by the Company or a Subsidiary wholly owned, directly or indirectly, by
the Company, free and clear of any Liens. Except as disclosed in Section 2.03(b)
of the Company Disclosure Schedule, there are no (i) outstanding Options
obligating the Company or any of its Subsidiaries to issue or sell any shares of
capital stock of any Subsidiary of the Company or to grant, extend or enter into
any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
the Company or a Subsidiary wholly owned, directly or indirectly, by the Company
with respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of the Company.
(c) Except as disclosed in Section 2.03(c) of the Company
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any shares of Common Stock or any capital stock of any Subsidiary of the
Company or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Subsidiary of the Company or any
other person.
2.04 No Conflicts; Approvals and Consents. The execution and
delivery by the Company of this Agreement and the Registration Rights Agreement,
and the performance by the Company of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby will
not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws (or other comparable corporate charter document) of the Company;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.04(b)of the
Company Disclosure Schedule, conflict with or result in a violation or breach of
any terms or provision of any Law or Order applicable to the Company or its
Assets and Properties; or
(c) except as disclosed in Section 2.04(c) of the Company
Disclosure Schedule, (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require the Company to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon the
Company or any of its Assets or Properties under, any contract or License to
which the Company is a party or by which any of its Assets and Properties is
bound.
2.05 Governmental Approvals and Filings. Except as disclosed
in Section 2.05 of the Company Disclosure Schedule, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority or
other public or private third party is necessary or required under any of the
terms, conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective Assets or Properties is bound for the execution and
delivery of this Agreement or the Registration Rights Agreement by the Company,
the performance by the Company of its obligations hereunder or thereunder or the
consummation of the transactions contemplated
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hereby or thereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually or
in the aggregate, could not be reasonably expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole or on the ability of
the Company to consummate the transactions contemplated hereby.
2.06 SEC Reports and Financial Statements. The Company has
delivered to the Purchaser, prior to the execution of this Agreement a true and
complete copy of each form, report, schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), and the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") since December 31, 1998 (as such
documents have since the time of their filing been amended or supplemented, the
"Company SEC Reports"), which are all the documents (other than preliminary
material) that the Company and its Subsidiaries were required to file with the
SEC since such date. As of their respective dates, the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Company SEC Reports (the "Company Financial
Statements") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP, except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q of the
SEC, and, as of the respective dates thereof, fairly presented (subject, in the
case of the unaudited interim financial statements, to year-end audit
adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Except for the filing of a report on Form 8-K with respect
to the Company's December 29, 2000 acquisition of Applied Tactical Systems,
Inc., the Company has timely filed all required reports under the Exchange Act
during the past 12 months.
2.07 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement (a) since
December 31, 1999 there has not been any change, event or development having, or
that could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole,
and (b) between December 31, 1999 and the date hereof the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice.
2.08 Legal Proceedings. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement or in Section 2.08 of the
Company Disclosure Schedule, (i) there are no Actions or Proceedings pending or,
to the Knowledge of the Company, threatened against, relating to or affecting,
nor to the Knowledge of the Company are there any
5
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, the Company or any of its
Subsidiaries or any of their respective Assets and Properties which,
individually or in the aggregate, could be reasonably expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement or the Registration Rights Agreement, and (ii) neither the
Company nor any of its Subsidiaries is subject to any continuing Order of any
Governmental or Regulatory Authority which, individually or in the aggregate,
could be reasonably expected to have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement or the Registration
Rights Agreement.
