NOTE PURCHASE AGREEMENT
dated as of July 31, 2001
by and among
VERTEX INTERACTIVE, INC.
and
PARTAS AG
TABLE OF CONTENTS
Page
No.
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ARTICLE I NOTE PURCHASE .......................................................1
1.01 Purchase ...........................................................1
1.02 Closing ............................................................1
1.03 Restrictive Legend .................................................1
1.04 Opinion of Counsel .................................................2
1.05 Use of Proceeds.....................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................2
2.01 Organization and Qualification .....................................2
2.02 Authority ..........................................................2
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
2.13 Brokers ............................................................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 Upon Conversion of the Note .....................8
3.06 Brokers ............................................................9
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
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No.
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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 Form of Note
Exhibit B Legal Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
ii
This NOTE PURCHASE AGREEMENT, dated as of July 31, 2001, is made and
entered into by and between VERTEX INTERACTIVE, INC., a New Jersey corporation
(the "Company"), and PARTAS AG ( the "Purchaser"). Capitalized terms not
otherwise defined herein have the meanings set forth in Section 4.01.
WHEREAS, the Purchaser desires to lend $359,375.00 to the Company and
the Company desires to issue to the Purchaser a promissory note substantially in
the form of Note attached hereto as Exhibit A (the "Note") and convertible into
250,000 shares (the "Shares") of common stock, par value $.005 per share of the
Company (the "Common Stock") 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
NOTE PURCHASE
1.01 Purchase. The Purchaser hereby agrees to lend $359,375.00 to the
Company and the Company hereby agrees to issue to Purchaser the Note on the
Closing Date, on the terms and subject to the conditions set forth in this
Agreement.
1.02 Closing. The Closing is taking place concurrently with the
execution and delivery of this Agreement at the offices of Milbank, Tweed,
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, One Chase Manhattan Plaza, New York, New York, at 10:00
A.M. local time, on July __, 2001 (the "Closing Date"). At the Closing,
Purchaser will wire transfer $359,375.00 of immediately available funds to such
account as the Company may reasonably direct by written notice delivered to
Purchaser by the Company before the Closing Date. Simultaneously, the Company
will issue to Purchaser the Note.
1.03 Restrictive Legend. Each certificate evidencing the Shares issued
in accordance with the terms of the Note 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 1.03 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 1.03 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.
1.04 Opinion of Counsel. The Purchaser shall receive an opinion, in the
form attached hereto as Exhibit B, from the Law Offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.,
counsel to the Company, dated as of the Closing Date.
1.05 Use of Proceeds. The Company shall use the funds received from the
issuance of the Note for working capital purposes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser on the date
hereof 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 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, the Registration Rights
Agreement and the Note and to
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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, the Registration Rights Agreement
and the Note 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, the Registration Rights
Agreement and the Note and the consummation by the Company of the transactions
contemplated hereby and thereby. This Agreement, the Registration Rights
Agreement and the Note 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 the Note, 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 Note.
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 June 11,
2001, 34,056,375 shares of Common Stock were issued and outstanding, of which
10,000 shares were held in the treasury of the Company and 8,822,146 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 June 11, 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 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,
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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, the Registration Rights Agreement and the
Note, 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 or the Note by the Company, the
performance by the Company of its obligations hereunder or thereunder or the
consummation of the transactions contemplated 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.
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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 Chances or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement (a) since
September 30, 2000 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 September 30, 2000 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 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, the Registration Rights Agreement
or the Note, and (ii) neither the Company nor any of its
5
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, the Registration Rights Agreement
or the Note.
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 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
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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.
2.13 Brokers. All negotiations relative to this Agreement and the Note
and the transactions contemplated hereby and thereby have been carried out by
the Company directly with the Purchaser without the intervention of any Person
on behalf of the Company in such manner as to give rise to any valid claim by
any Person against the Purchaser for a finder's fee, brokerage commission or
similar payment.
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 and
the Note, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby.
3.02 Authority: The execution, delivery and performance by Purchaser of
this Agreement and the Note, and the consummation by Purchaser of the
transactions contemplated hereby and thereby, 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 or thereunder. This Agreement and the Note have been duly
and validly executed and delivered by Purchaser and constitute legal, valid and
binding obligations of Purchaser enforceable against Purchaser 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).
3.03 No Conflicts; Approvals and Consents. (a) The execution and
delivery of this Agreement and the Note by Purchaser do not, and the performance
by Purchaser of its
7
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not:
(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 or the Note.
3.05 Purchase of Shares Upon Conversion of the Note. (a) Purchaser
acknowledges that this Agreement is made with Purchaser and the Note is being
issued to 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 will be 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,
the 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 this Agreement and
the Note with
8
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.
(c) Purchaser understands that none of the Shares, when issued, will
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 will be "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 acquisition 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 and the
Note for a substantial period of time.
3.06 Brokers. All negotiations relative to this Agreement and the Note
and the transactions contemplated hereby and thereby have been carried out by
the Purchaser directly with the Company without the intervention of any Person
on behalf of the Purchaser in such manner as to give rise to any valid claim by
any Person against the Company for a finder's fee, brokerage commission or
similar payment.
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.
9
"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.
"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.
"Closing Date" has the meaning ascribed to it in Section 1.02.
"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.
10
"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).
"Note" has the meaning ascribed to it in the forepart of this
Agreement..
"Option" has the meaning ascribed to it in Section 2.03.
"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.
"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.
"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
11
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 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 Closing 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:
Partas AG
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel. No.: (06084) 57 59
with a copy to:
[ ]
If to the Company, to:
Vertex Interactive, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: 973-808-1776
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.
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 the Purchaser, any Person
who has provided, or who is considering providing, financing to the Purchaser to
finance all or any portion of the $359,375.00 payable 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
13
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.
5.07 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 ▇▇▇▇ 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: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
Title: CEO
PARTAS AG
By: ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇
Title: Prasident
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 31, 2001, between Vertex
Interactive, Inc., a New Jersey corporation (the "Company"), and PARTAS AG (the
"Purchaser"). 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 Purchaser have entered into a Note Purchase
Agreement; dated as of the date hereof (the "Note Purchase Agreement"), pursuant
to which the Purchaser shall purchase a note dated July , 2001 issued to the
Purchaser by the Company in the amount of $359,375.00 (the "Note") convertible
into 250,000 shares of Common Stock, upon Shareholder Approval (as defined in
the Note). 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 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 180 days 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 180 days hereof, the
Company shall promptly issue to the Purchaser, upon obtaining Shareholder
Approval for such issuance, 34,782 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
2
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 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
3
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
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 if may lave 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 hand (taking
into consideration the fact that the provision of the registration rights
hereunder
7
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:
Partas AG
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel. No.: (06084) 57 59
with a copy to:
[ -- ]
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).
9
(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: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇
Title: CEO
PARTAS AG
By: ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇. ▇▇▇▇▇▇▇▇
Title: Prasident