-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OFgU4ElFCiqD4X/fe+aQMVPUaUfAEnrDIhWS1GvobmnshyCwIVmSKHRyHfewPYeh b8FNrUCZpmtMuOOyaEebog== /in/edgar/work/20000915/0000950134-00-007914/0000950134-00-007914.txt : 20000923 0000950134-00-007914.hdr.sgml : 20000923 ACCESSION NUMBER: 0000950134-00-007914 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000901 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000915 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDGE TECHNOLOGY GROUP INC CENTRAL INDEX KEY: 0001015172 STANDARD INDUSTRIAL CLASSIFICATION: [7997 ] IRS NUMBER: 133778895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-20995 FILM NUMBER: 723974 BUSINESS ADDRESS: STREET 1: 901 YAMATO ROAD SUITE 175 CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5617507559 MAIL ADDRESS: STREET 1: 901 YAMATO ROAD SUITE 175 STREET 2: SUITE 175 CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: VISUAL EDGE SYSTEMS INC DATE OF NAME CHANGE: 19960604 8-K 1 d80199e8-k.txt FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 1, 2000 EDGE TECHNOLOGY GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 0-20995 13-3778895 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 901 Yamato Road, Suite 175, Boca Raton, Florida 33431 (Address of principal executive offices) (561) 750-7559 (Registrant's telephone number, including area code) VISUAL EDGE SYSTEMS INC. (Former Name of Registrant, if Changed Since Last Report) 2 ITEM 5. OTHER EVENTS. CONVERSION OF CONVERTIBLE SECURITIES Edge has completed its corporate reorganization announced in July 2000. Infinity Investors Limited, Glacier Capital Limited and Summit Capital Limited, which were the holders of the convertible notes and shares of Series A-2 Convertible Preferred Stock (which are referred to as the convertible securities) issued by Edge, have converted all the convertible securities based on a formula of four (4) shares of common stock for each $1.00 of principle and interest outstanding through August 1, 2000 under the convertible notes and for each $1.00 of liquidation amount of the Series A-2 Preferred Stock and of unpaid dividends through August 1, 2000. The number of shares of common stock issued upon this conversion was 6,689,165 million after taking into account the reverse stock split discussed below. As a result of the conversion of the convertible securities, the four (4) for one (1) reverse stock split discussed below and the other transactions disclosed in this Report, Edge has 16,069,786 shares of common stock outstanding, 9,152,412 shares of which are held by Infinity, Glacier and Summit. CORPORATE CHANGES In addition to the transactions described above in this Report, Edge has taken the following actions effective as of September 1, 2000: o Edge has changed its name from Visual Edge Systems, Inc. to Edge Technology Group, Inc. o Edge has effected a four (4) for one (1) reverse stock split. o Edge has expanded the size of the Board of Directors to five (5) and elected Pierre Koshakji as a director and Johann Schotte as the Chairman of the Board. o Edge has elected Pierre Koshakji as the Chief Executive Officer, President and Secretary of Edge, and Thomas Peters as the Executive Vice President. o Edge has effected the sale and issuance of approximately 1,385,334 shares of common stock at a purchase price of $1.50 for each share, resulting in net proceeds of approximately $2,078,000 to Edge. o Edge has issued warrants to purchase approximately 692,667 shares of common stock at an exercise price of $3.00 for each share. o Edge has paid Infinity approximately $39,000 of principal plus all accrued and unpaid interest, an amount which has been advanced by Infinity to Edge for working capital purposes. o Edge has paid Infinity approximately $180,000 of principal plus all accrued and unpaid interest, an amount which has been advanced by Infinity to Edge for working capital purposes. o Edge has issued Marion Interglobal, Ltd. 83,333 shares of Edge's common stock in satisfaction of approximately $125,000 that has been advanced by Marion Interglobal to Edge for working capital purposes. Edge's common stock will trade on the OTC Bulletin Board under the trading symbol, "EDGED" for twenty trading days starting on September 6, 2000. After that time, the additional letter "D" will be removed and Edge's ticker symbol will return to "EDGE". The transfer of the common stock of Edge from Infinity to Entertainment Education Enterprises Corporation, or E3, previously discussed in Edge's Form 8-K filled with the Securities and Exchange on July 17, 2000 has not occurred. Infinity, Glacier and Summit waived this aspect to their conversion of the convertible securities. 3 PURCHASE POOLING.COM Purchase Pooling Investment Fund and Odyssey Ventures Online Holdings, S.A. have contributed 9,593,824 shares and 975,000 shares, respectively, of Series A Convertible Preferred Stock of Purchase Pooling.com, Inc. to Edge in exchange for a total of 2,913,630 shares of Edge common stock. PurchasePooling.com, Inc. is the first web-base demand aggregator enabling governmental and educational entities as well as businesses to save significantly on large-ticket capital items by combining their purchasing power nationwide and globally. HENCIE, INC. Edge remains in negotiations with Hencie, Inc. to close the investment transaction previously disclosed in Edge's Form 8-K filed with the Securities and Exchange Commission on July 17, 2000. Infinity, Glacier and Summit waived this provision relating to the conversion of the convertible securities. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) EXHIBITS 3.1 Amended and Restated Certificate of Incorporation of Edge 3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge 4.1 Amended and Restated Certificate of Incorporation of Edge (filed as Exhibit 3.1 in this Report) 4.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge (filed as Exhibit 3.2 in this Report) 4.3 Form of Common Stock Specimen 10.1 Employment Agreement, dated as of September 1, 2000, between Pierre Koshakji and Edge 99.1 Press Release dated September 5, 2000 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EDGE TECHNOLOGY GROUP, INC. (Registrant) Date: September 15, 2000 By:/s/ Pierre Koshakji ------------------------------------- Pierre Koshakji Chief Executive Officer and President 5 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Amended and Restated Certificate of Incorporation of Edge 3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge 4.1 Amended and Restated Certificate of Incorporation of Edge (filed as Exhibit 3.1 in this Report) 4.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of Edge (filed as Exhibit 3.2 in this Report) 4.3 Form of Common Stock Specimen 10.1 Employment Agreement, dated as of September 1, 2000, between Pierre Koshakji and Edge 99.1 Press Release dated September 5, 2000
