EXHIBIT 10.70
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
THIS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT made as of the 27th day of
February, 2002 by and among LAURUS MASTER FUND, LTD. ("Laurus"), VERTEX
INTERACTIVE, INC., a New Jersey corporation ("Vertex"), DATA CONTROL SYSTEMS,
INC., a New York corporation ("DCS"), RENAISSANCE SOFTWARE, INC., a Delaware
corporation ("RSI") and POSITIVE DEVELOPMENTS, INC., a California corporation
("PDI"; and together with Vertex, RSI and DCS, each a "Company" and
collectively, the "Companies").
W I T N E S S E T H:
WHEREAS, Vertex is indebted to Laurus under the terms of a Convertible Note
dated November 20, 2001 (as amended, modified and supplemented from time to
time, the "Existing Note") and has entered into a Security Agreement with Laurus
dated November 20, 2001 pursuant to which Vertex granted to Laurus a security
interest in certain of Vertex's accounts receivable as collateral security for
all of Vertex's, DCS' and RSI's obligations to Laurus (as amended, modified and
supplemented from time to time, the "Vertex Security Agreement" and together
with the Existing Note, collectively, the "Existing Vertex Agreements");
WHEREAS, DCS entered into a Security Agreement with Laurus dated November
20, 2001 pursuant to which DCS granted to Laurus a security interest in certain
of DCS' accounts receivable as collateral security for all of Vertex's, DCS' and
RSI's obligations to Laurus (as amended, modified and supplemented from time to
time, the "DCS Security Agreement");
WHEREAS, RSI entered into a Security Agreement with Laurus dated November
20, 2001 pursuant to which RSI granted to Laurus a security interest in certain
of RSI's accounts receivable as collateral security for all of Vertex's, DCS'
and RSI's obligations to Laurus (as amended, modified and supplemented from time
to time, the "RSI Security Agreement" and together with the Existing Vertex
Agreements and DCS Security Agreement, collectively, the "Prior Agreements");
WHEREAS, certain events of default have occurred under the Prior Agreements
entitling Laurus to exercise its rights and remedies against the Companies,
including, without limitation, acceleration of the Companies' obligations to
Laurus;
WHEREAS, each Company has requested that Laurus (a) forbear at this time
from exercising its rights and remedies against the Companies based upon the
occurrence of certain events of default under the Prior Agreements, (b) extend
additional financial accommodations to the Companies, (c) convert each
applicable Company's obligations to Laurus under the Prior Agreements to
obligations owing by each Company to Lauras hereunder, (d) amend and restate the
terms of the Prior Agreements such that the Prior Agreements shall be
consolidated with and into this Agreement and (e) purchase from each of the
respective Companies, from time to time, all of the right, title and interest of
such Company in and to certain accounts receivable due to such Company from its
customers; and
WHEREAS, Laurus is willing to do so upon the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, to induce Laurus to enter into this Agreement and purchase
such accounts receivable, and for other good valuable consideration, the receipt
and sufficiency of
which is hereby acknowledged, it is agreed as follows:
1. Tender of Accounts Receivable; Invoices.
(a) Each Company will tender to Laurus all of the accounts receivable
from its customers with respect to goods sold and delivered to, or services
performed for, such customers by such Company (individually, an "Account
Receivable," and, collectively, "Accounts Receivable") by delivering to Laurus
or, at Laurus' direction, Laurus' designated servicing agent (such person or
entity designated by Laurus as its servicing agent, the "Designated Agent") all
of the invoices to be rendered to such customers. In each instance, invoices
will be delivered promptly after the creation thereof. Laurus or the Designated
Agent will forward all such invoices delivered to such Company's customers
(without regard to whether such invoices are offered for purchase by Laurus), in
accordance with Laurus' or the Designated Agent's standard procedures, together
with a notice by such Company to its customers, in the form prescribed by Laurus
(or the Designated Agent), of the assignment of payment of such invoices to
Laurus.
(b) Laurus and/or the Designated Agent will conduct such examination
and verification of the invoices delivered to it, and such credit investigation
of the account debtors, as it considers necessary or desirable, and will notify
Vertex, as agent for the Companies, as to which of the individual Accounts
Receivable tendered by such Company, if any, Laurus elects to purchase from such
Company. Laurus shall have the absolute right, in the exercise of its
commercially reasonable credit judgment exercised in good faith to reject any or
all of the Accounts Receivable tendered to it by any Company, irrespective of
whether or not Laurus has previously purchased Accounts Receivable from such
Company or has purchased Accounts Receivable of any particular account debtor
(individually, an "Account Debtor," and, collectively, "Account Debtors").
2. Purchase and Sale of Accounts Receivable.
(a) Those Accounts Receivable which Laurus elects to purchase from
each Company shall be listed in an Invoice Delivery Schedule, substantially in
the form of Exhibit A (such form, together with any schedules and attachments
thereto is hereinafter referred to as an "Invoice Schedule"), executed by the
applicable Company and accepted by Laurus from time to time throughout the term
of this Agreement. Upon acceptance by Laurus of an Invoice Schedule, the
applicable Company shall be deemed to have sold, assigned, transferred, conveyed
and delivered to Laurus, and Laurus shall be deemed to have purchased and
received from such Company, all right, title and interest of such Company in and
to the Accounts Receivable listed in such Invoice Schedule. Notwithstanding the
foregoing, if any Company or Laurus fails to include in any Invoice Schedule a
particular Account Receivable tendered by any Company to Laurus, but Lauras
nonetheless makes an Initial Payment (as hereinafter defined) to any Company (or
to Vertex, as agent for the Companies) for such Account Receivable, then Laurus
shall be presumed conclusively to have purchased, and the applicable Company
shall be presumed conclusively to have sold, such Account Receivable pursuant to
this Agreement, and such Account Receivable shall be governed by the terms and
conditions (including, without limitation, the applicable Company's
representations and warranties to Laurus) of this Agreement. The Accounts
Receivable which Laurus has purchased, either by its acceptance of an Invoice
Schedule or by making an Initial Payment with respect thereto, are sometimes
referred to herein as "Purchased Receivables." The initial payment to be made by
Laurus (the "Initial Payment") may be in an amount up to 70% of the net amount
of such Eligible Accounts Receivable ("Initial Payment Percentage"), such
Initial Payment Percentage to be increased or decreased in the sole discretion
of Laurus; provided, however, in the event any Company's dilution rate with
respect to its Accounts Receivable exceeds 5%, Laurus shall have the right to
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reduce the Initial Payment Percentage by 1% for each 1% increase in the dilution
rate. As used herein, "Eligible Accounts Receivable" shall mean those Accounts
Receivable arising in ordinary course of the applicable Company's business which
Laurus, in its sole credit judgement, deems to be an Eligible Account
Receivable; provided, no Accounts Receivable will be deemed to be an Eligible
Account Receivable if 50% or more of the Accounts Receivable from the applicable
Account Debtor are 90 days past due. As used herein, "net amount" shall mean the
gross amount of Eligible Accounts Receivable less returns, discounts and
allowances to customers. Without the consent of Laurus, in no event shall the
aggregate outstanding amount of Initial Payments made by Laurus with respect to
Purchased Receivables exceed the lesser of (i) $2,405,000("Capital Availability
Amount") or (ii) or 70% of Eligible Accounts Receivable at such date.
(b) In the event the aggregate outstanding amount of Initial Payments
at any time exceeds the amount permitted by the last sentence of the foregoing
clause "(a)" (such excess amount, an "Overadvance"), then any and all such
Overadvances shall be due and payable on demand and shall be evidenced by the
Convertible Note made by Vertex in favor of Laurus dated the date hereof.
(c) On the date hereof, Laurus shall convert to Obligations hereunder
the aggregate amount of all obligations owing to Laurus under the Prior
Agreements (the "Existing Obligations") which as of the date hereof equal
$2,000,000. The Existing Obligations so converted shall be deemed repaid in full
on the date hereof and an Initial Payment in like amount shall be deemed made on
the date hereof.
(d) Upon acceptance of an Invoice Schedule, Laurus shall deliver to
Vertex, as agent for the Companies, the amount of the Initial Payment specified
in the Fee Schedule, a copy of which is attached as Exhibit B hereto and made a
part hereof (the "Fee Schedule") with respect to the Accounts Receivable listed
therein.
(e) By its execution of each Invoice Schedule with respect to Accounts
Receivable or acceptance (by Vertex as such Company's agent) of an Initial
Payment with respect to an Account Receivable, each Company shall be deemed to
represent, warrant and covenant to Laurus with respect to each such Purchased
Receivable that:
(i) Such Company is the sole owner of such Purchased Receivable
and such Purchased Receivable has not previously been assigned or
encumbered in any manner; such Company has the full power and authority to
sell such Purchased Receivable and its sale to Laurus has been duly
authorized by all necessary corporate action;
(ii) The goods or services listed or referred to in the invoice
related to such Purchased Receivable have been shipped or rendered to the
Account Debtor, and the prices and terms of shipment set forth therein
conform in all material respects to the terms of any related purchase order
or agreement with the Account Debtor;
(iii) The invoice representing such Purchased Receivable
correctly sets forth the full purchase price of the goods or services
covered thereby, and such amount is due and owing from the Account Debtor,
subject to no set-offs, deductions, disputes, contingencies or
counterclaims against such Company or the invoice, and payment thereof is
not contingent upon fulfillment of any obligation other than delivery of
the goods or services referred to in such invoice; and
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(iv) Upon acceptance of the Invoice Schedule related thereto and
payment of the Initial Payment with respect thereto, Laurus shall be vested
with all right, title and interest in and to such Purchased Receivable,
including all proceeds thereof, rights of stoppage in transit and rights of
return, contract rights and rights under policies of insurance.
(f) If any Purchased Receivable is not paid by the Account Debtor
within 90 days after the date that such Purchased Receivable was invoiced, or if
any Account Debtor asserts at any time any deduction, dispute, contingency,
set-off, or counterclaim with respect to any Purchased Receivable, the Companies
shall jointly and severally reimburse Laurus on demand for the amount of the
Initial Payment with respect to any Purchased Receivable. Each Company shall be
obligated to pay (and Laurus shall have the right to retain) the fee set forth
on Exhibit B with respect to such Purchased Receivable even if such Company is
required to reimburse Laurus for such Purchased Receivable.
3. Conditions Precedent. Laurus shall not be obligated to purchase, or at
any time to continue to purchase, any Accounts Receivable from any Company until
each of the following conditions shall have been satisfied:
(a) Laurus shall have filed Uniform Commercial Code financing
statements with the appropriate filing officer or officers in each jurisdiction
where, in the opinion of Laurus, such filing is necessary or desirable to
perfect the security interests granted herein;
(b) The Companies shall have delivered to Laurus an opinion of counsel
to the Companies reasonably acceptable to Laurus, in form and substance
satisfactory to Laurus, covering such legal matters as Laurus and its counsel
shall reasonably request;
(c) All security interests and liens covering the Collateral shall
have been released or otherwise terminated and/or subordinated in a manner
satisfactory to Laurus and its counsel;
(d) Each Company shall have executed and delivered to Laurus an
Internal Revenue Service Form 8821 authorizing Laurus to inspect and/or receive
all information regarding all of such Company's taxes for all periods; and
(e) Each Company shall have executed and/or delivered to Laurus all
other documents, agreements, instruments, certificates and opinion letters as
shall be required by Laurus in connection with the transactions contemplated by
this Agreement.
4. Collection of Accounts Receivable.
(a) Commencing on the date of this Agreement, Laurus or the Designated
Agent, as applicable, shall administer the collection of all Accounts Receivable
originated by each Company. Following identification of payments and application
to the related invoices, payments received with respect to Accounts Receivable,
net of the administration fee of the Designated Agent as set forth in an
Accounts Receivable Management Agreement dated as of the date hereof (as
amended, modified and supplemented from time to time) and any amounts due with
respect to Purchased Receivables, shall be remitted to Vertex, as agent for the
Companies, by Laurus (or the Designated Agent) at weekly intervals (or such
other intervals to which the Companies and Laurus may agree from time to time).
(b) Laurus shall have the right of endorsement on all payments
received in
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connection with each Account Receivable and each Company hereby appoints Laurus
the attorney-in-fact and agent of such Company for this purpose, which
appointment is coupled with an interest and is irrevocable during the term of
this Agreement.
(c) Neither Laurus nor the Designated Agent shall have any liability
to any Company for any mistake in the application of any payment received by it
with respect to any Account Receivable, so long as it acts in good faith and
without gross negligence.
5. Administration of Purchased Receivables. For administrative convenience,
all requests by Vertex, as agent for the Companies, for an Initial Payment shall
be made on the first business day of each week. Laurus will pay to Vertex, as
agent for the Companies, not more often than once per week, an amount equal to
the excess, if any, of (i) the aggregate amount collected by Laurus during the
immediately preceding week with respect to Purchased Receivables, less (ii) the
sum of (A) the aggregate Initial Payments made by Laurus with respect to such
Purchased Receivables, (B) the fees earned by Laurus with respect to such
Purchased Receivables, (C) the aggregate amount theretofore paid by Laurus (in
excess of the amounts specified in clauses (ii)(A) and (ii)(B)) with respect to
such Purchased Receivables, if any, and (D) any amounts due pursuant to Sections
8 and 10 below which have not theretofore been paid.