2.09 Compliance with Laws and Orders. The Company and its
Subsidiaries hold all Licenses for the lawful conduct of their respective
businesses, except for failures to hold such Licenses which, individually or in
the aggregate, are not having and could not be reasonably expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Company and its Subsidiaries are in compliance with the terms of such
Licenses, except failures so to comply which, individually or in the aggregate,
are not having and could not be reasonably expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement, the
Company and its Subsidiaries are not in violation of or default under any Law or
Order of any Governmental or Regulatory Authority, except for such violations or
defaults which, individually or in the aggregate, are not having and could not
be reasonably expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
2.10 Compliance with Agreements; Certain Agreements. (a)
Except as disclosed in the Company SEC Reports filed prior to the date of this
Agreement or Section 2.10(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with notice or lapse of time or both, could be reasonably expected to
result in a default under, (i) the certificate of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries or
(ii) any contract to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound, except in the case of clause (ii) for breaches,
violations and defaults which, individually or in the aggregate, are not having
and could not be reasonably expected to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 2.10(b) of the Company
Disclosure Schedule or in the Company SEC Reports filed prior to the date of
this Agreement or as provided for in this Agreement, as of the date hereof,
neither the Company nor any of its Subsidiaries is a party to any oral or
written (i) consulting agreement not terminable on thirty (30) days' or less
notice, (ii) union or collective bargaining agreement, (iii) agreement with any
executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving
6
the Company or any of its Subsidiaries of the nature contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other key
employee of the Company or any of its Subsidiaries providing any term of
employment or compensation guarantee, or (v) agreement or plan, including any
stock option, stock appreciation right, restricted stock or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
2.11 Affiliate Transactions. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or in Section 2.11
of the Company Disclosure Schedule, no officer, director or shareholder of the
Company has any interest (other than as a shareholder of the Company) in any
property, real or personal, tangible or intangible, including without limitation
intellectual property, used in or pertaining to the business of the Company.
2.12 No Disclosure of Material Non-public Information. None of
the representations or warranties contained herein include any material
non-public information regarding the Company, nor has any such information been
provided to Purchaser or its representatives in any other written or oral
communication by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as
follows:
3.01 Organization. Purchaser is duly organized, validly
existing and in good standing under the Laws of its jurisdiction of its
organization. Purchaser has the requisite power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
3.02 Authority. The execution, delivery and performance by
Purchaser of this Agreement, and the consummation by Purchaser of the
transactions contemplated hereby, have been duly and validly approved by
Purchaser, no other action on the part of Purchaser or its equityholders being
necessary for Purchaser to execute, deliver and perform its obligations
hereunder. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).
3.03 No Conflicts; Approvals and Consents. (a) The execution
and delivery of this Agreement by Purchaser does not, and the performance by
Purchaser of its obligations hereunder and the consummation of the transactions
contemplated hereby will not:
7
(i) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation,
by-laws, limited liability agreement or trust agreement (or other comparable
corporate charter document) of Purchaser;
(ii) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Purchaser or any of its
Assets and Properties; or
(iii) (x) conflict with or result in a violation or breach of,
(y) constitute (with or without notice or lapse of time or both) a default
under, (z) require Purchaser to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, or (iv) result in the creation or imposition of any Lien upon Purchaser or
any of its Assets or Properties under, any contract or License to which
Purchaser is a party or by which any of its Assets and Properties is bound.
(b) No consent, approval or action of, filing with (except for
any filing required pursuant to Section 13(d) of the Exchange Act) or notice to
any Governmental or Regulatory Authority on the part of Purchaser is required in
connection with the execution, delivery and performance of Purchaser's
obligations hereunder or the consummation of the transactions contemplated
hereby.
3.04 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which could reasonably
be expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
3.05 Purchase of Shares. (a) Purchaser acknowledges that this
Agreement is made with Purchaser in reliance upon Purchaser's representation to
the Company, which by Purchaser's execution of this Agreement Purchaser hereby
confirms, that (i) the Shares are being acquired by Purchaser and will be
acquired for investment for Purchaser's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same and (ii) that Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act. By executing
this Agreement, Purchaser further represents that it does not presently have any
contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participations to such Person or to any third Person, with
respect to any of the Shares. Purchaser represents that either (i) Purchaser has
not been formed for the specific purpose of acquiring the Shares or (ii) if
Purchaser has been formed for the specific purpose of acquiring the Shares, each
Person that has an interest in Purchaser is an "accredited investor" within the
meaning of Rule 501 under the Securities Act.
(b) Purchaser has had an opportunity to discuss the Company's
business, management, financial affairs and the terms and conditions of the sale
of the Shares pursuant to this Agreement with the Company's management.