EX-3.1 2 d80199ex3-1.txt AMENDED/RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF VISUAL EDGE SYSTEMS INC. Visual Edge Systems Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the corporation is Visual Edge Systems Inc. and the name under which the corporation was originally incorporated is Golf Vision, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State was July 15, 1994 as amended by the Certificates of Amendment dated March 16, 1995, March 29, 1995, May 2, 1996, and the Certificate of Designation, Preferences and Rights of Series A-2 Convertible Preferred Stock dated December 31, 1998 (collectively, the "Original Certificate of Incorporation"). 2. This Amended and Restated Certificate of Incorporation (the "Certificate") amends and restates the Corporation's Original Certificate of Incorporation in its entirety. The Certificate was duly adopted by the Board of Directors of the Corporation in accordance with the provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law, as amended from time to time (the "DGCL"), and was duly adopted by the stockholders of the Corporation in accordance with the applicable provisions of Sections 228, 242 and 245 of the DGCL. 3. The text of the Original Certificate of Incorporation is hereby further amended so that as amended and restated, the Corporation's Certificate of Incorporation shall now read in its entirety as follows: ARTICLE ONE Name The name of the corporation is Edge Technology Group, Inc. (the "Corporation"). ARTICLE TWO Registered Agent The address of the Corporation's registered office in the State of Delaware is 615 DuPont Highway, in the city of Dover, County of Kent. The name of its registered agent at such address is Capitol Services, Inc. 2 ARTICLE THREE Purpose The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity which corporations may be organized under the General Corporation Law of Delaware. ARTICLE FOUR Capital Stock A. The Corporation shall have authority to issue a total of ninety five million (95,000,000) shares, consisting of (a) ninety million (90,000,000) shares of common stock, par value $.01 per share ("Common Stock"), and five million (5,000,000) shares of preferred stock, without par value. The preferred stock may be issued from time to time in one or more series and with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and qualifications, or restrictions thereof as shall be stated and expressed in this Certificate or in any amendment hereto, or in a resolution adopted by the board of directors. B. There is hereby established a series of the authorized preferred stock of the Corporation, $.01 par value per share, which series shall be designated as "Series A-2 Cumulative Convertible Redeemable Preferred Stock," and which shall consist of Ten Thousand (10,000) shares (collectively, the "Series A-2 Shares" or singularly, a "Series A-2 Share") and shall have the following dividend rights, voting rights, conversion rights, terms of redemption, redemption prices, liquidation preferences and other rights, qualifications, limitations and restrictions. 1. DIVIDEND RIGHTS 1.1 A. Beginning on January 1, 2000, the holder of record of each Series A-2 Share (a "Holder") as of the Record Date (as defined below) shall be entitled to receive, when, as and if declared by the Corporation's Board of Directors or a duly authorized committee thereof, on March 31, June 30, September 30 and December 31 of each year (each a "Dividend Payment Date"), cumulative dividends per Series A-2 Share (the "Dividends") in either (i) cash equal to the "Cash Rate" (as hereinafter defined) multiplied by the Liquidation Preference (as defined in Paragraph 2.1 and as adjusted below) out of the funds of the Corporation legally available therefor or (ii) at the option of the Corporation or if the Corporation is legally restricted from paying such Dividends in cash, in shares of Common Stock (as hereinafter defined) equal to the "Stock Rate" (as hereinafter defined) multiplied by the Liquidation Preference (as similarly defined and adjusted), for each Quarterly Payment Period (as hereafter defined) that such Series A-2 Share is outstanding; PROVIDED, HOWEVER, that dividends shall not be paid in shares of Common Stock unless the Corporation has previously filed, and the U.S. Securities and Exchange Commission (the "Commission") has previously declared effective, a Registration Statement permitting the public resale of such shares from time to time by the Holders pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), -2- 3 and such Registration Statement remains available for use by the Holders (the "Share Registration Event") and PROVIDED, FURTHER, that upon liquidation or redemption, or following an Event of Default (as defined in Paragraph 1.5), accrued and unpaid Dividends will be paid in cash only. The Cash Rate and the Stock Rate shall be collectively referred to as the "Dividend Rate." To the extent permitted by applicable law and not prohibited pursuant to the terms of applicable credit instruments, senior securities or this Certificate, the Board of Directors shall declare Dividends on each Dividend Payment Date (or, if such day is not a business day, on the next business day thereafter). Notwithstanding any of the foregoing provisions of this Paragraph 1.1.A, the Corporation shall not pay, and no Holder shall be entitled to receive, any Dividends during the calendar year of 1999. B. A "Quarterly Payment Period" shall mean the three-month period ending on March 31, June 30, September 30 and December 31 of each year. C. The "Cash Rate" shall mean an annual dividend rate of 8.25% (i.e., a quarterly dividend rate of 2.0625%), PROVIDED, HOWEVER, the "Cash Rate" shall mean an annual dividend rate of 18.00% (i.e., a quarterly dividend rate of 4.5%) immediately upon the occurrence of an Event of Default payable in cash. D. The "Stock Rate" shall mean an annual dividend rate of 8.25% (i.e., a quarterly dividend rate of 2.0625%) PROVIDED, HOWEVER, the "Stock Rate" shall mean an annual dividend rate of 18.00% (i.e., a quarterly dividend rate of 4.5%) immediately upon the occurrence of an Event of Default (subject to possible adjustment in the event of fractional shares as set forth in the following sentence) payable in shares of Common Stock of the Corporation such that the number of shares of Common Stock issued as Dividends shall be determined by dividing the dollar amount of interest then owing by the Conversion Price (as defined in Paragraph 4.2 below). Dividends paid at the Stock Rate shall not be paid in fractional shares (all such fractional shares being rounded up to the nearest whole number of shares). E. Beginning on January 1, 2000, dividends shall accrue (whether or not paid) during each Quarterly Payment Period from the Dividend Payment Date immediately preceding such Quarterly Payment Period to the earlier to occur of a conversion event specified in Paragraph 4 hereof, a redemption event specified in Paragraph 5 hereof or the last day of such Quarterly Payment Period. Dividends shall be calculated on the basis of a 90-day Quarterly Payment Period and the actual number of days elapsed. The Holder of any Series A-2 Shares which are the subject of a conversion pursuant to Paragraph 4 shall, on the Conversion Date (as defined in Paragraph 4.5), be entitled to receive accrued Dividends on such Series A-2 Shares which have not been declared and paid on or before such Conversion Date. The Holder of any Series A-2 Shares which are the subject of a redemption pursuant to Paragraph 5 shall, on the redemption date (as specified in paragraph 5.2.A), be entitled to receive dividends on such Series A Shares which have not been declared and paid on or before such redemption date. For any period with respect to which the Dividend is not fully paid as described herein, such accrued but unpaid Dividends shall be added to the Liquidation Preference of the Series A-2 Shares effective at the beginning of the period next succeeding the period as to which such Dividends were not paid, and shall thereafter -3- 4 accrue additional Dividends at the applicable Dividend Rate. Any Dividend payment made on Series A-2 Shares shall be credited against the earliest accrued but unpaid Dividend which has been added to the Liquidation Preference of the Series A-2 Shares pursuant to this Paragraph 1.1.E and shall reduce the Liquidation Preference by the amount of the Dividend paid. Notwithstanding any of the foregoing provisions of this Paragraph 1.1.E, no Dividends shall accrue during the calendar year 1999, and no Dividends which, absent the provisions of this sentence, would have accrued during the calendar year 1999 shall be added to the Liquidation Preference of the Series A-2 Shares. 