6. Cross-Collateralization. If a Default (as defined in Section 11 below)
shall have occurred and be continuing, in addition to Laurus' rights and
remedies under Section 11 below, Laurus shall have the right, which may be
exercised in its sole and absolute discretion at any time and from time to time
during the continuance of such Default, to apply all amounts collected with
respect to Accounts Receivable as follows, before any payment from such
collections shall be made to any Company: (i) against the unreimbursed balance
of the Initial Payments and any Overadvances made by Laurus to the Companies;
(ii) to the payment of all fees accrued with respect to Accounts Receivable
purchased by Laurus from the Companies, whether or not such fees have become due
and payable pursuant to the terms of this Agreement; and (iii) to the payment of
any and all other liabilities and obligations of each Company to Laurus pursuant
to this Agreement and any other agreement entered into between Laurus and any
Company, including, without limitation, the Accounts Receivable Management
Agreement, dated as of the date hereof among the Companies, Laurus and Access
Capital, Inc. (the "Transaction Documents"). For purposes of this Section 6,
"Company" means and includes each person named as a Company in the preamble to
this Agreement and any parent, subsidiary, controlling person or other
affiliate.
7. Collection of Accounts Receivable.
(a) Each Company will instruct all Account Debtors obligated with
respect to its Accounts Receivable to mail or deliver payments on such Accounts
Receivable directly to Laurus at its address set forth at the end of this
Agreement or to such other address that Laurus may specify in a written notice
to the Company. Such instructions shall not be rescinded or modified without
Laurus' prior written consent. If, despite such instructions, any Company shall
receive any payments with respect to any Accounts Receivable purchased by
Laurus, it shall receive such payments in trust for the benefit of Laurus, shall
segregate such payments from its other funds, and shall deliver or cause to be
delivered to Laurus, in the same form as so received with all necessary
endorsements, all such payments received as soon as practicable, but in no event
later than five business days after the receipt thereof by such Company. The
Companies shall jointly and severally pay Laurus or, as applicable, the
Designated Agent, fifteen percent (15%) of the amount of any payment on account
of Purchased Receivables which has been received by any Company and not
delivered in kind to Laurus no later than five business days following receipt
by such Company.
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(b) Laurus shall have the full power and authority to collect each
Account Receivable, and may, in its sole discretion, settle, compromise, or
assign (in whole or in part) the claim for any of the Accounts Receivable, or
otherwise exercise any other right now existing or hereafter arising with
respect to any of the Accounts Receivable, if such action will facilitate
collection. The amount of any reduction resulting from any such settlement,
compromise, assignment or other collection action shall reduce the balance
otherwise due to the Companies hereunder. Each Company acknowledges and agrees
that Laurus shall have the sole and exclusive right to commence legal action to
collect any Account Receivable; provided, however, Laurus shall only exercise
such right to commence such legal action to the extent the Companies fail to
cause such Account to be collected or otherwise reimburse Laurus for the full
face amount of such Account within 7 days following notice by Laurus to Vertex
of Laurus' intention to commence any such legal action; provided, further,
Laurus shall have the right at any time to commence any such legal action
following the occurrence and during the continuance of a Default.
8. Payment of Expenses and Taxes; Indemnification. Each Company will
jointly and severally (a) pay or reimburse Laurus for all of Laurus'
out-of-pocket costs and expenses incurred in connection with the preparation and
execution of, and any amendment, supplement or modification to, the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of counsel to
Laurus (whether or not such counsel is affiliated with Laurus), (b) pay or
reimburse Laurus for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under the Transaction Documents, and
the verification of the Accounts Receivable and the credit worthiness of the
account debtors, including, without limitation, fees and disbursements of
counsel to Laurus (whether or not such counsel is affiliated with Laurus) and
any collateral evaluation (e.g. field examinations, collateral analysis or other
business analysis) performed by Laurus or for its benefit as Laurus deems
necessary; (c) pay, indemnify, and hold Laurus harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from, any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement of modification of, or any waiver
or consent under or in respect of, the Transaction Documents; (d) pay,
indemnify, and hold Laurus harmless from and against any and all claims,
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, whether
threatened, pending or determined (including attomeys' fees and court costs now
or hereafter arising from the enforcement of this clause), (1) with respect to
the execution, delivery, enforcement and performance of the Transaction
Documents, including, without limitation, the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
collateral, or (2) arising directly or indirectly from the activities of any
Company or any subsidiary, its predecessors in interest, or third parties with
whom any Company or any subsidiary has a contractual relationship, or arising
directly or indirectly from the violation of any environmental protection,
health, or safety law, whether such claims are asserted by any governmental
agency or any other person or entity, or (3) arising by virtue of or in
connection with any representation or warranty by any Company being untrue as of
the date made or any agreement or covenant by any Company not being performed as
and when required hereunder (all of the foregoing, collectively, the
"indemnified liabilities"); provided, that no Company shall have any obligation
hereunder to Laurus with respect to indemnified liabilities arising from (i) the
gross negligence or willful misconduct of Laurus, (ii) salaries and other
amounts payable by Laurus to its employees in the ordinary course of business
(other than for legal fees specifically billed with respect to a particular
matter to which the foregoing relates) or (iii) expenses incurred by Laurus
(other than those specifically
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enumerated above) in the ordinary course of business in connection with the
performance of its obligations hereunder. To the extent that Laurus shall incur
costs or expenses, or shall provide amounts to any Company in excess of amounts
otherwise delivered hereunder as Initial Payments, all such amounts shall bear
interest at a monthly rate equal to 2% of the amounts so provided, for each
month or portion thereof as such amounts shall be outstanding. The agreements in
this Section 8 shall survive the termination of this Agreement.
9. Term.
(a) This Agreement shall be effective for a period commencing on the
date hereof and continuing until the close of business on the third anniversary
of the date hereof (the "Initial Term"). At the expiration of the Initial Term,
this Agreement shall be deemed to be automatically renewed for an additional
period equal to the Initial Term and thereafter to be automatically renewed for
succeeding terms of equal length at the end of the first and each succeeding
renewal term, unless Vertex, as agent for the Companies, shall deliver written
notice of cancellation to Laurus not earlier than 40 days and not later than 60
days prior to the expiration date of the Initial Term or any succeeding renewal
term.
(b) The representations, warranties and covenants of each Company and
the remedies of Laurus for a breach of such representations, warranties and/or
covenants, shall survive the termination of this Agreement, and such termination
shall not affect the rights of Laurus to enforce its remedies under the
Transaction Documents against any Company or against any collateral after a
default by any Company.
10. Facility Fee.
The Companies shall jointly and severally pay to Laurus simultaneous
with the execution of this Agreement, as well as on each anniversary date, a
facility fee in an amount equal to 2% of the Capital Availability Amount, except
that with respect to such payment on the date hereof such amount shall be 1% of
the amount of the Existing Obligations and 2% on the amount in excess of the
Existing Obligations.
11. Defaults; Remedies. If any of the following events (each herein
referred to as a "Default") shall occur:
(a) Any material representation, warranty or covenant made by any
Company in any of the Transaction Documents shall prove to have been incorrect,
incomplete or misleading on or as of the date made or deemed made; or
(b) Any Company shall fail to perform or observe any material term,
covenant or agreement contained in any Transaction Document and such failure
shall continue for a period of five (5) days after written notice thereof from
Laurus shall have been received by Vertex, as agent for the Companies; or
(c) Laurus shall reasonably believe that any Company is failing to
tender all of its Accounts Receivable to Laurus for purchase pursuant to Section
1 of this Agreement; or any company shall have failed to tender Accounts
Receivable to Laurus for purchase for a period of ten (10) or more consecutive
business days; or
(d) Any Company shall instruct any Account Debtor to mail or deliver
payment on Accounts Receivable to such Company or to any person or entity other
than Laurus or, at Laurus' direction, the Designated Agent, or deposit any check
from an Account Debtor for
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payment of an Accounts Receivable in violation of Section 7(a) hereof; or
(e) There shall be any change in the controlling ownership of any
Company, except with respect to shares of Vertex's Common Stock issued to
current shareholders of Plus Solutions, Ltd.; or
(f) Any Company (i) except as set forth in Vertex's Quarterly Report
filed with the Securities and Exchange Commission on February 20, 2002, shall
generally not pay, or shall be unable to pay, or shall admit in writing its
inability to pay its debts as such debts become due; or (ii) shall make an
assignment for the benefit of creditors, or petition or apply to any tribunal
for the appointment of a custodian, receiver, or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or (iv)
shall have had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an adjudication
or appointment is made, or (v) shall take any corporate action indicating its
consent to, approval of, or acquiescence in any such petition, application,
proceeding, or order for relief or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (vi) shall suffer
any such custodianship, receivership, or trusteeship to continue undischarged
then, in any of the foregoing events (a) through (f) above, Laurus, without
notice to any Company, may exercise all of the rights provided in Section 6 and,
by notice to Vertex, as agent for the Companies, may: (i) declare the Facility
Fee, Laurus' accrued fees with respect to the Purchased Receivables (calculated
as provided in the Fee Schedule as if all Purchased Receivables had been paid in
full on the date of such declaration) and all other amounts payable under the
Transaction Documents to be forthwith due and payable, whereupon the Facility
Fee and all such other amounts shall become and be forthwith due and payable,
without demand, protest, or further notice of any kind, all of which are hereby
expressly waived by each Company; or (ii) declare that its obligation to
purchase and/or administer Accounts Receivable pursuant to this Agreement is
terminated, whereupon such obligation or obligations shall forthwith terminate;
or (iii) both. Laurus may terminate its obligation to purchase additional
Accounts Receivable pursuant to this Agreement without terminating this
Agreement or its right to administer Accounts Receivable pursuant to the terms
hereof. Each Company and Laurus acknowledge that the actual damages that would
be incurred by Laurus after the occurrence of a Default would be difficult to
quantify and that each Company and Laurus have agreed that the fees and
obligations set forth in this paragraph and in this Agreement would constitute
fair and appropriate liquidated damages in the event of any such termination.
12. Security Interest.
(a) Each Company hereby grants Laurus a security interest (the
"Security Interest") in all of the following property now owned or at any time
hereafter acquired by it, or in which it now has or at any time in the future
may acquire any right, title or interest (the "Collateral"): all accounts
whether or not purchased by Laurus pursuant to this Agreement, all other
personal property and fixtures of such Company, including, without limitation,
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles and software), chattel paper (whether
tangible or electronic), supporting obligations, investment property, letter of
credit rights, trademarks and tradestyles in which such Company now has or
hereafter may acquire any right, title or interest and the proceeds and products
thereof (including without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto
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or therefor, all rights of such Company pursuant to this Agreement, and all
contract rights and other general intangibles related to the Accounts Receivable
and associated therewith and the proceeds and products thereof (including
without limitation proceeds of insurance) and all additions, accessions and
substitutions thereto or therefor. Terms used in the foregoing language of this
Section which are defined in the Uniform Commercial Code as enacted and in
effect from time to time in the State of New York (the "Code") are used as so
defined in the Code.
(b) This Security Interest shall secure any and all obligations and
liabilities of each Company under any and all of the Transaction Documents,
whether such liabilities and obligations be direct or indirect, absolute or
contingent, secured or unsecured, now existing or hereafter arising or acquired,
due or to become due (the "Obligations").
(c) Each Company will do all lawful acts which Laurus deems necessary
or desirable to protect the Security Interest or otherwise to carry out the
provisions of this Agreement, including, but not limited to, the execution of
all documents, instruments and agreements in form satisfactory to Laurus and
will promptly pay on demand any filing fees or other costs in connection with
the filing or recordation of any and all Uniform Commercial Code financing,
continuation, amendment and termination statements and similar instruments. Each
Company irrevocably appoints Laurus as its attorney-in-fact during the term of
this Agreement, to do all acts which it may be required to do in connection with
the creation and perfection of its security interest under this Agreement, such
appointment being deemed to be a power coupled with an interest.
(d) Each Company warrants that (i) its principal place of business,
chief executive office and the place where the records concerning its accounts
and contract rights are located at the address set forth herein and (ii) it is
duly organized in the State of (1) New Jersey, in the case of Vertex, with an
organization identification number of 9117766000 (2) New York, in the case of
DCS, which is a state in which an organization identification number is not so
assigned, (3) Delaware, in the case of RSI, with an organization identification
number of 2813888 (4) California, in the case of PDI, with an organization
identification number of C1811921. None of the Accounts Receivable is evidenced
by a promissory note or other instrument. No Company shall reincorporate itself
under the laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof. Each Company will keep its
principal place of business and chief executive office and the office where it
keeps its records concerning its accounts and contract rights at the location
therefor specified in the previous sentence or, upon 30 days' prior written
notice to Laurus, at any other locations in a jurisdiction where all actions
required by this Section 4 shall have been taken with respect to the Collateral.
Each Company will hold and preserve its records concerning its accounts and
contract rights and will permit representatives of Laurus at any time during
normal business hours to inspect and make abstracts from such records.