Purchaser understands that such discussions, as well as the written information
issued by the Company, were intended to describe the aspects of the Company's
business which it believes to be material.
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(c) Purchaser understands that none of the Shares have been,
and none of them will be, registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of Purchaser's representations and warranties as expressed in
this Article III. Purchaser understands that the Shares are "restricted
securities" under applicable United States federal and state securities laws and
that, pursuant to these laws, Purchaser must hold the Shares indefinitely unless
they are registered with the SEC, or an exemption from such registration and
qualification requirements is available. Purchaser acknowledges that the Company
has no obligation to register or qualify the Shares for resale except as
expressly provided under the Registration Rights Agreement. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
on requirements relating to the Company which are outside of Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser has such knowledge and experience in financial
and business matters that Purchaser is capable of evaluating the merits and
risks of the transactions contemplated hereby, including the purchase of the
Shares.
(e) Purchaser is able to bear the economic risk of acquiring
the Shares and to hold the Shares acquired by Purchaser pursuant to this
Agreement for a substantial period of time.
ARTICLE IV
DEFINITIONS
4.01 Definitions. (a) 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 Subscription Agreement and the Company
Disclosure Schedules, as the same shall be amended from time to time.
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"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.
"Common Stock" has the meaning ascribed to it in the forepart
of this Agreement.
"Company" has the meaning ascribed to it in the forepart of
this Agreement.
"Company Financial Statements" has the meaning ascribed to it
in Section 2.06.
"Company SEC Reports" has the meaning ascribed to it in
Section 2.06.
"Exchange Act" has the meaning ascribed to it in Section 2.06.
"Funding Date" has the meaning ascribed to it in Section 1.03.
"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.
"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.
"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).
"Option" has the meaning ascribed to it in Section 2.03.
10
"Order" 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
2.03.
"Purchase Price" has the meaning ascribed to it in Section
1.02.
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, between the Company and the Purchaser.
"Rule 144" shall mean Rule 144 promulgated by the SEC under
the Securities Act (or any successor or similar rule then in force).
"SEC" has the meaning ascribed to it in Section 2.06.
"Securities Act" has the meaning ascribed to it in Section
2.06.
"Share Certificates" has the meaning ascribed to it in Section
1.03.
"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.
(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).
11
ARTICLE V
MISCELLANEOUS
5.01 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 Funding Date for a period of two years.
5.02 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:
If to Purchaser:
Federal Partners, L.P.
▇/▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Pillsbury Winthrop LLP
▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company, to:
Vertex Interactive, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
with a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Esq.
12
and to:
Law Offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, 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.
5.03 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.
5.04 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. Notwithstanding the foregoing, the Company will pay the
fees and reasonable out of pocket expenses of Purchaser's counsel up to $10,000
upon receipt by the Company of appropriate documentation.
5.05 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. 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.
5.06 Confidentiality. Each party hereto will hold, and will
use its best efforts to cause its Affiliates, and in the case of each Purchaser,
any Person who has provided, or who is considering providing, financing to such
Purchaser to finance all or any portion of the Purchase Price, 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
13
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.
5.07 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.
5.08 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
5.09 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.
5.10 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 Purchaser may assign any or all of its 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 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.
5.11 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
5.12 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
14
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.
5.13 Governing Law. This Agreement 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.
5.14 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 New York, New York 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.
5.15 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.
15
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/ ▇▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇
----------------------------------------------
Name:
Title:
FEDERAL PARTNERS, L.P.
By Ninth Floor Corporation, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
COMPANY DISCLOSURE SCHEDULE
Section 2.01
On December 29, 2000, the Company purchased 100% of the outstanding capital
stock of Applied Tactical Systems, Inc.
Section 2.03(b)
None.
Section 2.03(c)
None.
Section 2.04(b)
None.
Section 2.04(c)
None.
Section 2.05
None.
Section 2.08
None.
Section 2.10(b)
Certain employees at ICS International AG Identcode-Systeme (Germany) are
included in a Working Counsel agreement.