1.2 Dividends shall to the extent permitted by applicable law be declared at least twenty (20) business days prior to the next Dividend Payment Date for payment on the next Dividend Payment Date to the Holders of record on the date determined in such declaration, which date shall in no event be more than fifteen (15) business days after the date of declaration (the "Record Date"). Dividends shall be payable on the earlier to occur of a conversion event specified in Paragraph 4 hereof or a redemption transaction referenced in Paragraph 5 herein or each Dividend Payment Date (or if any such day is not a business day, the next succeeding business day). 1.3 So long as any Series A-2 Shares are outstanding, the Corporation shall not declare, pay or set aside for payment any dividend (other than in shares of Junior Stock (as hereinafter defined)) or other distribution in respect of its Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for any consideration (other than shares of its Junior Stock) any shares of its Junior Stock, any warrants, rights, calls or options exercisable for any shares of Junior Stock unless all dividends accumulated and unpaid with respect to the Series A-2 Shares are simultaneously declared and paid. "Junior Stock" means Common Stock or any other series of preferred stock of the Corporation which ranks junior to or on a parity with (as determined pursuant to Paragraph 6) the Series A-2 Shares. "Common Stock" means the common stock, par value $.01 per share, of the Corporation and any share of successor or replacement stock. 1.4 If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: A. In Event of Default (as defined in Section 12.1 of that Bridge Securities Purchase Agreement, dated June 13, 1997, by and among the Corporation and one or more of the Holders, as subsequently amended (the "Purchase Agreement")) has occurred; B. Dividend Payment Date has passed for three (3) business days without declaration and payment (or the setting aside for payment) of the full Dividend contemplated hereby on all outstanding Series A-2 Shares; C. The Corporation has failed to timely observe or perform any covenant contained in this Certificate including, without limitation, any conversion contemplated by Paragraph 4 hereof or any redemption contemplated by Paragraph 5 hereof; -4- 5 then, the Cash Rate and the Stock Rate shall be increased as specified in Paragraph 1.1.C and 1.1.D above until the aggregate deficiency shall be declared and fully paid. 2. RIGHTS ON LIQUIDATION 2.1 In the event of the liquidation, dissolution, winding-up or sale or other disposition of all or substantially all of the assets of the Corporation, whether voluntary or involuntary (each a "Liquidation"), the Holder of a Series A-2 Share shall be entitled to receive with respect to such Series A-2 Share, after the satisfaction of all distributions to holders of other series of preferred stock, if any, which are expressly senior in liquidation preference to the Series A-2 Shares, including any series of preferred stock which is mandatorily redeemable (collectively, the "Senior Payments") but before any distribution is made to or set aside for the holders of Common Stock or any other series of preferred stock of the Corporation, if any, which are junior in liquidation preference to the Series A-2 Shares, cash or any other assets of the Corporation in an amount (or having a fair market value) equal to $1,000 per share (the "Liquidation Preference") plus all accrued but unpaid Dividends, in cash, up to the date of the final distribution in Liquidation. If, after the satisfaction of all Senior Payments, the assets of the Corporation available for distribution to Holders shall be insufficient to permit the payment in full of the amount due the Holders pursuant to this Paragraph 2.1, then the entire assets of the Corporation available for distribution to Holders after the satisfaction of all Senior Payments shall be distributed pari passu among the Holders and the holders of other series of preferred stock which are not junior in liquidation preferences to the Series A-2 Shares, if any, in accordance with their respective liquidation preferences. The fair market value of any assets of the Corporation and the proportion of cash and other assets distributed by the Corporation to the Holders of the Series A-2 Shares shall be reasonably determined in good faith by the Board of Directors. A merger or consolidation of the Corporation with another corporation (or other business entity) or a voluntary sale of all or substantially all of the assets of the Corporation principally in exchange for stock and/or securities of another corporation (all referred to as a "Merger") shall not be deemed a Liquidation if such Merger does not occur as part of a proceeding under Title 11 of the United States Code or any federal or state law for the protection of creditors or relief of debtors. 2.2 After the payment to the holders of the Series A-2 Shares of the full preferential amounts provided for in Paragraph 2.1, the holders of Series A-2 Shares shall have no right or claim to any of the remaining Assets of the Corporation. 3. VOTING RIGHTS 3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3 below, each Holder shall have no voting rights. To the extent Holders of the Series A-2 Shares have the right to vote, each Holder shall be entitled to that number of votes for each share of Series A-2 Shares held by such Holder equal to the total number of shares of Common Stock obtainable upon conversion of such shares of Series A-2 Shares at the current Conversion Price on the record date for the vote which is being taken or, if no such record date is established, at the date such vote is taken or any written consent is solicited. -5- 6 3.2 So long as any of the Series A-2 Shares are outstanding the Corporation will not, without the affirmative vote or consent of the Holders of at least sixty six and two thirds percent (66-2/3%) of the Series A-2 Shares at the time outstanding, given in person or by proxy, either in writing or by a resolution adopted at a meeting called for such purpose, with the Holders of the Series A-2 Shares voting or consenting separately as a class: A. Amend, alter or repeal any of the provisions of the Corporation's Certificate of Incorporation or Bylaws or the resolution providing for the issue of the Series A-2 Shares or pass any shareholder resolution, including such action effected by merger or similar transaction in which the Corporation is the surviving corporation, if such amendment or resolution would affect adversely the preferences, special rights or powers of the Series A-2 Shares except if such action is otherwise permitted under the other provisions of this Paragraph 3.2; B. Increase or decrease (other than by redemption or conversion) the total number of authorized Series A-2 Shares; C. Issue any capital stock which ranks senior to or on a parity with the Series A-2 Shares with respect to rights to receive distributions upon liquidation, dissolution, or winding up of the Corporation or with respect to dividends; or D. Enter into a Merger in which the Corporation is not the surviving corporation; PROVIDED, HOWEVER, that the provisions of this subparagraph D shall not be applicable to any such Merger if the authorized capital stock of the surviving corporation immediately after such Merger shall include only classes or series of stock for which no such consent or vote would have been required pursuant to this Paragraph 3.2 if such class or series had been authorized by the Corporation immediately prior to such Merger or which have the same rights, preferences and limitations and authorized amount as a class or series of stock of the Corporation authorized prior to such Merger and continuing as an authorized class or series at the time thereof. A Merger of the Corporation, or similar transaction in which the holders of its capital stock receive all cash, shall not be deemed to adversely affect the preferences, special rights or powers of the Series A-2 Shares. The authorization or issuance of any other series of preferred stock, if such other series ranks junior to the Series A-2 Shares with respect to rights to receive distributions upon liquidation, dissolution or winding up of the Corporation or with respect to dividends, shall not be deemed to adversely affect the preferences, special rights or powers of the Series A-2 Shares. 