(e) Each Company warrants that it has title to the Collateral
purportedly owned by it and that there are no sums owed or claims, liens,
security interests or other encumbrances (collectively, "Liens") against the
Collateral other than Permitted Liens (as hereafter defined). Each Company will
notify Laurus of any Liens against the Collateral, will defend the Collateral
against any Liens adverse to Laurus, and will not create, incur, assume, or
suffer to exist now or at any time throughout the duration of the term of this
Agreement, any Liens against the Collateral, whether now owned or hereafter
acquired, except liens in favor of Laurus and Permitted Liens. The term
Permitted Liens means Liens in the Collateral in favor of (a) MidMark
Investments, Inc., the lien priorities with respect to which are governed by the
terms of an Intercreditor Agreement dated as of the date hereof and (b) Pitney
▇▇▇▇▇, Inc., the lien priorities with respect to which are governed by the terms
of an Intercreditor Agreement
-9-
dated as of the date hereof, as each such agreement may be amended, modified and
supplemented from time to time.
(f) Each Company authorizes Laurus to file one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
Laurus may file a photographic or other reproduction of this Agreement in lieu
of a financing or continuation statement in any filing office where it is
permissible to do so.
(g) Each Company irrevocably appoints Laurus as its attorney-in-fact
(which power of attorney is coupled with an interest) and proxy, with full
authority in the place and stead of such Company and in its name or otherwise,
from time to time in Laurus' discretion, to take any action or execute any
instrument which Laurus may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation: (i) to obtain and
adjust insurance required to be paid to Laurus pursuant to this Agreement; (ii)
to ask, demand, collect, ▇▇▇ for, recover, compound, receive, and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral; (iii) to receive, endorse, and collect any checks, drafts
or other instruments, documents, and chattel paper in connection with clause (i)
or clause (ii) above; (iv) to sign such Company's name on any invoice or ▇▇▇▇ of
lading relating to any account, on drafts against customers, on schedules and
assignments of accounts, on notices of assignment, financing statements and
other public records, on verification of accounts and on notices to customers
(including notices directing customers to make payment directly to Laurus); (v)
if a Default has occurred and is continuing if required in the reasonable
judgement of Laurus, to notify the postal authorities to change the address for
delivery of its mail to an address designated by Laurus, to receive, open (in
the presence of an officer of Vertex if reasonably practicable in light of the
then existing circumstances) and process all mail addressed to such Company (and
to make reasonable provisions to allow the Company to receive its mail after
review by Laurus), to send requests for verification of accounts to customers;
and (vi) to file any claims or take any action or institute any proceedings
which Laurus may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Laurus with respect to any of
the Collateral. Each Company ratifies and approves all acts of said attorney;
and so long as the attorney acts in good faith and without gross negligence it
shall have no liability to any Company for any act or omission as such attorney.
(h) if any Company fails to perform any agreement contained herein,
Laurus may itself perform, or cause performance of, such agreement or
obligation, and the costs and expenses of Laurus incurred in connection
therewith shall be jointly and severally payable by the Companies and shall be
fully secured hereby.
(i) The powers conferred on Laurus hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon Laurus to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Laurus shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
(j) Anything herein to the contrary notwithstanding, (i) each Company
shall remain liable under any contracts and agreements relating to the
Collateral, to the extent set forth therein, to perform all of its obligations
thereunder, to the same extent as if this Agreement had not been executed; (ii)
the exercise by Laurus of any of its rights hereunder shall not release any
Company from any of its obligations under the contracts and agreements relating
to the Collateral; and (iii) Laurus shall not have any obligation or liability
by reason of this Agreement under any contracts and agreements relating to the
Collateral, nor shall Laurus be obligated to
-10-
perform any of the obligations or duties of the any Company thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.
(k) In recognition of Laurus' right to have its attorneys' fees and
other expenses incurred in connection with this Agreement secured by the
Collateral, notwithstanding payment in full of all liabilities and obligations
of the Companies to Laurus under the Transaction Documents, Laurus shall not be
required to record any terminations or satisfactions of any of any of Laurus'
liens on the Collateral unless and until each Company has executed and delivered
to Laurus a general release in a form reasonably satisfactory to Laurus.
(l) If any Default shall have occurred and be continuing:
(i) Laurus may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the
affected Collateral), and also may (1) require each Company to, and
each Company hereby agrees that it will at its expense and upon
request of Laurus forthwith, assemble all or part of the Collateral as
directed by Laurus and make it available to Laurus at a place to be
designated by Laurus which is reasonably convenient to both parties
and (2) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale,
at any of Laurus' offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as Laurus may deem
commercially reasonable. Each Company agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to
Vertex, as agent for the Companies, of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Laurus shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. Laurus may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
any such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(ii) Any cash held by Laurus as Collateral and all cash proceeds
received by Laurus in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the
discretion of Laurus, be held by Laurus as Collateral for, and/or then
or any time thereafter be applied in whole or in part by Laurus
against, all or any part of the Obligations in such order as Laurus
shall elect. Any surplus of such cash or cash proceeds held by Laurus
and remaining after payment in full of all the Obligations shall be
paid over to the applicable Company or to whomsoever may be lawfully
entitled to receive such surplus.
(iii) Laurus may exercise any and all rights and remedies of any
and all Companies under or in connection with the Collateral,
including, without limitation, any and all rights of each Company to
demand or otherwise require payment of any amount under, or
performance of any provision of, any account, contract or agreement.
(iv) All payments received by any and all Companies under or in
connection with the Collateral shall be received in trust for the
benefit of Laurus, shall be segregated from other funds of the
applicable Company and shall be
-11-
forthwith paid over to Laurus in the same form as so received (with
any necessary endorsement).
13. Notices. All notices and other communications hereunder and under any
other Transaction Document (unless otherwise specified in such Transaction
Document) shall be deemed given when personally delivered, sent by a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt, or sent by telegram, telex or telefax (provided,
however, that notices given by telegram, telex or telefax shall be deemed given
when dispatched by telegram, telex or telefax, as the case may be, and
confirmation of error-free receipt is received) and if to a party hereto
addressed as set forth beneath its name at the foot hereof unless a party shall
give notice in writing of a different address or telefax number in the manner
provided herein.
14, Amendments. Etc. No amendment, modification, termination, or waiver of
any provision of any Transaction Document to which any Company is a party, nor
consent to any departure by any Company from any Transaction Document to which
it is a party, shall in any event be effective unless the same shall be in
writing and signed by Laurus and Vertex, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
15. No Waiver. No course of dealing between Laurus and any Company, nor any
failure or delay on the part of Laurus in exercising any right, power, or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power, or remedy preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy hereunder.
The rights and remedies provided in the Transaction Documents are cumulative,
and are not exclusive of any other rights, powers, privileges, or remedies, now
or hereafter existing, at law or in equity or otherwise.
16. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of each Company and Laurus and their respective successors and
assigns, except that no Company may assign or transfer any of its rights under
any Transaction Document to which it is a party without the prior written
consent of Laurus.
17. Integration. This Agreement and the other Transaction Documents contain
the entire agreement between the parties relating to the subject matter hereof
and supersede all oral statements and prior writings with respect thereto.
18. Severability of Provisions. Any provision of any Transaction Document
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
19. Additional Reports. In the event that at any time after the expiration
of the term of this Agreement (as the same may be extended or modified, or
terminated following the occurrence of a default), any Company or any successor
or assignee of any Company, shall request additional information from Laurus
including, without limitation, account reports, collections advice for
previously concluded transactions or information for such Company's accounting
records, such information shall be supplied by Laurus to such Company if
available, and such Company shall pay Laurus based on the time spent by Laurus
personnel in the preparation of such information for such Company, and for the
disbursements incurred by Laurus in connection therewith, at the hourly rates
established by Laurus for the consulting services of
-12-
its personnel.
20. Amendment and Restatement. As of the date hereof, the terms and
provisions of the Prior Agreements shall be deemed and hereby are amended and
restated in their entirety and the Prior Agreements shall be and hereby are
consolidated with and into and superceded by this Agreement; provided, however,
nothing contained in this Agreement shall impair or affect in any manner
whatsoever the liens and security interests heretofore granted to Laurus under
the Prior Agreements.
21. Joint and Several Arrangement.
(a) Each Company hereby irrevocably designates Vertex to be its
attorney and agent and in such capacity to request Initial Payments, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of each
Company, and hereby authorizes Laurus to pay over or credit all proceeds of such
Initial Payments and other amounts due to any Company hereunder in accordance
with the request of Vertex.
(b) The handling of the accounts receivable purchase arrangement
contemplated hereby with Vertex as the agent for the Companies in the manner set
forth in this Agreement is solely as an accommodation to the Companies and at
their request. Neither Laurus nor the Designated Agent shall incur any liability
to any Company as a result thereof. To induce Laurus to enter into this
Agreement and in consideration thereof, each Company, jointly and severally,
hereby indemnifies Laurus and the Designated Agent and holds Laurus and the
Designated Agent harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against Laurus or the
Designated Agent by any person or entity arising from or incurred by reason of
the handling of the transactions contemplated hereby as provided herein,
reliance by Laurus and/or the Designated Agent on any request or instruction
from Vertex or any other action taken by Laurus or the Designated Agent in
accordance with the terms of this Agreement and applicable law, except to the
extent due to the willful misconduct or gross (not mere) negligence of the
indemnified party.
(c) All Obligations shall be joint and several (whether or not
expressly stated herein), and each Company shall make payment upon the maturity
of the Obligations, by acceleration or otherwise, and such obligation and
liability on the part of each Company shall in no way be affected by any
extensions, renewals and forbearance granted by Laurus to any Company, failure
of Laurus to give any Company any notice, any failure of Laurus to pursue or
preserve its rights against any Company, the release by Laurus of any Collateral
now or thereafter acquired from any Company, and such agreement by each Company
to pay upon any notice issued pursuant thereto is unconditional and unaffected
by prior recourse by Laurus to any other Company or any Collateral for such
Company's Obligations or the lack thereof.
(d) Each Company expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which
such Company may now or hereafter have against any other Company or other person
or entity directly or contingently liable for the Obligations, or against or
with respect to any other Company's property (including, without limitation, any
property which is Collateral for the Obligations), arising from the existence or
performance of this Agreement, until all Obligations have been paid in full in
cash and this Agreement has been irrevocably terminated
(e) Each Company represents and warrants to Laurus that (i) the
Companies have one or more common shareholders, directors and officers, (ii) the
businesses and corporate
-13-
activities of the other Companies are closely related to, and substantially
benefit, the business and corporate activities of such Company, (iii) the
financial and other operations of the Companies are performed on a combined
basis as if the Companies constituted a consolidated corporate group, (iv) such
Company will receive a substantial economic benefit from entering into this
Agreement and will receive a substantial economic benefit from the application
of each Initial Payment hereunder, in each case, whether or not such amount is
used directly by such Company and (v) all requests for Initial Payments
hereunder by Vertex are for the exclusive and indivisible benefit of each
Company as though, for purposes of this Agreement, the Companies constituted a
single entity.
22. Headings. Section headings in the Transaction Documents are included in
such Transaction Documents for the convenience of reference only and shall not
constitute a part of the applicable Transaction Documents for any other purpose.
23. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN,
THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES THAT A FINAL JUDGMENT
IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT. NOTHING CONTAINED
HEREIN SHALL LIMIT IN ANY MANNER WHATSOEVER LAURUS' RIGHT TO LITIGATE ANY AND
ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT IN
ANY OTHER COURTS AS LAURUS MAY SELECT, WHICH SUCH COURTS ARE CONVENIENT FORUMS
AND THE UNDERSIGNED SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
25. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
26. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, ALL OF WHICH SHALL CONSTITUTE ONE AND THE SAME AGREEMENT, AND ANY
PARTY HERETO MAY EXECUTE THIS AGREEMENT BY SIGNING ONE OR MORE COUNTERPARTS.
[SIGNATURE LINES OF FOLLOWING PAGE]
-14-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
LAURUS MASTER FUND, LTD. VERTEX INTERACTIVE, INC.
By: [Signature Illegible] By:
----------------------------------- ----------------------------------
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ Grin Attn:_________________________________
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone Number:_____________________
Telefax Number: (▇▇▇) ▇▇▇-▇▇▇▇ Telefax Number:_______________________
DATA CONTROL SYSTEMS, INC. RENAISSANCE SOFTWARE, INC.
By: By:
----------------------------------- ----------------------------------
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:__________________________________ Attn:_________________________________
Telephone Number:______________________ Telephone Number:_____________________
Telefax Number:________________________ Telefax Number:_______________________
POSITIVE DEVELOPMENTS, INC.
By:
-----------------------------------
Name:
Title:
Address for Notices:
Attn:__________________________________
Telephone Number:______________________
Telefax Number:________________________
-15-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
LAURUS MASTER FUND, LTD. VERTEX INTERACTIVE, INC.
By: By: ▇. ▇▇▇▇
----------------------------------- ----------------------------------
Name: Name: ▇. ▇▇▇▇
Title: Title: CEO
Address for Notices: Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ Grin Attn:_________________________________
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone Number:_____________________
Telefax Number: (▇▇▇) ▇▇▇-▇▇▇▇ Telefax Number:_______________________
DATA CONTROL SYSTEMS, INC. RENAISSANCE SOFTWARE, INC.
By: ▇. ▇▇▇▇ By: ▇. ▇▇▇▇
----------------------------------- ----------------------------------
Name: ▇. ▇▇▇▇ Name: ▇. ▇▇▇▇
Title: CEO Title: CEO
Address for Notices: Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:__________________________________ Attn:_________________________________
Telephone Number:______________________ Telephone Number:_____________________
Telefax Number:________________________ Telefax Number:_______________________
POSITIVE DEVELOPMENTS, INC.