Section 2.10(c)
Lease Agreement between the Company and a real estate partnership of which
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Operating Officer of the Company's North America
operations, is a partner.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of April 3, 2001
between Vertex Interactive, Inc., a New Jersey corporation (the "Company"), and
Federal Partners, L.P. (the "Purchaser"). Capitalized terms used herein but not
otherwise defined shall have the meaning ascribed to them in the Subscription
Agreement (defined below).
W I T N E S S E T H:
WHEREAS, the Company and Purchaser have entered into a
Subscription Agreement, dated as of the date hereof (the "Subscription
Agreement"), pursuant to which the Purchaser shall purchase 1,043,478 shares of
Common Stock. The Shares and any additional shares issued pursuant to the
Section 1(a) of this Agreement 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 Subscription
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. The Company shall use
its reasonable best efforts to prepare and file within 45 days after the date
hereof, 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 Purchaser 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").
If the Registration Statement has not been filed within 45
days after the date hereof, the Company shall promptly issue to the Purchaser
104,348 additional shares (the "Additional Shares") of Common Stock (as adjusted
for any stock splits, stock dividends, stock combinations or recapitalizations
or reclassifications having similar effect, or a merger, consolidation or sale
of all or substantially all of the assets of the Company in which all shares of
Common Stock are converted into the right to receive cash, property or other
securities, each occurring after the date hereof. Fractional shares shall be
rounded to the nearest whole share. The Company agrees to include the Additional
Shares in the Registration Statement. The issuance of Additional Shares pursuant
to this Section 1(a) shall not relieve the Company of its obligation to file the
Registration Statement.
(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
2
keep the Registration Statement effective under the Securities Act. The Company
will promptly notify the Purchaser 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 Purchaser 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 Purchaser 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 Purchaser 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 Purchaser shall
reasonably request.
(d) Blue Sky Compliance. The Company shall register or qualify
or cooperate with the Purchaser 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
Purchaser reasonably shall request and do any and all other acts and things
which may be reasonably necessary to enable the Purchaser 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.
(e) Notification. During the Effectiveness Period, the Company
shall notify the Purchaser promptly, and (if requested by Purchaser) 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
3
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 Purchaser, deliver promptly to Purchaser copies of all
correspondence between the SEC and the Company, its counsel or auditors.
(i) Stock Certificates. The Company will cooperate with the
Purchaser 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 "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.
4
3. Obligations of the Purchaser. Following the filing of the
Registration Statement and during any period that the Registration Statement is
effective, the Purchaser 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 Purchaser offers
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 Purchaser (as
defined in Rule 10b-6 under the Exchange Act) to) bid for or purchase for any
account in which any Purchaser has 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 Purchaser 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 Purchaser pursuant to
Section 1(e)(iv) above and until the Company provides to the Purchaser 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 Purchaser of the Registrable Stock, including, without limitation,
registration and filing fees (A) with respect to 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 Purchaser
shall be responsible for the payment of fees and disbursements of counsel to the
Purchaser in connection with the preparation of the Registration Statement and
the Prospectus and fees paid to brokers in connection with the sale of any of
the Registrable Stock.
5. Indemnification.
5
(a) Indemnity by the Company. The Company shall (i) indemnify
and hold harmless the Purchaser and each person who controls the Purchaser,
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
Purchaser 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 Purchaser. The Purchaser 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 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 the
Purchaser; 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
6
and in conformity with written information furnished to the Company by the
Purchaser 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, 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
7
hand (taking into consideration the fact that the provision of the registration
rights hereunder served as an inducement to the Purchaser 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 ▇▇▇▇ ▇▇▇) 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 York 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, and (iii)
may not be amended or supplemented except by an instrument or counterparts
thereof in writing signed by the Company and the Purchaser. 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.
8
(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:
if to the Company, to:
Vertex Interactive, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
and to:
Law Offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
if to Purchaser, to:
Federal Partners, L.P.
▇/▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Pillsbury Winthrop LLP
▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
9
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.
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/ ▇▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇
---------------------------------------------------
Name:
Title:
FEDERAL PARTNERS, L.P.
By Ninth Floor Corporation, its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