3.3 The Holders of a majority of the outstanding Series A-2 Shares (the "Majority Holders") voting separately as a class shall be entitled to appoint one (1) designee to serve on the Board of Directors of the Corporation (the "Designee"). The Majority Holders may, in their discretion, by written notice to the Corporation appoint, remove and replace the Designee, with or without cause at any time and from time to time. Further, without the affirmative vote or approval of the Designee then serving on the Board of Directors of the Corporation following the appointment of such Designee by the Majority Holders, the Corporation may not (i) commence a -6- 7 voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, moratorium or other similar law now or hereafter in affect, (ii) seek the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Corporation (or for any substantial part of its property), (iii) consent to any such relief or to such appointment of or taking possession by any such official in any voluntary case or other proceeding commenced against the Corporation, or (iv) take any corporate or other action to authorize any of the foregoing. 3.4 Copies of all notices sent to the holders of any other class or series of capital stock of the Corporation (including the Common Stock) shall be simultaneously sent to each Holder. 4. CONVERSION RIGHTS 4.1 NUMBER OF SERIES A-2 SHARES. Each Series A-2 Share shall be convertible, at the option of the Holder thereof, at any time and from time to time, into that number of shares of Common Stock obtained by dividing the Liquidation Preference (including any Dividends added to the Liquidation Preference pursuant to Paragraph 1.1.E) of such Series A-2 Share by the Conversion Price determined in accordance with Paragraph 4.2. The Holder is not entitled to any rights of a holder of Common Stock (except to the extent expressly set forth herein) until such Holder has converted all or a portion of his Series A-2 Shares pursuant to the provisions of this Paragraph 4. 4.2 CONVERSION PRICE. The Conversion Price shall be equal to: (i) $1.25 as to the Series A-2 Shares with an aggregate the Liquidation Preference of which shares aggregates to no more than $2,000,000; (ii) if Series A-2 Shares with an aggregate Liquidation Preference of $2,000,000 or more have been converted into shares of Common Stock, then the Conversion Price for the first $2,000,000 of aggregate Liquidation Preference of the Series A-2 Shares shall be governed by clause (i) of this Paragraph 4.2, and the Conversion Price for the excess over $2,000,000, up to a maximum of $1,000,000, of aggregate Liquidation Preference of the Series A-2 Shares shall be $2.00 from the date hereof until June 30, 1999, inclusive, $1.375 from July 1, 1999 until January 1, 2000, inclusive, and $1.25 after January 1, 2000; and (iii) if Series A-2 Shares with an aggregate Liquidation Preference of $3,000,000 or more have been converted into shares of Common Stock, then the Conversion Price for the first $2,000,000 of aggregate Liquidation Preference of the Series A-2 Shares shall be governed by clause (i) of this Paragraph 4.2, the Conversion Price for the next $1,000,000 of aggregate Liquidation Preference of the Series A-2 Shares shall be governed by clause (ii) of this Paragraph 4.2 and the Conversion Price for the excess over $3,000,000 of aggregate Liquidation Preference of the Series A-2 Shares shall be $2.50 from the date hereof until June 30, 1999, inclusive, $2.00 from July 1, 1999 until January 1, 2000, inclusive, and $1.25 thereafter; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default, Conversion Price shall mean the formula F/P where F = the Liquidation Preference of the Series A-2 Shares being converted, together with accrued and unpaid dividends thereon through the Conversion Date, and P = the lesser of (x) $6.00 and (y) the product of 77.5% multiplied by the Market Price (as defined in Paragraph 4.9) as of the Conversion Date (as defined in Paragraph 4.5). "Closing Bid Price" shall mean the closing bid price of the Corporation's Common Stock as reported by Bloomberg L.P. ("Bloomberg") on the principal securities exchange or trading -7- 8 market where such security is listed or traded or, if the foregoing does not apply, the closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no trading price is reported for such security by Bloomberg, then the average of the bid prices of any market-makers for such securities as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the closing bid price cannot be calculated for such security on such date on any of the foregoing bases, the closing bid price of such security on such date shall be the fair market value as mutually determined by the holders of the Series A-2 Shares and the Corporation for which the calculation of the closing bid price requires, and in the absence of such mutual determination, as determined by the Board of Directors of the Corporation in good faith. Notwithstanding the foregoing provisions of Paragraph 4.2, if the Closing occurs under the Agreement and Fourth Amendment to Bridge Securities Purchase Agreement and Related Documents among the Holders and the Corporation, each Series A-2 Share will convert into Common Stock in such a manner that each $1.00 in value of each Series A-2 Share, based upon the Liquidation Preference of such share, together with each $1.00 in value of all accrued and unpaid dividends thereon, shall be convertible into four (4) shares of Common Stock. 4.3 LIMITATION ON CONVERSION. Notwithstanding the conversion rights under this Paragraph 4, in no event shall any Holder be entitled at any one time to convert any Series A-2 Share if the sum of (i) the number of shares of Common Stock beneficially owned by such Holder and any person or entity controlling, controlled by or under common control with such Holder (other than shares of Common Stock which may be deemed beneficially owned through the ownership of unconverted Series A-2 Shares, or other derivative securities convertible into or exchangeable for shares of Common Stock which contain a limitation similar to that set forth herein), and (ii) the number of shares of Common Stock issuable upon the conversion of the Series A-2 Shares with respect to which this determination is being made, would result in beneficial ownership by such Holder and any person or entity controlling, controlled by or under common control with such Holder of more than 9.99% of the outstanding shares of Common Stock after giving effect to such conversion. For purposes hereof, beneficial ownership shall be determined in accordance with Rule 13d-3 of the Exchange Act and Regulations 13D-G thereunder, except as otherwise provided herein. The foregoing limitation shall not apply and shall be of no further force or effect (i) immediately preceding and upon any consummation of any Sale Event (as hereinafter defined), or (ii) following the occurrence of any Event of Default which is not cured within the greater of the time period specified in either (A) a written notice delivered from any Holder to the Corporation or (B) any applicable grace period. "Sale Event" means