By: ▇. ▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇
Title: CEO
Address for Notices:
Attn:__________________________________
Telephone Number:______________________
Telefax Number:________________________
EXHIBIT A
INVOICE DELIVERY SCHEDULE
Bulk #:__________________
Invoice #:_______________
Aggregate Amount of Invoices: $_______________
Initial Payment: $____________________________
Date:___________ 2002
Pursuant to the terms and conditions of the Accounts Receivable Purchase
Agreement in effect by and among the Company (as named below), the other
Companies named therein and Laurus Master Fund, Ltd. ("Laurus"), the Company
(named below) hereby sells to Laurus, and Laurus hereby purchases from such
Company, the accounts receivable of such Company set forth on Schedule A
attached hereto and made a part hereof. Reference is made to the Accounts
Receivable Purchase Agreement among the parties, the terms and conditions of
which are incorporated herein by this reference.
Name of Company: Accepted:
_________________________________ LAURUS MASTER FUND, LTD.
By: By:
----------------------------------- ----------------------------------
Name: Name:
Title: Title:
-16-
EXHIBIT B
FEE SCHEDULE
The fee earned by Laurus Master Fund, Ltd., for purchasing Accounts
Receivable with an initial payment of 70% shall be an amount equal to 1-2/3% per
month of the aggregate outstanding amount of initial payments until such time
as the initial payments are collected in full. Such fee shall be payable not
later than the last day of each month and upon termination of the foregoing
Accounts Receivable Purchase Agreement, but in the ordinary course may be
deducted from invoices as the same are collected or unpaid beyond the applicable
eligibility date hereunder, Proceeds of collections shall be effectively
credited to the outstanding balances on the fifth (5th) business day after its
receipt.
Agreed to and Accepted:
VERTEX INTERACTIVE, INC.
By: ▇. ▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇
Title: CEO
DATA CONTROL SYSTEMS, INC.
By: ▇. ▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇
Title: CEO
RENAISSANCE SOFTWARE, INC.
By: ▇. ▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇
Title: CEO
POSITIVE DEVELOPMENTS, INC.
By: ▇. ▇▇▇▇
----------------------------------
Name: ▇. ▇▇▇▇
Title: CEO
-17-
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this "Agreement") dated as of February 26,
2002 among LAURUS MASTER FUND, LTD. ("Laurus"), VERTEX INTERACTIVE, INC.
("Vertex"), DATA CONTROL SYSTEMS, INC. ("DCS"), POSITIVE DEVELOPMENTS, INC.,
("PDI"), RENAISSANCE SOFTWARE, INC. ("RSI" and together with Vertex, DCS and
PDI, each a Company and collectively the "Companies"), MIDMARK INVESTMENTS,
INC., AS AGENT for the NoteHolders ("MidMark") and the noteholders listed on
Schedule A hereto (the "NoteHolders" and together with MidMark, collectively,
the "MidMark Creditors").
BACKGROUND
As an inducement for Laurus to provide an accounts receivable purchase
facility in favor of the Companies, the MidMark Creditors have agreed to enter
into this Agreement to provide for the lien priorities of the Creditors (as
hereafter defined) in certain of the assets of the Companies.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1. General Terms. For purposes of this Agreement, the following
terms shall have the following meanings:
"Accounts Receivable Purchase Agreement" shall mean the Accounts
Receivable Purchase Agreement dated as of the date hereof among Company, DCS,
RSI, PDI and Laurus, as the same may be amended, supplemented, modified or
restated from time to time.
"Accounts Receivable Purchase Agreements" shall mean, collectively,
the Accounts Receivable Purchase Agreement and the other Documents, each as from
time to time in effect.
"Collateral" shall mean all of the property and interests in property,
tangible or intangible, real or personal, now owned or hereafter acquired by any
and all Companies in or upon which the applicable Creditor at any time has a
Lien, and including, without limitation, all proceeds and products of such
property and interests in property.
"Companies" shall have the meaning set forth in the introductory
paragraph to this Agreement and their respective successors and assigns.
"Creditor Agreements" shall mean, collectively, the Accounts
Receivable Purchase Agreements and the MidMark Agreements.
"Creditors" shall mean, collectively, Laurus and the MidMark Creditors
and their respective successors and assigns.
"Documents" shall mean all documents, instruments and agreements at
any time heretofore, now or at any time hereafter executed and/or delivered by
any Company or any other Person to, with or in favor of Laurus in connection
with the Accounts Receivable Purchase Agreement or related thereto, as all of
the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
"Laurus Obligations" shall mean all Obligations of any kind owed to
Laurus from time to time under or pursuant to any of the Accounts Receivable
Purchase Agreements including, without limitation, all principal, interest
accruing thereon, charges, expenses, fees and other sums (including all
interest, charges, expenses, fees and other sums accruing after commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any or all of the Companies) chargeable to any or all of the
Companies by Laurus, and reimbursement, indemnity or other obligations due and
payable to Laurus. Laurus Obligations shall continue to constitute Laurus
Obligations, notwithstanding the fact that such Laurus Obligations or any claim
for such Laurus Obligations is subordinated, avoided or disallowed under the
federal Bankruptcy Code or other applicable law. Laurus Obligations shall also
include any indebtedness of each Company incurred in connection with a
refinancing of the Laurus Obligations under the Accounts Receivable Purchase
Agreements if the terms and conditions of the agreements, documents and
instruments related to such refinancing, taken as a whole, are not materially
more onerous to the MidMark Creditors than those set forth in the Accounts
Receivable Purchase Agreements, as in effect on the date hereof.
"Laurus Senior Collateral" shall mean (i) all accounts receivable
("Accounts") of each Company and all remedies, guaranties, security and liens in
respect of the Accounts, including, without limitation, rights of stoppage in
transit, replevin, repossession and reclamation and other rights and remedies of
an unpaid vendor, lienor or secured party, (ii) all goods relating to or which
by sale resulted in Accounts, including, without limitation, all returned,
reclaimed or repossessed goods and (iii) all proceeds and products thereof.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights of way and the like), lien (statutory or
other), security agreement or transfer intended as security, including without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease or any financing lease having
substantially the same economic effect as any of the foregoing.
"MidMark" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"MidMark Agreements" shall mean the Security and Collateral Agency
Agreement dated November 1, 2001 among Vertex and the MidMark Creditors (the
"Vertex Security Agreement"), the "Notes" and other documents referred to in the
recitals to the Vertex Security Agreement and all agreements, documents and
instruments at any time heretofore, now or at any time hereafter executed and/or
delivered by any Company or any other Person to, with or in favor of the MidMark
Creditors in connection therewith or related thereto, as all of the
-2-
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
"MidMark Creditors" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"MidMark Obligations" sha11 mean all Obligations of any kind owed to
any or all of the MidMark Creditors from time to time under or pursuant to any
of the MidMark Agreements including, without limitation, all principal, interest
accruing thereon, charges, expenses, fees and other sums (including all
interest, charges, expenses, fees and other sums accruing after commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any or all of the Companies) chargeable to any or all of the
Companies by any of the MidMark Creditors, and reimbursement, indemnity or other
obligations due and payable to any and all of the MidMark Creditors. MidMark
Obligations shall continue to constitute MidMark Obligations, notwithstanding
the fact that such MidMark Obligations or any claim for such MidMark Obligations
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. MidMark Obligations shall also include any indebtedness of
each Company incurred in connection with a refinancing of the MidMark
Obligations under the MidMark Agreements if the terms and conditions of the
agreements, documents and instruments related to such refinancing, taken as a
whole, are not materially more onerous to Laurus than those set forth in the
MidMark Agreements, as in effect on the date hereof.
"MidMark Senior Collateral" shall mean the Collateral, other than the
Laurus Senior Collateral.
"Person" shall mean an individual, a partnership, a corporation
(including a business trust), a joint stock company, a trust, an unincorporated
association, a joint venture, a limited liability company, a limited liability
partnership or other entity or a government or any agency, instrumentality or
political subdivision thereof.
"Secured Lender Remedies" shall mean any action which results in the
sale, foreclosure, realization upon, or a liquidation of any of the Collateral,
including, without limitation, the exercise or any of the rights or remedies of
a "secured party" under Article 9 of the Uniform Commercial Code (as in effect
from time to time), such as, without limitation, the notification of account
debtors.
1.2. Other Terms. Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Accounts Receivable Purchase Agreement.
1.3. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Except as expressly set forth
herein, all references to any instruments or agreements, including, without
limitation, references
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to any of the Creditor Agreements shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof.
2. Intercreditor Provisions
2.1. Acknowledgment. Each Creditor hereby agrees and acknowledges that
(a) it has been granted a Lien upon the Collateral, (b) the Laurus Senior
Collateral has been assigned by Company to Laurus as absolute owner thereof and
Laurus has been granted a Lien thereupon and (c) the MidMark Creditors have been
granted a Lien upon the Laurus Senior Collateral only to the extent of any and
all credit balances due from Laurus to the applicable Company in respect
thereof.
2.2. Priority. Notwithstanding the order or time of attachment, or the
order, time or manner of perfection, or the order or time of filing or
recordation of any document or instrument, or other method of perfecting a Lien
in favor of each Creditor in any Collateral, and notwithstanding any conflicting
terms or conditions which may be contained in any of the Creditor Agreements,
the Liens of (a) Laurus upon the Laurus Senior Collateral have and shall have
priority over the Liens of the MidMark Creditors upon the Laurus Senior
Collateral and such Liens of the MidMark Creditors are and shall be, in all
respects, subject and subordinate to the Liens of Laurus therein to the full
extent of the Laurus Obligations outstanding from time to time and (b) the
MidMark Creditors upon the MidMark Senior Collateral have and shall have
priority over the Liens of Laurus upon the MidMark Senior Collateral and such
Liens of Laurus are and shall be, in all respects, subject and subordinate to
the Liens of the MidMark Creditors therein to the full extent of the MidMark
Obligations outstanding from time to time. No MidMark Creditor shall take any
action to foreclose or realize upon the Laurus Senior Collateral until such time
as the Laurus Obligations shall have been paid in full in cash and the Accounts
Receivable Purchase Agreements shall have been irrevocably terminated. Laurus
shall not take any action to foreclose or realize upon the MidMark Senior
Collateral until such times as the MidMark Obligations shall have been paid in
full in cash and the MidMark Agreements shall have been irrevocably terminated.
2.3. No Alteration of Priority. The Lien priorities provided in
Section 2.2 hereof shall not be altered or otherwise affected by any amendment,
modification, supplement, extension, renewal, restatement or refinancing of any
Laurus Obligations or any indebtedness payable under the MidMark Agreements, nor
by any action or inaction which any Creditor may take or fail to take in respect
of the Laurus Senior Collateral.
2.4. Perfection. The foregoing provisions of this Agreement are
intended solely to govern the respective Lien priorities as between the
Creditors and shall not impose on Laurus any obligations in respect of the
disposition of proceeds of foreclosure on any Laurus Senior Collateral which
would conflict with prior perfected claims therein in favor of any other Person
or impose on any MidMark Creditor any obligations in respect of the disposition
of proceeds of foreclosure on any MidMark Senior Collateral which would conflict
with prior perfected claims therein in favor of any other Person. Each MidMark
Creditor agrees that it will not contest the validity, perfection, priority or
enforceability of the Liens of Laurus in the Collateral and that as between
Laurus and the MidMark Creditors, the terms of this Agreement shall govern even
if part or all of the Laurus Obligations or the Liens of Laurus securing payment
and performance thereof are avoided, disallowed, set aside or otherwise
invalidated in
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any judicial proceeding or otherwise. Laurus agrees that it will not contest the
validity, perfection, priority or enforceability of the Liens of the MidMark
Creditors in the Collateral and that as between Laurus and the MidMark
Creditors, the terms of this Agreement shall govern even if part or all of the
MidMark Obligations or the Liens of the MidMark Creditors securing payment and
performance thereof are avoided, disallowed, set aside or otherwise invalidated
in any judicial proceeding or otherwise.
2.5. Management of Laurus Senior Collateral. Laurus shall have the
exclusive right to manage, perform and enforce the terms of the Accounts
Receivable Purchase Agreements with respect to the Laurus Senior Collateral and
to exercise and enforce all privileges and rights thereunder according to its
discretion and the exercise of its business judgment, including, without
limitation, the exclusive right to liquidate such Laurus Senior Collateral. In
connection therewith, each MidMark Creditor waives any and all rights to affect
the method or challenge the appropriateness of any action by Laurus.
2.6. Management of MidMark Senior Collateral. MidMark (as agent for
the MidMark Creditors) shall have the exclusive right to manage, perform and
enforce the terms of the MidMark Agreements with respect to the MidMark Senior
Collateral and to exercise and enforce all privileges and rights thereunder
according to its discretion and the exercise of its business judgment,
including, without limitation, the exclusive right to liquidate such MidMark
Senior Collateral. In connection therewith, Laurus waives any and all rights to
affect the method or challenge the appropriateness of any action by MidMark
2.7. Sale of Laurus Senior Collateral. Notwithstanding anything to the
contrary contained in any of the Creditor Agreements, only Laurus shall have the
right to restrict or permit, or approve or disapprove, the sale, transfer or
other disposition of Laurus Senior Collateral. Each MidMark Creditor will,
immediately upon the request of Laurus, release or otherwise terminate its Liens
upon the Laurus Senior Collateral, to the extent such Laurus Senior Collateral
is sold or otherwise disposed of either by Laurus, its agents or Company with
the consent of Laurus, and each MidMark Creditor will immediately deliver such
release documents as Laurus may require in connection therewith.