the occurrence of any of the following: (i) After December 20, 1998 any Person or group of Persons (within the meanings of Sections 13 and 14 of the Exchange Act and the rules and regulations of the Commission relating to such sections) other than the Purchasers shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act and Regulations 13D-G thereunder) of 50.1% or more of the outstanding shares of Common Stock of the Corporation; (ii) Individuals constituting the Board of Directors of the Corporation on December 20, 1998 (together with any new directors whose election by such -8- 9 Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by vote of at least 50.1% of the directors still in office who are either directors as of the date hereof or whose election or nomination for reelection was previously so approved), cease for any reason to constitute at least 66% of the Board of Directors of the Corporation then in office; (iii) Any transfer of all or substantially all of the assets of the Corporation to any Person in a single transaction or a series of related transactions; or (iv) Any consolidation or merger of the Corporation with or into another Person in which the Corporation is (x) not the surviving entity or (y) survives such merger as a wholly owned subsidiary of another Person (other than a merger which is effected solely to change the jurisdiction of incorporation in the Corporation and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock of the surviving entity). 4.4 CONVERSION UPON REORGANIZATION. In case at any time and from time to time the Corporation shall (i) effect a Share Reorganization (as defined in Paragraph 4.12), (ii) effect a Merger, (iii) transfer all or substantially all of its assets or (iv) reclassify its Common Stock (other than as contemplated by Paragraph 4.2) and pursuant to any such event (each, a "Capital Reorganization"), any assets or securities of the Corporation, any successor or transferee corporation or any affiliate thereof or cash is received by or distributed to the holders of Common Stock, then each Holder of Series A-2 Shares shall have the right thereafter to convert each Series A-2 Share into the kind and amount of securities, cash or property that such Holder would have received upon consummation of such transaction if such Holder had converted the Holder's Series A-2 Shares into Common Stock immediately prior to the consummation of such transaction, and the Holder shall have no other conversion rights nor shall there be any adjustment to the Conversion Price. In any such event, effective provision shall be made in the Certificate of Incorporation of the successor or transferee corporation or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the Series A-2 Shares shall thereafter be applicable, as nearly as reasonably may be, to any such other securities, cash and property deliverable upon conversion of the Series A-2 Shares or other convertible stock or securities received by the Holders in place thereof, and any such successor or transferee corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such other securities, cash or property as the Holders of the Series A-2 Shares, or other convertible stock or securities received by the Holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provision for the protection of the conversion right as provided herein. In case securities other than Common Stock, cash or property shall be issuable, payable or deliverable by the Corporation upon conversion as aforesaid, then all references in this Paragraph 4.4 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities, cash or property. 4.5 CONVERSION METHOD. Any Holder of Series A-2 Shares may, at any time prior to the close of business on the date which is two (2) business days prior to the Redemption Date (as defined in Paragraph 5.2) for such Series A-2 Shares, exercise the conversion rights as -9- 10 to such Series A-2 Shares by delivering to the Corporation during regular business hours, care of the then transfer agent (the "Transfer Agent") for the Corporation, a notice requesting conversion on a specified date and the number of Series A-2 Shares that the Holder elects to convert (a "Notice of Conversion"). The Notice of Conversion shall also state the names and addresses of the persons to whom certificates for shares of Common Stock shall be issued, the denominations of such certificates and reasonable delivery instructions with respect thereto. Each conversion shall be deemed to have been effected on the date such Notice of Conversion (the "Conversion Date") is delivered to the Transfer Agent (including delivery via facsimile). The person in whose name any certificate for shares of Common Stock is issuable upon the conversion shall be deemed to have become the holder of record of the Common Stock at such time. If the stock transfer books of the Corporation are closed on the Conversion Date, the Conversion Date for purposes of determining record ownership shall be the next succeeding day on which the stock transfer books are open (and the conversion shall be deemed to have been effected immediately prior to the close of business on that day), but in all cases the conversion shall be at the Conversion Price in effect on the Conversion Date specified in the Notice of Conversion. As promptly as practicable after the Conversion Date but in any event within three (3) trading days of the receipt of the Notice of Conversion, the Corporation shall, and shall use its best lawful efforts to cause the Transfer Agent to, issue and deliver to such Holder, at the expense of the Corporation and in accordance with such Holder's delivery instructions, a certificate or certificates for the number of full shares of Common Stock to which such Holder is entitled and cash with respect to any fractional interest in a share of Common Stock as provided in Paragraph 4.6 below (which shall be promptly deposited by the Corporation with the Transfer Agent for delivery to the Holder). 4.6 FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common Stock or scrip shall be issued upon conversion of Series A-2 Shares. If more than one Series A-2 Share shall be surrendered for conversion at any one time by the same Holder, the number of full shares of Common Stock issuable upon conversion of such Series A-2 Shares shall be computed on the basis of the aggregate number of Series A-2 Shares so surrendered. Instead of any fractional shares of Common Stock which otherwise would be issuable upon conversion of any Series A-2 Shares, the Corporation shall pay a cash adjustment in respect of such fractional interest based upon the Conversion Price in effect at the close of business on the last business day prior to the Conversion Date. 4.7 TAXES. All shares of Common Stock issued upon conversion of Series A-2 Shares will be validly issued, fully paid and nonassessable. The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series A-2 Shares pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Series A-2 Shares so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such transfer has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid or that no such tax is payable. 4.8 SURRENDERED SERIES A-2 SHARES. All certificates representing Series A-2 Shares converted or redeemed shall be appropriately canceled on the books of the Corporation -10- 11 and the Series A-2 Shares so converted or redeemed represented by such certificates shall be restored to the status of authorized but unissued Series A-2 Shares. 4.9 MARKET PRICE. The term "Market Price" on any day shall mean the average of the closing bid prices per share of the Common Stock as reported by Bloomberg on the NASDAQ Stock Market's SmallCap Market, or on such other exchange or automated quotation system as the Common Stock is then traded, or, if the foregoing does not apply, the average of the closing bid prices of any market makers for such securities as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each case for the five (5) consecutive trading days immediately preceding the date of determination. When referred to herein, a "trading day" shall mean a business day in which the principal market on which the Common Stock is traded is open for trading for at least four (4) hours. If at the time of any computation pursuant to this Paragraph 4.9 the Common Stock is not then traded on any trading market, the "Market Price" for the purposes hereof shall be the fair value as reasonably determined in good faith by the Board of Directors of the Corporation. 4.10 AVAILABLE COMMON STOCK. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of Series A-2 Shares, such number of shares of Common Stock as shall from time to time be sufficient to effect a conversion of all outstanding Series A-2 Shares under Paragraph 4.1, as such number may from time to time be adjusted, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding Series A-2 Shares, the Corporation shall promptly take such corporate action as may, in the opinion of its counsel and subject to any necessary approval of its stockholders, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 4.11 NOTICE TO HOLDERS. In the event (i) the Corporation shall declare a dividend or other distribution on the Common Stock other than regular cash dividends declared in the ordinary course or dividends or other distributions payable in Common Stock, (ii) the Common Stock is subdivided, combined or reclassified, (iii) of a Merger, (iv) of a Liquidation, (v) the Corporation offers for subscription pro rata to holders of Common Stock any additional shares of stock of any class or series or other rights, or (vi) an Event of Default shall occur then, in each such event, the Corporation shall mail to each Holder at the Holder's address as it appears in the stock records of the Corporation, promptly and in any event at least fifteen (15) days prior to the date described in clause (a) below, a notice stating (a) if applicable, the date for the determination of holders of Common Stock entitled to receive the distribution, subscription rights or the consideration in the Merger or Liquidation, or the date of determination as to which shares of Common Stock will be affected by a subdivision, combination, reclassification, (b) a brief statement of the facts requiring such notice, and (c) if applicable, that the Conversion Price shall be adjusted. 4.12 ADJUSTMENT OF CONVERSION PRICE. A. If and whenever the Corporation shall: -11- 12 (i) subdivide the outstanding shares of Common Stock into a greater number of shares; (ii) consolidate the outstanding shares of Common Stock into a smaller number of shares; (iii) issue Common Stock or securities convertible into or exchangeable for shares of Common Stock as a stock dividend to all or substantially all the holders of Common Stock; (iv) make a distribution on the outstanding Common Stock to all or substantially all the holders of Common Stock payable in Common Stock or securities convertible into or exchangeable for Common Stock; (v) (a) issue shares of Common Stock, or securities convertible into or exchangeable for shares of Common Stock, in exchange for an amount of cash exceeding $3,000,000 or (b) during any calendar year, issue to any Person or Persons, other than Greg Norman, Great White Shark Enterprises or David Feherty, an aggregate of more than 100,000 shares of Common Stock, or securities convertible into or exchangeable for an aggregate of more than 100,000 shares of Common Stock; any of such events being herein called a "Share Reorganization," then in each such case, the Conversion Price shall be adjusted, effective immediately after the record date at which the holders of Common Stock are determined for the purposes of the Share Reorganization or, if no record date is fixed, the effective date of the Share Reorganization, by multiplying the Conversion Price in effect on such record or effective date, as the case may be, by a fraction of which: (I) the numerator shall be the number of shares of Common Stock outstanding on such record or effective date (without giving effect to the transaction); and (II) the denominator shall be the number of shares of Common Stock outstanding after giving effect to such Share Reorganization, including, in the case of a distribution of securities convertible into or exchangeable for shares of Common Stock, the number of shares of Common Stock that would have been outstanding if such securities had been converted into or exchanged for Common Stock on such record or effective date; PROVIDED, HOWEVER, that no adjustment to the Conversion Price will be made with respect to (y) any portion of an issuance pursuant to clause (v)(a) of this section, the proceeds of which are used to pay all or any part of the Company's obligations to the Purchasers, and such proceeds shall not be considered in determining whether the issuance exceeds the $3,000,000 threshold set forth in clause (v)(a) of this section, or (z) any issuance, the price per share at which such issuance is made (or, in the case of securities convertible into or exchangeable for shares of -12- 13 Common Stock, at an exchange or conversion price per share as of the date of issue of such securities) is equal to or greater than 85% of the Market Price as of the date of such issuance. B. If and whenever the Corporation shall issue to all or substantially all the holders of Common Stock, rights, options or warrants under which such holders are entitled, during a period expiring not more than 45 days after the record date of such issue, to subscribe for or purchase Common Stock (or securities convertible into or exchangeable for Common Stock), at a price per share (or, in the case of securities convertible into or exchangeable for Common Stock, at an exchange or conversion price per share at the date of issue of such securities) of less than 95% of the Market Price of the Common Stock on such record date (any such event being herein called a "Rights Offering"), then, in each such case, the Conversion Price shall be adjusted, effective immediately after the record date at which holders of Common Stock are determined for the purposes of the Rights Offering, by multiplying the Conversion Price in effect on such record date by a fraction of which: (i) the numerator shall be the sum of: (I) the number of shares of Common Stock outstanding on such record date; and (II) a number obtained by dividing: (A) either, (x) the product of the total number of shares of Common Stock so offered for subscription or purchase and the price at which such shares are so offered, or (y) the product of the maximum number of shares of Common Stock into or for which the convertible or exchangeable securities so offered for subscription or purchase may be converted or exchanged and the conversion or exchange price of such securities, or, as the case may be, by (B) the Market Price of the Common Stock on such record date; and (ii) the denominator shall be the sum of: (I) the number of shares of Common Stock outstanding on such record date; and (II) the number of shares of Common Stock so offered for subscription or purchase (or, in the case of securities convertible into or -13- 14 exchangeable for Common Stock, the maximum number of shares of Common Stock for or into which the securities so offered for subscription or purchase may be converted or exchanged). To the extent that such rights, options or warrants are not exercised prior to the expiry time thereof, the Maximum Price shall be readjusted effective immediately after such expiry time to the maximum price which would then have