2.8. Sale of MidMark Senior Collateral. Notwithstanding anything to
the contrary contained in any of the Creditor Agreements, only the MidMark
Creditors shall have the right to restrict or permit, or approve or disapprove,
the sale, transfer or other disposition of MidMark Senior Collateral. Laurus
will, immediately upon the request of MidMark (as agent for the MidMark
Creditors), release or otherwise terminate its Liens upon the MidMark Senior
Collateral, to the extent such MidMark Senior Collateral is sold or otherwise
disposed of either by the MidMark Creditors, their agents or Company with the
consent of the MidMark Creditors, and Laurus will immediately deliver such
release documents as the MidMark Creditors may require in connection therewith.
2.9. Secured Lender Remedies. In no event shall any MidMark Creditor
exercise any Secured Lender Remedies in respect of the Laurus Senior Collateral
until such time as the Laurus Obligations shall have been paid in full in cash
and the Accounts Receivable Purchase Agreements shall have been irrevocably
terminated. In no event shall Laurus exercise any Secured Lender Remedies in
respect of the MidMark Senior Collateral until such time as the MidMark
Obligations shall have been paid in full in cash and the MidMark Agreements
shall
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have been irrevocably terminated. No MidMark Creditor shall join in, solicit any
other Person to, or act to cause the commencement of, any case involving any
Company under any state or federal bankruptcy or insolvency laws or seek the
appointment of a receiver for the affairs or property of any Company until such
time as the Laurus Obligations shall have been paid in full in cash and the
Accounts Receivable Purchase Agreements shall have been irrevocably terminated.
In the event any MidMark Creditor shall receive any payment or distribution of
any kind representing proceeds of any Laurus Senior Collateral as to which its
Lien in the Laurus Senior Collateral is or is required to be subordinated to the
Lien of Laurus, before the Laurus Obligations shall have been paid in full in
cash and the Accounts Receivable Purchase Agreements irrevocably terminated,
such sums shall be held in trust by such MidMark Creditor for the benefit and on
account of Laurus and such amounts shall be paid to Laurus for application to
the then unpaid Laurus Obligations under the Accounts Receivable Purchase
Agreements. In the event Laurus shall receive any payment or distribution of any
kind representing proceeds of any MidMark Senior Collateral as to which its Lien
is or is required to be subordinated to the Lien of the MidMark Creditors,
before the MidMark Obligations shall have been paid in full in cash and the
MidMark Agreements irrevocably terminated, such sums shall be held in trust by
Laurus for the benefit and on account of the MidMark Creditors and such amounts
shall be paid to MidMark (as agent for the MidMark Creditors) for application to
the then unpaid MidMark Obligations under the MidMark Agreements.
2.10. Notice and Waiver of Marshaling. The MidMark Creditors and
Laurus acknowledge that this Agreement shall constitute notice of their
respective interests in the Collateral as provided by the New York Uniform
Commercial Code and each hereby waives any right to compel any marshaling of any
of the Collateral.
3. Miscellaneous.
3.1. Survival of Rights. The right of any Creditor to enforce the
provisions of this Agreement shall not be prejudiced or impaired by any act or
omitted act of any Company or any Creditor, including forbearance, waiver,
consent, compromise, amendment, extension, renewal, or taking or release of
security in respect of any Laurus Obligations and/or MidMark Obligations or
noncompliance by any Company with such provisions, regardless of the actual or
imputed knowledge of any Creditor.
3.2. Amendments to Creditor Agreements. Nothing contained in this
Agreement, or in any other agreement or instrument binding upon any of the
parties hereto, shall in any manner limit or restrict the ability of any
Creditor from changing the terms of the applicable Creditor Agreements, or to
otherwise waive, amend or modify the terms and conditions of the applicable
Creditor Agreements, in such manner as the applicable Creditors and the
applicable Companies shall mutually determine. Each Creditor hereby consents to
any and all such waivers, amendments, modifications and compromises, and any
other renewals, extensions, indulgences, releases of Collateral or other
accommodations granted by any Creditor to the applicable Companies from time to
time, and agrees that none of such actions shall in any manner affect or impair
the relative Lien priorities and subordination established by this Agreement.
3.3. Bankruptcy Financing Issues. This Agreement shall continue in
full force and effect after the filing of any petition ("Petition") by or
against any or all of the Companies
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under the United States Bankruptcy Code (the "Code") and all converted or
succeeding cases in respect thereof. All references herein to Companies shall
be deemed to apply to any and all Companies as debtors-in-possession and to a
trustee for any and all Companies. If any Company shall become subject to a
proceeding under the Code, and if Laurus shall desire to permit the use of cash
collateral or to provide post-petition financing to such Company under the Code,
the MidMark Creditors agree as follows: (1) adequate notice to the MidMark
Creditors shall be deemed to have been provided for such post-petition financing
if MidMark (as agent for the MidMark Creditors) receives notice thereof at least
three (3) Business Days (or such shorter notice as is given to Laurus) prior to
the earlier of (a) any hearing on a request to approve such post-petition
financing or (b) the date of entry of an order approving the same; and (2) no
objection will be raised by any MidMark Creditor to any such use of cash
collateral or such post-petition financing from Laurus.
3.4. Receipt of Agreements. Each Creditor hereby acknowledges that it
has delivered to the other Creditor correct and complete copy of the Creditor
Agreements of such Creditor as in effect on the date hereof. Each Creditor,
solely for the purposes of this Agreement, hereby acknowledges receipt of a
correct and complete copy of the Creditor Agreements of such other Creditor as
in effect on the date hereof.
3.5. Notice of Default and Certain Events. Laurus and MidMark (as
agent for the MidMark Creditors) shall undertake in good faith to notify the
other of the occurrence of any of the following as applicable:
(a) the obtaining of actual knowledge of the occurrence of any
default under any of the Creditor Agreements of such Creditor;
(b) the acceleration of any Laurus Obligations or of any MidMark
Obligations;
(c) the granting by Laurus of any waiver of any "default" or
"event of default" under any of the Accounts Receivable Purchase Agreements or
the granting by any MidMark Creditor of any waiver of any "default" or "event of
default" under any of the MidMark Agreements;
(d) The payment in full by Companies (whether as a result of
refinancing or otherwise) of all Laurus Obligations or all MidMark Obligations;
or
(e) the sale or liquidation of, or realization upon, the Laurus
Senior Collateral or the MidMark Senior Collateral.
The failure of any party to give such notice shall not affect the relative
Lien priorities as provided in this Agreement.
3.6. Notices. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) when personally delivered
to any officer of the party to whom it is addressed, (b) on the earlier of
actual receipt thereof or three (3) days following posting thereof by certified
or registered mail, postage prepaid, (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
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when sent by telecopier to the number set forth below with electronic
confirmation of receipt, in each case addressed to each party at its address or
telecopier number set forth below or at such other address or telecopier number
as has been furnished in writing by a party to the other by like notice:
If to Laurus: Laurus Master Fund, Ltd.
c/o Laurus Capital Management, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Grin
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to any MidMark Creditor: MidMark Investments, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & English LLP
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Company: Vertex Interactive, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Telephone: _______________
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
3.7. Binding Effect; Other. This Agreement shall be a continuing
agreement, shall be binding upon and shall inure to the benefit of the parties
hereto from time to time and their respective successors and assigns, shall be
irrevocable and shall remain in full force and effect until the Laurus
Obligations shall have been satisfied or paid in full in cash and the Accounts
Receivable Purchase Agreements shall have been irrevocably terminated, but shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part
-8-
thereof, of any amount paid by or on behalf of any Company with regard to the
Laurus Obligations is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Company, or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee, custodian, or similar officer, for any Company or
any substantial part of its property, or otherwise, all as though such payments
had not been made. No action which any Creditor or any Company may take or
refrain from taking with respect to the Laurus Obligations and/or the MidMark
Obligations, including any amendments thereto, shall affect the provisions of
this Agreement. Any waiver or amendment hereunder must be evidenced by a signed
writing of the party to be bound thereby, and shall only be effective in the
specific instance. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The headings in this
Agreement are for convenience of reference only, and shall not alter or
otherwise affect the meaning hereof.
4. Representations and Warranties. (a) Each MidMark Creditor represents and
warrants to Laurus that MidMark (as agent for the MidMark Creditors) is the
holder of the Liens which secure or will secure the MidMark Obligations. MidMark
(as agent for the MidMark Creditors) agrees that it shall not assign or transfer
any of the Liens without (i) prior notice being given to Laurus and (ii) such
assignment or transfer being made expressly subject to the terms of this
Agreement. Each MidMark Creditor further warrants to Laurus that it has full
right, power and authority to enter into this Agreement and, to the extent such
MidMark Creditor is an agent or trustee for other parties, that this Agreement
shall fully bind all such other parties.
(b) Laurus represents and warrants to each MidMark Creditor that
Laurus is the holder of the Liens which secure the Laurus Obligations. Laurus
agrees that it shall not assign or transfer any of the Liens without (i) prior
notice being given to MidMark (as agent for the MidMark Creditors) and (ii) such
assignment or transfer being made expressly subject to the terms and provisions
of this Agreement. Laurus further warrants to each MidMark Creditor that it has
full right, power and authority to enter into this Agreement and, to the extent
Laurus is an agent or trustee for other parties, that this Agreement shall fully
bind all such other parties.
5. Refinancing. In the event that the Laurus Obligations and/or the MidMark
Obligations are refinanced in full, the applicable Creditor agrees at the
request of such refinancing party to enter into an intercreditor agreement on
terms substantially similar to this Agreement.
6. Proceedings. ANY JUDICIAL PROCEEDING BROUGHT BY OR AGAINST ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT OR ANY RELATED AGREEMENT MAY BE BROUGHT IN
ANY COURT OF COMPETENT JURISDICTION IN STATE OF NEW YORK, UNITED STATES OF
AMERICA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH PARTY HERETO
ACCEPTS FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LAURUS TO
BRING PROCEEDINGS AGAINST ANY MIDMARK CREDITOR OR ANY COMPANY IN ANY
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COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY MIDMARK
CREDITOR OR ANY COMPANY AGAINST LAURUS INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS
AGREEMENT OR ANY RELATED AGREEMENT, SHALL BE BROUGHT ONLY IN A COURT LOCATED IN
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇; PROVIDED THAT NOTWITHSTANDING THE
FOREGOING, IF IN ANY JUDICIAL PROCEEDING BY OR AGAINST ANY MIDMARK CREDITOR OR
ANY COMPANY THAT IS BROUGHT IN ANY OTHER COURT SUCH COURT DETERMINES THAT LAURUS
IS AN INDISPENSABLE PARTY, SUCH MIDMARK CREDITOR OR COMPANY SHALL BE ENTITLED TO
JOIN OR INCLUDE EACH PARTY HERETO IN SUCH PROCEEDINGS IN SUCH OTHER COURT. EACH
MIDMARK CREDITOR AND EACH COMPANY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE
OF ANY ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON
LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.
7. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY CREDITOR OR COMPANY OR ANY OF
THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENTS OR
AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT ANY OF
THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
8. Companies' Acknowledgement. Each Company agrees that (i) nothing
contained in this Agreement shall be deemed to amend, modify, supercede or
otherwise alter the terms of the respective agreements between such Company and
each Creditor and (ii) this Agreement is solely for the benefit of the Creditors
and shall not give any Company, its successors or assigns or any other person
any rights vis-a-vis any Creditor.
9. Counterparts; Facsimile. This Agreement may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
-10-
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
this __________ day of _________________________, 2002.
LAURUS MASTER FUND, LTD.
By: ▇▇▇▇▇ Grin
----------------------------------
Name: ▇▇▇▇▇ Grin
Title: Director
MIDMARK INVESTMENTS, INC., AS AGENT
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
MIDMARK CAPITAL II, L.P.,
By: MidMark Associates II, L.L.C.,
its General Partner
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
MIDMARK CAPITAL, L.P.,
By: MidMark Associates Inc.,
its General Partner
By:
----------------------------------
Name:
-------------------------------
Title:
-------------------------------
O'BRIEN LIMITED PARTNERSHIP
By: ▇▇▇▇▇ ▇▇▇▇▇▇, General Partner
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
[SIGNATURE LINES CONTINUED ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
this __________ day of _________________________, 2002.
LAURUS MASTER FUND, LTD.