been in effect upon the number of shares of Common Stock (or securities exchangeable into Common Stock) actually delivered upon the exercise of such rights, options or warrants. C. If and whenever the Corporation shall issue or distribute to all or substantially all the holders of Common Stock: (i) shares of the Corporation of any class, other than Common Stock; (ii) rights, options or warrants; or (iii) any other assets (excluding cash dividends and equivalent dividends in shares paid in lieu of cash dividends in the ordinary course); and if such issuance or distribution does not constitute a Share Reorganization or a Rights Offering (any such event being herein called a "Special Distribution"), then, in each such case, the Conversion Price shall be adjusted, effective immediately after the record date at which the holders of Common Stock are determined for purposes of the Special Distribution, by multiplying the Conversion Price in effect on such record date by a fraction of which: (i) the numerator shall be the difference between: (A) the product of the number of shares of Common Stock outstanding on such record date and the Market Price of the Common Stock on such date; and (B) the fair market value, as determined by the Directors (whose determination shall be conclusive), to the holders of Common Stock of the shares, rights, options, warrants, evidences of indebtedness or other assets issued or distributed in the Special Distribution (net of any consideration paid therefor by the holders of Common Stock), and (ii) the denominator shall be the product of the number of shares of Common Stock outstanding on such record date and the Market Price of the Common Stock on such date. D. The following rules and procedures shall be applicable to adjustments made in this Certificate: (i) no adjustment in the Conversion Price shall be required unless such adjustment would result in a change of at least 1% in the -14- 15 Conversion Price then in effect, PROVIDED, HOWEVER, that any adjustments which, but for the provisions of this clause would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment; (ii) no adjustment in the Conversion Price shall be made pursuant to this Paragraph 4.12 in respect of the issue from time to time of Common Stock to holders of Common Stock who exercise an option to receive substantially equivalent dividends in Common Stock in lieu of receiving cash dividends in the ordinary course; and (iii) if a dispute shall at any time arise with respect to any adjustment of the Conversion Price, such dispute shall be conclusively determined by the auditors of the Corporation or, if they are unable or unwilling to act, by a firm of independent chartered accountants selected by the Directors and any such determination shall be binding upon the Corporation and the Holders. E. The Corporation shall from time to time promptly after the occurrence of any event which requires an adjustment in the Conversion Price deliver to the Holders and the Transfer Agent a certificate specifying the nature of the event requiring the adjustment, the amount of the adjustment necessitated thereby, the Conversion Price after giving effect to such adjustment and setting forth, in reasonable detail, the method of calculation and the facts upon which such calculation is based. F. If the Corporation shall fix a record date for: (a) any Share Reorganization (other than the subdivision of outstanding Common Stock into a greater number of shares or the consolidation of outstanding Common Stock into a smaller number of shares), (b) any Rights Offering, (c) any Special Distribution, (d) any Capital Reorganization (other than a reclassification or redesignation of the Common Stock into other shares), or (e) any cash dividend other than a cash dividend on the Series A-2 Shares, the Corporation shall, not less than ten (10) days prior to such record date or, if no record date is fixed, prior to the effective date of such event, give to the Holders notice of the particulars of the proposed event or the extent that such particulars have been determined at the time of giving the notice. -15- 16 5. REDEMPTION OBLIGATIONS 5.1 OPTIONAL REDEMPTION. A. The Corporation may, at its option, redeem all or any portion of the Series A-2 Shares remaining unconverted, by notice to the Holder of such shares specifying the amount of the redemption. In the event that the foregoing notice is provided to a Holder, such Holder shall have no right to convert any of such Holder's Series A-2 Shares into shares of Common Stock pursuant to the provisions of Paragraph 4 hereof. Partial redemption shall be in an aggregate principal amount of not less than $300,000. B. The price to be paid by the Corporation to redeem all or any portion of the Series A-2 Shares remaining unconverted shall be the sum of (i) the aggregate Liquidation Preference of the Series A-2 Shares plus (ii) any accrued and unpaid dividends on the Series A-2 Shares being redeemed, through the date of consummation of the redemption (as specified in Paragraph 5.2.A); PROVIDED, HOWEVER, that upon the occurrence of an Event of Default, the price to be paid by the Corporation to redeem all or any portion of the Series A-2 Shares remaining unconverted shall be the greater of (y) the aggregate Liquidation Preference of the Series A-2 Shares and (z) the Formula Price. The "Formula Price" shall mean the greater of (I) the Liquidation Preference of the Series A-2 Shares, as applicable, plus any accrued and unpaid dividends thereon, being redeemed through the date of consummation of the redemption (as specified in Paragraph 5.2 below) and (II) the sum of (x) the product of (i) the number of shares of Common Stock into which the Series A-2 Shares being redeemed are then convertible at the then current Conversion Price and (ii) the average Closing Bid Price for the five (5) Trading Days ending two (2) Business Days immediately preceding the applicable date of consummation of the redemption as specified in Paragraph 5.2 below, and (y) the applicable amount of accrued but unpaid dividends on the Series A-2 Shares, as applicable, being redeemed through the date of consummation of the redemption (as specified in Paragraph 5.2 below). C. The Corporation shall be required to redeem all of the issued and outstanding Series A-2 Shares in the manner provided by the Purchase Agreement. 5.2 REDEMPTION PROCEDURES A. Any redemption pursuant to Paragraph 5.1 above shall be deemed to be consummated and effective on the date notice is provided to the holder of the Series A-2 Shares being redeemed (the "Redemption Date"). B. Within one (1) business day after the effective date of a redemption of the Series A-2 Shares as specified above, the Corporation shall deposit the applicable redemption price with the Transfer Agent for immediate delivery to each Holder of the Series A-2 Shares subject to redemption as contemplated by any applicable Transfer Agent Agreement and, simultaneously therewith, shall provide notice to the Holders (the "Redemption Notice") advising them of (i) the fact of redemption, (ii) the applicable -16- 17 redemption date, (iii) the applicable redemption price and (iv) all other material facts relating to the redemption referenced therein. C. The Corporation shall select the Series A-2 Shares to be redeemed in any redemption in which not all of the Series A-2 Shares are to be redeemed (to the extent permitted) so that the ratio of the number of Series A-2 Shares of each holder selected for redemption to the total number of Series A-2 Shares owned by that holder shall be the same as the ratio of all such Series A-2 Shares selected for redemption bears to the total of all then outstanding Series A-2 Shares. Should any Series A-2 Shares be required to be redeemed under the terms hereof not be redeemed solely by reason of limitations imposed by law, the Series A-2 Shares shall then be redeemed to the maximum extent permitted by law and shall be redeemed thereafter on the earliest possible dates. 