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
MIDMARK INVESTMENTS, INC., AS AGENT
By: ▇▇▇▇▇ ▇.▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Managing Director
-------------------------------
MIDMARK CAPITAL II, L.P.,
By: MidMark Associates II, L.L.C.,
its General Partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Managing Director
-------------------------------
MIDMARK CAPITAL, L.P.,
By: MidMark Associates Inc.,
its General Partner
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title:
-------------------------------
O'BRIEN LIMITED PARTNERSHIP
By: ▇▇▇▇▇ ▇▇▇▇▇▇, General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: General Partner
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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[SIGNATURE LINES CONTINUED ON FOLLOWING PAGE]
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▇▇▇▇▇ ▇▇▇▇▇ CUSTODIAN F/B/O/
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Managing Director
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇, as
Joint Tenants
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
VERTEX INTERACTIVE, INC., as a
Company
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
DATA CONTROL SYSTEMS, as a Company
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
RENAISSANCE SOFTWARE, INC. as a
Company
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
POSITIVE DEVELOPMENTS, INC., as a
Company
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-12-
▇▇▇▇▇ ▇▇▇▇▇ CUSTODIAN F/B/O/
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By:
-------------------------------
Name:
Title:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇, as
Joint Tenants
By:
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By:
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
VERTEX INTERACTIVE, INC., as a
Company
By: ▇. ▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇
-------------------------------
Title: CEO
-------------------------------
DATA CONTROL SYSTEMS, as a Company
By: ▇. ▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇
-------------------------------
Title: CEO
-------------------------------
RENAISSANCE SOFTWARE, INC. as a
Company
By: ▇. ▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇
-------------------------------
Title: CEO
-------------------------------
POSITIVE DEVELOPMENTS, INC., as a
Company
By: ▇. ▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇
-------------------------------
Title: CEO
-------------------------------
-12-
We consent and agree that the execution and delivery by the MidMark Parties of
this Intercreditor Agreement dated as of February 26, 2002 among Laurus Master
Fund, Ltd., MidMark Investments, Inc., Vertex Interactive, Inc. and certain
other parties does not constitute a breach of the Intercreditor Agreement
between ourselves and MidMark dated February 1, 2002.
PITNEY ▇▇▇▇▇ INC.
BY: ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: EVP & Chief Financial Officer
------------------------------------
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
: ss.:
COUNTY OF NEW YORK )
On the 26th day of February, 2002, before me personally came ▇▇▇▇▇ Grin to
me known, who, being by me duly sworn did depose and say that he is the Director
of LAURUS MASTER FUND, LTD., the corporation described in and which executed the
above instrument; and that s/he signed her/his name thereto by order of the
board of directors of said corporation.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Notary Public. State of New York ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
No. 02GI5044900 -----------------------------------
Qualified in New York County Notary Public
Commission Expires June 5, 2003
STATE OF __________ )
: ss.:
COUNTY OF _________ )
On the ____ day of ________, 2002, before me personally came __________
_________ to me known, who, being by me duly sworn did depose and say that s/he
is the _________________ of MIDMARK INVESTMENT, INC., the corporation described
in and which executed the above instrument; and that s/he was authorized to sign
her/his name thereto.
-----------------------------------
Notary Public
STATE OF __________ )
: ss.:
COUNTY OF _________ )
On the ____ day of ________, 2002, before me personally came ________
_________ to me known, who, being by me duly sworn did depose and say that s/he
is the _________________ of MIDMARK ASSOCIATES II, L.L.C., the limited liability
company described in and which executed the above instrument; and that s/he was
authorized to sign her/his name thereto.
-----------------------------------
Notary Public
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of ________, 2002, before me personally came __________ to
me known, who, being by me duly sworn did depose and say that he is the ________
of LAURUS MASTER FUND, LTD., the corporation described in and which executed the
above instrument; and that s/he signed her/his name thereto by order of the
board of directors of said corporation.
-----------------------------------
Notary Public
STATE OF NEW JERSEY )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say that s/he
is the Managing Director of MIDMARK INVESTMENT, INC., the corporation described
in and which executed the above instrument; and that s/he was authorized to sign
her/his name thereto.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say that s/he
is the Managing Director of MIDMARK ASSOCIATES II, L.L.C., the limited liability
company described in and which executed the above instrument; and that s/he was
authorized to sign her/his name thereto.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say that s/he
is the Managing Director of MIDMARK ASSOCIATES, INC., the corporation described
in and which executed the above instrument; and that s/he was authorized to sign
her/his name thereto.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇ ▇▇▇▇▇▇
to me known, who, being by me duly sworn did depose and say he is the general
partners of O'BRIEN LIMITED PARTNERSHIP, the limited partnership described in
and which executed the above instrument; and that s/he was authorized to sign
his name thereto.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say that he is
the individual who executed the above instrument.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say that s/he
is the Trustee of ▇▇▇▇▇ ▇▇▇▇▇, the corporation described in and which executed
the above instrument; and that s/he signed her/his name thereto by order of the
board of directors of said corporation.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, ▇▇▇▇
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ )
: ss.:
COUNTY OF ▇▇▇▇▇▇ )
On the 20th day of February, 2002, before me personally came ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ to me known, who, being by me duly sworn did depose and say
that they are the individuals who executed the above instrument.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Notary Public
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
NOTARY PUBLIC OF NEW JERSEY
My Commission Exp. Aug. 2, 2005
STATE OF __________ )
: ss.:
COUNTY OF _________ )
On the _______ day of ________________, 2002, before me personally came
__________________ to me known, who, being by me duly sworn did depose and say
that s/he is the _________________ of VERTEX INTERACTIVE, INC., the corporation
described in and which executed the above instrument; and that s/he was
authorized to sign her/his name thereto.
-----------------------------------
Notary Public
STATE OF __________ )
: ss.:
COUNTY OF _________ )
On the _______ day of ________________, 2002, before me personally came
__________________ to me known, who, being by me duly sworn did depose and say
that s/he is the _________________ of DATA CONTROL SYSTEMS, INC., the
corporation described in and which executed the above instrument; and that s/he
was authorized to sign her/his name thereto.
-----------------------------------
Notary Public
-16-
ACCOUNTS RECEIVABLE MANAGEMENT AGREEMENT
By and between
LAURUS MASTER FUND, LTD.
(the "Company")
And
ACCESS CAPITAL, INC.
("ACI")
Regarding the accounts receivable of:
VERTEX INTERACTIVE, INC.
(including ATS and CTI)
DATA CONTROL SYSTEMS, INC.
POSITIVE DEVELOPMENTS, INC.
RENAISSANCE SOFTWARE, INC.
(collectively, the "Client")
THIS AGREEMENT made as of the 27 day of February, 2002 by and between the
Company, a Cayman Islands company and ACI, a New York corporation.
W I T N E S S E T H:
WHEREAS, the Company provides accounts receivable purchase facility to the
Client pursuant to an Accounts Receivable Purchase Agreement (the "Accounts
Receivable Purchase Agreement") dated as of the date hereof by and among each
Client and the Company; and
WHEREAS, the Client makes sales on credit to customers in its markets; and
WHEREAS, to induce the Company to provide such financial consideration to
the Client, the Client has granted a security interest in, among other assets,
its accounts receivable to the Company, and has agreed to allow the Company,
directly or through a servicing agent, to service, administer and collect the
Client's accounts receivable; and
WHEREAS, ACI has offered to provide the Company with accounts receivable
management, administration and collection services with respect to the Client's
accounts receivable hereunder; and
WHEREAS, the Company has requested ACI to manage the collection of the
Client's accounts receivable, and ACI is willing to do so, upon the terms and
subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby mutually agree as follows:
1. Accounts Receivable Defined. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the term
"Accounts Receivable" means an account, as that term is defined in Section 9-102
of the New York Uniform Commercial Code, arising from the sale of goods or the
performance of services by the Client and represented by an invoice shown as
open on the books of the Client on the date of its most current aged trial
balance of accounts receivable or created after the date hereof.
2. Management, Administration and Collection of Accounts Receivable. ACI
shall perform the services of the Company's accounts receivable manager with
respect to the Accounts Receivable of the Client created during the term of the
Accounts Receivable Purchase Agreement;
(a) ACI, in its capacity as manager of the Client's Accounts
Receivable, shall manage and administer with due care the collection of all the
Accounts Receivable originated by the Client. The Company will cause the Client
promptly to deliver to ACI copies of all invoices related to the Client's
Accounts Receivable issued to customers of the Client unpaid on the date hereof
or
-2-
issued hereafter at any time during the term of the Accounts Receivable Purchase
Agreement, as the same may be modified or extended ("Invoices").
(i) ACI shall input in its data base such information contained in the
invoices as ACI shall deem appropriate to provide management and collection
services to the Company. The Client shall be and remain responsible for the
ensuring that all of its Invoices are properly sent to the persons responsible
for payment of the related Client's Accounts Receivable unless, at the Company's
option, it shall elect to instruct the Client to deliver its Invoices to ACI
prior to billing, in which event ACI shall ▇▇▇▇ the Invoices of the Client.
(ii) Upon execution of this Agreement, the Company shall provide to
ACI and ACI will forward to the Client's customers, a notice in the form of
Attachment 1. ACI shall have the right of endorsement on all payments received
in connection with each Client Account Receivable and the Company hereby
appoints ACI the attorney-in-fact and agent of the Company for this purpose,
which appointment is coupled with an interest and is irrevocable during the term
of this Agreement. ACI shall segregate such payments in a separate account in
its books and records (the "Account"). Upon receipt and after clearance of any
payment, and the deduction of any amounts due ACI, on a weekly basis ACI shall
deliver the balance of such payment to the Company by wire transfer to the
Company at the following account or any portion of such payment to the Client as
instructed by the Company:
Account Name: Banc of America Securities, LLC
ABA # ▇▇▇▇▇▇▇▇▇
Account # 1233932118
For Further Credit to: Laurus Master Fund, Ltd.
Account Number - 313-15751
ACI will utilize information received to maintain a current aged trial
balance of outstanding receivables and will post collections, record deductions,
credits and chargebacks and be apprised of items disputed in writing by account
debtors. ACI shall have no responsibility or liability for any errors or
omissions arising from any failure by the Company or Client to comply with this
subsection except to the extent such errors or omissions result directly from
the negligence or willful misconduct of ACI.
(iii) ACI will act as agent of the Company in the collection of the
Client's Accounts Receivable. Oral and written communications between ACI
employees and customers of the Client will be made in name of the Company, with
the identification of the agency capacity of ACI as appropriate. ACI shall bear
no credit risk with regard to any invoicing.
(iv) ACI shall have no liability to the Client or any lender to, or
other creditor of the Client for any mistake in the management or collection of
any Invoice, or in the application of any payment received with respect to any
Account Receivable, so long as ACI acts with due care and in a competent and
professional manner. The liability of ACI to the Company for
-3-
any claims shall be limited to the amount of the Management Fee (as herein after
defined) actually paid to ACI.
(b) Adjustments and Delinquencies.
(i) If ACI is advised by an account debtor that an Invoice is
disputed or that such account debtor has a claim against the Client on account
of any services performed or goods sold and delivered, ACI will provide the
Company with such information as ACI has concerning the dispute or claim. The
Client shall promptly notify ACI of any discounts, adjustments, credits,
allowances or other accommodations granted to any account debtor with respect to
the Accounts Receivable. ACI shall work with the Company, Client and its
customers on disputed items, but ACI shall neither settle any disputed items
without the consent of the Company nor shall ACI be responsible for resolving
any claim or controversy between the Company and the Client, or the Client and
any customer of the Client.
(ii) ACI will make reasonable, diligent efforts to collect
Client's Accounts Receivable on behalf of the Company in accordance with ACI's
regular procedures and with applicable laws and governmental regulations
consistent with its obligations to provide its services with due care and in a
competent and professional manner, but shall have no responsibility for
instituting legal action to collect any delinquent Accounts Receivable. If any
Account Receivable shall not be paid in full within a reasonable period after
its due date, ACI will notify the Company and thereafter cooperate with the
Company in the Company's collection efforts.
(iii) The work of ACI will include not only the direct review of
individual customer credit, but also, to the extent appropriate and requested,
advice to the Company as to the construction and management of credit ▇▇▇▇▇▇ and
credit enhancement strategies, including, without limitation, letters of credit,
credit insurance, government export guarantees, third party assurances and other
risk mitigation policies. ACI may at any time and from time to time hire one or
more persons or entities to assist it in connection effectuating the provisions
of this clause (iii).
(c) Payment of Expenses and Taxes; Indemnification.
The Company will pay, indemnify, and hold ACI harmless from, any and
all legal and other fees (as outlined in Attachment 2) which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement of modification of, or any waiver or consent under or in respect of,
this Agreement, it being recognized that the costs incurred in the preparation
of this Agreement through the date of its execution and delivery on the date
hereof shall be at the sole expense of ACI, but that if any costs are incurred
from and after the date hereof, such costs shall be the expense of the Company.
(d) Additional Requirements. In the event that any time after the
expiration of the term of this Agreement (as same may be extended or modified,
or terminated following the occurrence of a default), the Company or any
successor or assignee shall request additional
-4-
information from ACI including, without limitation, account reports, collections
advice for previously concluded transactions or information for account records,
such information shall be supplied by ACI, if available. The Company shall pay
ACI based on the time spent by ACI personnel in the preparation of such
information, and for the disbursements incurred by ACI in connection therewith,
at the reasonable hourly rates established by ACI for the consulting services of
its personnel.
3. Fees; Credits.
(a) In consideration of the services of ACI under this Agreement, the
Company shall pay to ACI a management fee (the "Management Fee") in an amount
equal to one and one half percent (1.5%) of the Invoices subject to this
Agreement. The Management Fee shall be due at the time of the creation of the
applicable Invoices and the delivery of such Invoices to ACI, but shall be
deducted from the proceeds of any amounts collected by ACI. The Management Fee
will be due both for valid Invoices as well as disputed or uncollectible items,
so that ACI shall have the right to apply from collections any fees due it for
disputed or uncollectible items. If any amount due in payment of the Management
Fee or any other amounts due to ACI hereunder shall not otherwise have been
collected from amounts received by ACI from the collection of Accounts
Receivable, within 120 days following the date of the applicable Invoice, the
Company shall pay such amount to ACI immediately upon demand from ACI. Late
payments shall bear interest at the rate of 1% per month.
(b) In addition to the Management Fee, the Company shall pay to ACI
all direct expenses incurred by ACI, including, without limitation, postage and
federal express, credit reports, photocopying, telecommunications, lien search
costs and other out-of-pocket expenses related to the management services to be
provided hereunder.
(c) In consideration of (i) ACI's agreement to collect Accounts
Receivable during any "liquidation period" (as hereafter defined) and the
Company's agreement to assist ACI to effectuate such collections, the Client
shall jointly and severally be liable to the Company and ACI for a liquidation
fee in the amount of ten percent (10%) of the face amount of each Account
Receivable outstanding at any time during a "liquidation period". For the
purposes hereof, "liquidation period" means a period: (i) beginning on the
earliest date of (x) an event referred to in Section 11 (f) of the Accounts
Receivable Purchase Agreement; or (y) the cessation of business of any Client;
and (ii) ending on the date on which ACI and the Company have actually received
all fees, costs, expenses and other amounts due and owing to them under this
Agreement, the Accounts Receivable Purchase Agreement and all other Transaction
Documents (as defined in the Accounts Receivable Purchase Agreement). The
foregoing liquidation fee shall be paid on the earlier to occur of: (i) the date
on which ACI collects the applicable Account Receivable; and (ii) the 90th day
from the invoice of such Account Receivable by deduction from the proceeds of
any amounts collected by ACI. The Company acknowledges that the foregoing fees
shall be deemed Obligations under and as defined in the Accounts Receivable
Purchase Agreement and shall be secured by the Collateral (as defined in the
Accounts Receivable Purchase Agreement).
-5-
4. Term. This Agreement shall be effective from the date hereof and
continue until the amounts due pursuant to the Invoices have been collected or
upon the agreement of each of the parties hereto.
5. Notices. All notices and other communications hereunder shall be given
by first class mail, postage prepaid, recognized overnight messenger or telefax,
and if to a party hereto addressed as set forth beneath its name at the foot
hereof unless a party shall give notice in writing of a different address or
telefax number in the manner provided herein.
6. Amendments, Etc. No amendment, modification, termination, or waiver of
any provision of this Agreement, no consent to any departure from this
Agreement, shall in any event be effective unless the same shall be in writing
and signed by the party to be charged, and then such waiver or consent shall be
effective only in specific instance and for the specific purpose for which
given.
7. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company and ACI and their respective successors and
assigns.
8. Integration. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements
and prior writings with respect thereto.
9. Headings. Section headings in this Agreement are included in such
Transaction Documents for the convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
-6-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
ACCESS CAPITAL, INC.
By: Miles ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: Miles ▇. ▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Client Services Department
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇ ▇▇▇-▇▇▇▇
LAURUS MASTER FUND, LTD.
By:
--------------------------------
Name: ▇▇▇▇▇ Grin
Title:
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE LINES CONTINUED ON FOLLOWING PAGE]
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
ACCESS CAPITAL, INC.
By:
----------------------------------
Name: Miles ▇. ▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Client Services Department
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇ ▇▇▇-▇▇▇▇
LAURUS MASTER FUND, LTD.
By: ▇▇▇▇▇ Grin
--------------------------------
Name: ▇▇▇▇▇ Grin
Title:
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
[SIGNATURE LINES CONTINUED ON FOLLOWING PAGE]
-7-
CONSENTED AND AGREED TO:
VERTEX INTERACTIVE, INC. POSITIVE DEVELOPMENTS, INC.
By: ▇.▇▇▇▇ By: ▇.▇▇▇▇
------------------------------------ --------------------------------
Name: ▇.▇▇▇▇ Name: ▇.▇▇▇▇
Title: CEO Title: CEO
Address for Notices: Address for Notices:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:__________________________________ Attn:_________________________________
Telephone Number:______________________ Telephone Number:_____________________
Telefax Number:________________________ Telefax Number:_______________________
DATA CONTROL SYSTEMS, INC. RENAISSANCE SOFTWARE, INC.
By: ▇.▇▇▇▇ By: ▇. ▇▇▇▇
---------------------------------- ----------------------------------
Name: ▇.▇▇▇▇ Name: ▇.▇▇▇▇
Title: CEO Title: CEO
Address for Notices: Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:__________________________________ Attn:_________________________________
Telephone Number:______________________ Telephone Number:_____________________
Telefax Number:________________________ Telefax Number:_______________________
-8-
Attachment 1
[SAMPLE FORM OF ASSIGNMENT LETTER TO BE PUT ON VERTEX STATIONERY]
[Date]
[Name & Address of Your Customer]
Gentlemen:
Please be advised that under a financial arrangement between Laurus Capital
Management, L.L.C. ("Laurus") and us, payment of the invoices identified on the
schedule attached have been assigned to Laurus. Effective immediately, please
remit payments for these invoices as follows:
By Check: By Wire:
LAURUS CAPITAL MANAGEMENT, LLC Bank Name: Citibank, N.A.
c/o ACCESS CAPITAL, INC. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
▇-▇▇▇-▇▇▇▇ ABA#: ▇▇▇▇▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇ (NY) Swift Code: ▇▇▇▇▇▇▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇ (FAX) Acct Name: Access Capital, Inc.
Acct No.: 3759-1924
This assignment is operative immediately and cannot be modified or revoked,
nor can payment of any of these invoices be directed to any other party than
Access Capital, Inc. without the prior written consent of Laurus, which
institution is relying upon this assignment.
Thank you for your cooperation in this matter.
Very truly yours,
--------------------------------------
Name:
Title:
-9-
Attachment 2
Initial Lien & Litigation Searches
UCC Filing Fees
Dun & Bradstreet Reports
Wire Transfer Fees
Bounced Check Charges
Federal Express Charges
Quarterly Search Updates
-10-
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VERTEX INTERACTIVE, INC.,
THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, VERTEX INTERACTIVE, INC., a New Jersey corporation
(hereinafter called the "Borrower"), hereby promises to pay to LAURUS MASTER
FUND, LTD., ▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇. ▇▇▇ ▇▇▇▇ G.T., Queensgate
House, South Church Street, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the
"Holder") on order, without demand, the outstanding Overadvance (as defined in
the Accounts Receivable Purchase Agreement among the Holder, the Borrower, Data
Control Systems, Inc., Positive Developments, Inc. and Renaissance Software,
Inc. dated as of February 27, 2002, as the same may be amended, modified or
supplemented from time to time (the "Purchase Agreement")) as may be due and
owing by the Borrower to the Holder from time to time under the terms of the
Purchase Agreement, with simple interest accruing at the annual rate of 7%, on
February 27, 2005 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a five(5) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of twenty percent (20%) per annum shall apply to the
amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert, interest
payable on this Note shall accrue at the annual rate of seven percent (7%) and
be payable in arrears commencing March 31, 2002 and quarterly thereafter, and on
the Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.
1
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below. Borrower acknowledges that the Holder shall be entitled to exercise
the conversion rights hereunder each time an Overadvance (as defined in the
Purchase Agreement) shall be in existence under the terms of the Purchase
Agreement.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the issuance of
this Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, and at the Holder's
election, the interest accrued on the Note, (the date of giving of such notice
of conversion being a "Conversion Date") into fully paid and nonassessable
shares of common stock of the Borrower (the "Conversion Shares") as such stock
exists on the date of issuance of this Note, or any shares of capital stock of
the Borrower into which such stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price as defined in Section 2.1(b)
hereof (the "Conversion Price"), determined as provided herein. Upon delivery to
the Borrower of a Notice of Conversion as described below of the Holder's
written request for conversion, the Borrower shall issue and deliver to the
Holder within three business days from the Conversion Date that number of shares
of Common Stock for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Borrower will deliver accrued but
unpaid interest on the Note through the Conversion Date directly to the Holder
on or before the Delivery Date (as defined below). The number of shares of
Common Stock to be issued upon each conversion of this Note shall be determined
by dividing that portion of the principal of the Note to be converted and
interest, if any, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be the lower of (i) ninety two percent (92%) of
the closing price for the Common Stock on the day the Overadvance is created
("Maximum Base Price"); or (ii) eighty eight percent (88%) of the average of the
three lowest closing prices for the Common Stock on the NASD OTC Bulletin Board,
NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange,
or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock, the "Principal
Market"), or on any securities exchange or other securities market on which the
Common Stock is then being listed or traded, for the thirty (30) trading days
prior to but not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1 (a) and 2.1(b),
2
shall be subject to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at any time shall
consolidate with or merge into or sell or convey all or substantially all its
assets to any other corporation, this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence the
right to purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of such
consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or Holder. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or Holder after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result of
such change with respect to the Common Stock immediately prior to such
reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater, or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.
(d) During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the full conversion of
this Note. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the Holder in
whole or in part as described in Section 2.1(a) hereof and Article 4. Upon
partial conversion of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be issued by the
3
Borrower to the Holder for the principal balance of this Note and interest which
shall not have been converted or paid.
ARTICLE III
REGISTRATION RIGHTS
3.1 Registration Rights Granted. The Borrower hereby grants the
following registration rights to the Holder.
(a) In the event that the Registration Statement pursuant to 3.1(b)
below is not declared effective by the SEC or is filed and declared effective
but shall thereafter cease to be effective (without being succeeded immediately
by an additional registration statement filed and declared effective), on one
occasion, for a period commencing 180 days after the date hereof, but not later
than four (4) years after the date hereof (the "Request Date"), the Borrower,
upon a written request therefor from the Holder (the shares issuable with
respect to this Note, being, the "Registrable Securities"), shall prepare and
file with the SEC a registration statement under the Securities Act covering the
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration statement.
As a condition precedent to the inclusion of Registrable Securities, the Holder
shall provide the Borrower with such information as the Borrower reasonably
requests. The obligation of the Borrower under this Section 3.1 shall be limited
to one registration statement.
(b) The Borrower shall file with the SEC no later than May 31, 2002
(the "Filing Date"), and use its reasonable commercial efforts to cause to be
declared effective a registration statement within 90 days of the Filing Date in
order to register the Registrable Securities for resale and distribution under
the Securities Act (the "Effective Date"). The Borrower will register not less
than a number of shares of Common Stock in the aforedescribed registration
statement that is equal to 200% of the Registrable Securities at the Conversion
Prices set forth in this Note, that would be in effect on the date hereof or the
date of filing of such registration statement (employing the conversion price
which would result in the greater number of Shares), assuming the conversion of
100% of the this Note. The Registrable Securities shall be reserved and set
aside exclusively for the benefit of the Holder, and not issued, employed or
reserved for anyone other than the Holder. Such registration statement will be
promptly amended or additional registration statements will be promptly filed by
the Borrower as necessary to register additional shares to allow the public
resale of all Common Stock included in and issuable by virtue of the Registrable
Securities. Except the securities listed on Schedule ____ and securities
contemplated with the Plus transaction, no securities of the Borrower other than
the Registrable Securities will be included in the registration statement
described in this Section 3.1(b) without the approval of the Holder.
4
3.2 Registration Procedures. If and whenever the Borrower is required
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Borrower will, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided);
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the later
of: (i) twelve months after the Maturity Date of this Note or (ii) four years
after the date hereof, and comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Holder's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Holder, and to each underwriter if any, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
to facilitate the public sale or their disposition of the securities covered by
such registration statement;
(d) use its best efforts to register or qualify the Holder's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Holder and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Borrower shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Borrower
is then listed;
(f) immediately notify the Holder and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Borrower has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(g) make available for inspection by the Holder, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Holder or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Borrower, and cause the Borrower's
officers,
5
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
3.3 Provision of Documents.
(a) At the request of the Holder, provided a demand for registration
has been made pursuant to Section 3.1(a), the Registrable Securities will be
included in a registration statement filed pursuant to this Article 3.
(b) In connection with each registration hereunder, the Holder will
furnish to the Borrower in writing such information and representation letters
with respect to itself and the proposed distribution by it as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws. In connection with each registration pursuant to Article 3
covering an underwritten public offering, the Borrower and the Holder agree to
enter into a written agreement with the managing underwriter in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Borrower's size and
investment stature.
3.4 Non-Registration Events. The Borrower and the Holder agree that
the Holder will suffer damages if any registration statement required under
Section 3.1(a) above is not filed within 60 days after written request by the
holder and not declared effective by the SEC within 180 days after such filing,
and maintained in the manner and within the time periods contemplated by Article
3 hereof, and it would not be feasible to ascertain the extent of such damages
with precision. Accordingly, if (i) the Registration Statement described in
Section 3.1(a) is not filed within 60 days of such written request, or is not
declared effective by the SEC on or prior to the date that is 180 days after
such filing, or (ii) the registration statement described in Section 3.1(b) is
not filed on or before the Filing Date or not declared effective on or before
the sooner of the Effective Date, or within five days of receipt by the Borrower
of a communication from the SEC that the registration statement described in
Section 3.1(b) will not be reviewed, or (iii) any registration statement
described in Section 3.1(a) or (b) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of
time which shall exceed 60 days in the aggregate per year but not more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
date the Registration Statement is declared effective) (each such event referred
to in this Section 3.4 is referred to herein as a "Non-Registration Event"),
then, for so long as such Non-Registration Event shall continue, the Borrower
shall pay in cash as Liquidated Damages to each holder of any Registrable
Securities an amount equal to one percent (1%) per month or part thereof during
the pendency of such Non-Registration Event of the principal of this Note,
whether or not converted, then owned of record by such holder or issuable as of
or subsequent to the occurrence of such Non-Registration Event. Payments to be
made pursuant to this Section shall be paid at the Borrower's option at the end
of any such month in (x) cash by payment of immediately available funds or (y)
by adding the
6
aggregate amount us such Liquidated Damages to the principal amount of the Note.
It shall be deemed a Non-Registration Event to the extent that all the Common
Stock included in the Registrable Securities and underlying the Securities is
not included in an effective registration statement as of and after the
Effective Date at the conversion prices in effect from and after the Effective
Date.
3.5 Expenses. All expenses incurred by the Borrower in complying with
Article 3, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Borrower, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the NASD, transfer taxes and fees of transfer agents are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Holder beyond those included in
Registration Expenses, are called "Selling Expenses."
The Borrower will pay all Registration Expenses in connection with the
registration statement under Article 3. All Selling Expenses in connection with
each registration statement under Article 3 shall be borne by the Holder.
3.6 Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the Securities Act pursuant to Article 3, the Borrower will indemnify and hold
harmless Holder, each officer of Holder, each director of Holder, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls Holder or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Holder, or such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement contained in any registration statement under which such
Registrable Securities was registered under the Act pursuant to Article 3, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Holder, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Borrower will not be liable in any such case if and to the extent that any such
loss; claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Holder, the underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Article 3, the Holder will indemnify and
hold harmless the Borrower, and each person, if any,
7
who controls the Borrower within the meaning of the Securities Act, each officer
of the Borrower who signs the registration statement and each director of the
Borrower, against all losses, claims, damages or liabilities, joint or several,
to which the Borrower or such officer or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (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 under which such Registrable Securities were
registered under the Securities Act pursuant to Article 3, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Borrower and each
such officer or director for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Holder will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to Holder, as such, furnished in writing
to the Borrower by Holder specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of the Holder
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of the Registrable Securities sold by the Holder under such registration
statement bears to the total public offering price of all securities sold
thereunder.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 3.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 3.6(c) if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 3.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with
8
the reasonable expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Holder, or any controlling person of the Holder, makes a claim for
indemnification pursuant to this Section 3.6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 3.6 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of the Holder
or controlling person of the Holder in circumstances for which indemnification
is provided under this Section 3.6; then, and in each such case, the Borrower
and the Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Holder is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement.
ARTICLE IV
MECHANICS OF CONVERSION
4.1 Mechanics of Conversion.
(a) Upon the conversion of the Note or part thereof, the Borrower
shall, at its own cost and expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Borrower's transfer agent
shall issue stock certificates in the name of the Holder (or its nominee) or
such other persons as designated by the Holder and in such denominations to be
specified representing the number of Conversion Shares. The Borrower warrants
that no instructions other than these instructions have been or will be given to
the transfer agent of the Borrower's Common Stock and that the Conversion Shares
issued will be unlegended, free-trading, and freely transferable, and will not
contain a legend restricting the resale or transferability of the Conversion
Shares, provided the Holder has notified the Borrower of the Holder's intention
to sell the Conversion Shares and the Conversion Shares are included in an
effective registration statement or are otherwise exempt from registration when
sold.
(b) Holder will give notice of its decision to exercise its right to
convert the Note or part thereof by telecopying or otherwise delivering an
executed and completed notice of the number of shares to be converted to the
Borrower (the "Notice of Conversion"). The Holder will not be required to
surrender the Note until the Holder receives a certificate or certificates, as
the case may be, representing the Conversion Shares or until the Note has been
fully satisfied. Each date on which a Notice of
9
Conversion is telecopied or delivered to the Borrower in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Borrower will or will
cause the transfer agent to transmit the Borrower's Common Stock certificates
representing the shares issuable upon conversion of the Note (and a certificate
representing the balance of the Notes not so converted, if requested by Holder)
to the Holder via express courier for receipt by such Holder within five
business days after receipt by the Borrower of the Notice of Conversion (the
"Delivery Date").
(c) The Borrower understands that a delay in the delivery of the
Conversion Shares in the form required pursuant to this Article, or the
Mandatory Redemption Payment described in Section 4.2 hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as defined in Section 4.2)
could result in economic loss to the Holder. As compensation to the Holder for
such loss, the Borrower agrees to pay late payments to the Holder for late
issuance of the Conversion Shares in the form required pursuant to Article 4
hereof upon conversion of the Note or late payment of the Mandatory Redemption
Payment, in the amount of $10 per business day after the Delivery Date or
Mandatory Redemption Payment Date, as the case may be, for each $10,000 Note
principal being converted or redeemed. The Borrower shall pay any payments
incurred under this Section in immediately available funds upon demand.
Furthermore, in addition to any other remedies which may be available to the
Holder, in the event that the Borrower fails for any reason to effect delivery
of the Conversion Shares by the Delivery Date or make payment by the Mandatory
Redemption Payment Date, the Holder will be entitled to revoke all or part of
the relevant Notice of Conversion or rescind all or part of the notice of
Mandatory Redemption by delivery of a notice to such effect to the Borrower
whereupon the Borrower and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice, except that late
payment charges described above shall be payable through the date notice of
revocation or rescission is given to the Borrower.
(d) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum amount
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to a Holder and thus refunded to the
Borrower.
4.2 Mandatory Redemption. In the event the Borrower is unable to issue
Conversion Shares on a Delivery Date or at any time when a Note is convertible,
for any reason, then at the Holder's election, the Borrower must pay to the
Holder five (5) business days after request by the Holder or on the Delivery
Date (if requested by the Holder) a sum of money determined by multiplying the
principal of the Note required to be converted and not so converted (or
otherwise not convertible, as applicable) by 130%, together with accrued but
unpaid interest thereon ("Mandatory Redemption Payment"). The Mandatory
Redemption Payment must be received by the Holder on the same date as the
Conversion Shares are otherwise deliverable or within five (5) business days
after request, whichever is sooner ("Mandatory Redemption Payment Date"). Upon
receipt of the Mandatory Redemption
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Payment, the corresponding Note principal and interest will be deemed paid and
no longer outstanding.
4.3 Maximum Conversion. Neither the Holder nor any other holder
(including any Affiliate of the Holder) of all or a portion of the Note shall be
entitled to convert that amount of a Note or Notes in connection with that
number of shares of Common Stock which would result in the aggregate beneficial
ownership after giving effect to all prior conversions of any portion of the
Note by the Purchase or any Holder (including for this purpose all shares of
Common Stock received or to be received upon conversion of the Note, even if
such shares of Common Stock are no longer beneficially owned) by the Holder and
any Holder as a group of more than 4.99% on a Conversion Date (as adjusted for
stock splits, stock dividends, combinations or other recapitalizations). A
Holder may void the conversion limitation described in this Section 4.3 upon an
Event of Default under the Note. For the purposes of hereof, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. Holder shall not be entitled to convert on
a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder on a Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this proviso is being made
on a Conversion Date, which would result in beneficial ownership by the Holder
of more than 4.99% of the outstanding shares of Common Stock of the Borrower on
such Conversion Date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. Subject to
the foregoing, a Holder shall not be limited to aggregate conversions of only
4.99%. A Holder may void the conversion limitation described in this Section 8.3
upon 75 days prior notice to the Borrower or upon an Event of Default under the
Note. A Holder may allocate which of the equity of the Borrower deemed
beneficially owned by such Holder shall be included in the 4.99% amount
described above and which shall be allocated to the excess above 4.99%.
4.4 Injunction - Posting of Bond. In the event the Holder shall elect
to convert the Note or part hereof, the Borrower may not refuse conversion for
any reason, unless an injunction from a court, on notice, restraining and or
enjoining conversion of all or part of said Note shall have been sought and
obtained and the Borrower posts a surety bond for the benefit of the Holder in
the amount of 130% of the amount of the Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent it obtains judgment.
4.5 Buy-In. In addition to any other rights available to the Holder,
if the Borrower fails to deliver to the Holder Conversion Shares by the Delivery
Date and if after the Delivery Date the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Holder of the Common Stock which the Holder anticipated receiving
upon such conversion (a "Buy-In"), then the Borrower shall pay in cash to the
Holder (in addition to any remedies available to or elected by such Holder) the
amount by which (A) the Holder's total purchase
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price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (B) the aggregate principal and/or interest amount of the
Note, for which such conversion was not timely honored, together with interest
thereon at a rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as liquidated
damages and not as a penalty). For example, if the Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 of Note principal and/or interest,
the Borrower shall be required to pay the Holder $1,000, plus interest. The
Holder shall provide the Borrower written notice indicating the amounts payable
to the Holder in respect of the Buy-In.
4.6 NASDAQ Approval. The Borrower and the Holder agree that until the
Borrower either obtains shareholder approval of the issuance of the Securities,
or an exemption from NASDAQ's corporate governance rules as they may apply to
the Securities, and an opinion of counsel reasonably acceptable to the Holder
that NASDAQ's corporate governance rules do not conflict with nor may result in
a delisting of the Borrower's common stock from the National Market (the
"Approval") upon the conversion of the Notes, the Holder may not receive upon
conversion of the Notes more than the number of common shares greater than 19.9%
of the shares of Borrower's common stock outstanding on the Closing Date. The
Borrower covenants to use its best efforts to obtain the Approval required
pursuant to the NASDAQ's corporate governance rules to allow conversion of this
Note and interest thereon within 90 days of written request by the Holder (the
"Trigger Date"). The Borrower further covenants to use its best efforts to file
the preliminary proxy statement relating to the Approval with the Commission on
or before thirty days after the Trigger Date ("Proxy Filing Date"). The Borrower
further covenants to use its best efforts to obtain the Approval no later than
ninety days after the Trigger Date ("Approval Date"). The Borrower's failure to
(i) file the proxy on or before the Proxy Filing Date; or (ii) the Borrower's
failure to obtain the Approval on or before the Approval Date (each being an
"Approval Default") shall be deemed an Event of Default under the Note, but only
to the extent that the Note and interest thereon may not be converted due to the
Borrower's failure to obtain such Approval.
ARTICLE V
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, all without demand, presentment or
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:
5.1 Failure to Pay Principal or Interest. The Borrower fails to pay
any installment of principal or interest hereon or on any other promissory note
issued pursuant to the Purchase Agreement, when due, a notice to cure the
default is provided by the Holder to the Borrower and such failure continues for
a period of five (5) days after such notice is provided.
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5.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of seven (7) days after written notice
to the Borrower from the Holder.
5.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading.
5.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
5.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower.
5.6 Delisting. Delisting of the Common Stock from all Principal
Markets or the Borrower's failure to comply with the conditions for such
listings.
5.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension separately for the Common Stock lasting for longer than 48 hours.
5.8 Failure to Deliver Common Stock or Replacement Note. The
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note, or if required a replacement Note.
5.9 Registration Default. The occurrence of a Non-Registration Event
as described in Section 3.4 of the Note.
5.10 Approval Default. The occurrence of an Approval Default as
described in Section 4.6 of the Note.
5.11 Default Under Related Agreement. An Event of Default occurs under
and as defined in any one or more of the following agreements which is not cured
during any applicable cure or grace period: the Accounts Receivable Purchase
Agreement dated as of the date hereof between Borrower, Holder and certain of
the Borrower's Subsidiaries, as such agreement maybe amended, modified and
supplemented from time to time.
ARTICLE VI
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MISCELLANEOUS
6.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
6.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address as set forth on the signature page to the Purchase
Agreement executed in connection herewith and a copy to the Law Offices of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ PC, attention ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, and to the Holder at the
address set forth on the signature page to the Purchase Agreement for such
Holder, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, or at such other
address as the Borrower or the Holder may designate by ten days advance written
notice to the other parties hereto. A Notice of Conversion shall be deemed given
when made to the Borrower pursuant to the Purchase Agreement.
6.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
6.4 Assignability. This Note shall be binding upon the Borrower and
its successors and assigns.
6.5 Cost of Collection. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
6.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
14
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note.
6.7 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
6.8 Security Interest. The holder of this Note has been granted a
security interest in accounts receivable of the Borrower, as more fully
described in a Accounts Receivable Purchase Agreement.
6.9 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any
party against the other.
[THIS SPACE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
name by its Chief Executive Officer on this __ day of February, 2002.
VERTEX INTERACTIVE, INC.
By: [Signature Illegible]
-------------------------------
WITNESS:
[Signature Illegible]
-----------------------------
15
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $__________ of the principal and
$_____________ of the interest due on the Note issued by VERTEX INTERACTIVE,
INC. on February 27, 2002 into Shares of Common Stock of VERTEX INTERACTIVE,
INC. (the "Borrower") according to the conditions set forth in such Note, as of
the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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