5.3 PAYMENT OF ADDITIONAL AMOUNTS A. Any and all payments by the Corporation hereunder to any Holder and each "qualified assignee" thereof shall be made free and clear of and without deduction or withholding for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes") unless such Taxes are required by law or the administration thereof to be deducted or withheld. If the Corporation shall be required by law or the administration thereof to deduct or withhold any Taxes from or in respect of any sum payable under the Series A-2 Shares (i) the sum payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional amounts paid under this Paragraph 5.3) such Holder receives an amount equal to the sum it would have received if no such deduction or withholding had been made; (ii) the Corporation shall make such deductions or withholdings; and (iii) the Corporation shall forthwith pay the full amount deducted or withheld to the relevant taxation or other authority in accordance with applicable law. A "qualified assignee" of a Holder is a person that is organized under the laws of (I) the United States or (II) any jurisdiction other than the United States or any political subdivision thereof and that (y) represents and warrants to the Corporation that payments of the Corporation to such assignee under applicable law would not be subject to any Taxes and (z) from time to time, as and when requested by the Corporation, executes and delivers to the Corporation and the Internal Revenue Service forms, and provides the Corporation with any information, necessary to establish such assignee's continued exemption from Taxes under applicable law. B. The Corporation shall forthwith pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (all such taxes, charges and levies hereinafter referred to as "Other Taxes") which arise from any payment made under this Certificate or the transactions contemplated hereby. C. The Corporation shall indemnify each Holder, or qualified assignee, for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Paragraph 5.3) paid by each Holder, or qualified assignee, and any liability (including penalties, interest -17- 18 and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date such Holder or assignee makes written demand therefor. A certificate as to the amount of such Taxes or Other Taxes submitted to the Corporation by such Holder or assignee shall be conclusive evidence of the amount due from the Corporation to such party. D. Within 30 days after the date of any payment of Taxes, the Corporation will furnish to each Holder the original or a certified copy of a receipt evidencing payment thereof. 6. RANKING OF STOCK OF THE CORPORATION Any stock of any class or classes of the Corporation shall be deemed to rank: A. Prior to the Series A-2 Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the Holders; B. On a parity with the Series A-2 Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking and fund provisions, if any, are different from those of the Series A-2 Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices without preference or priority, one over the other, as between the holders of such stock and the Holders; and C. Junior to the Series A-2 Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the Holders of the Series A-2 Shares shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation, winding up of the Corporation, or upon redemption as the case may be, in preference or priority to the holders of shares of such class or classes. ARTICLE FIVE Existence The corporation is to have perpetual existence. ARTICLE SIX Election of Directors Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. -18- 19 ARTICLE SEVEN Right to Amend Bylaws The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE NINE Director Liability No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. ARTICLE TEN Bylaws Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. -19- 20 IN WITNESS WHEREOF, Visual Edge Systems Inc. has signed this Amended and Restated Certificate of Incorporation to be effective upon filing. VISUAL EDGE SYSTEMS INC., a Delaware corporation By: /s/ Thomas S. Peters --------------------------- Name: Thomas S. Peters ------------------------- Title: President ------------------------ -20- EX-3.2 3 d80199ex3-2.txt CERT. OF AMEND. TO AMEND/RESTATED CERT. OF INCORP. 1 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF EDGE TECHNOLOGY GROUP, INC. Edge Technology Group, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That, in accordance with Section 242 of the General Corporation Law of the State of Delaware, the Board of Directors of Edge Technology Group, Inc. duly adopted resolutions approving a 4 to 1 reverse stock split and an amendment to the Amended and Restated Certificate of Incorporation of said corporation to reflect such reverse stock split. SECOND: That Article Four of the Amended and Restated Certificate of Incorporation be amended and restated to read in its entirety as follows: "ARTICLE FOUR Capital Stock A. The Corporation shall have authority to issue a total of twenty seven million five hundred thousand (27,500,000) shares, consisting of (a) twenty two million five hundred thousand (22,500,000) shares of common stock, par value $.01 per share, and five million (5,000,000) shares of preferred stock, without par value." B. Effective as of 5:00 p.m., Eastern time, on September 1, 2000, all outstanding shares of Common Stock held by each holder of record on such date shall be automatically combined at the rate of one-for-four without any further action on the part of the holders thereof or this Corporation. No fractional shares shall be issued and in lieu thereof all fractional shares shall be increased to the next higher whole number of shares." THIRD: That in accordance with Section 228(a) of the General Corporation Law of the State of Delaware, the holders of all of the majority of the outstanding shares of voting stock of Edge Technology Group, Inc. duly adopted said amendment by written consent. 2 IN WITNESS WHEREOF, Edge Technology Group, Inc. has signed this Certificate of Amendment to be effective upon filing. EDGE TECHNOLOGY GROUP, INC. By: /s/ Pierre Koshakji ------------------------------ Name: Pierre Koshakji --------------------------- Title: CEO and President --------------------------- EX-4.3 4 d80199ex4-3.txt FORM OF COMMON STOCK SPECIMEN 1 EXHIBIT 4.3 EDGE TECHNOLOGY GROUP, INC. NUMBER SHARES E CUSIP 279869 10 1 SEE REVERSE FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFIES that is the owner of FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF $.01 PER SHARE OF EDGE TECHNOLOGY GROUP, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation of the Corporation and any amendments thereto, to all of which the holder, by acceptance hereof, assents. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/ PIERRE KOSHAKJI /s/ PIERRE KOSHAKJI Secretary President [EDGE TECHNOLOGY GROUP, INC. SEAL] Countersigned and Registered AMERICAN STOCK TRANSFER & TRUST COMPANY (New York, N.Y.) Transfer Agent and Registrar By Authorized Officer EX-10.1 5 d80199ex10-1.txt EMPLOYMENT AGREEMENT WITH PIERRE KOSHAKJI 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is made effective as of the 1st day of September, 2000 (the "Effective Date") between Edge Technology Group, Inc. (formerly known as Visual Edge Systems Inc.), a Delaware corporation (the "Company"), and Pierre Koshakji, an individual ("Employee"). RECITALS WHEREAS, the Company desires to secure the services and employment of Employee on behalf of the Company, and Employee desires to enter into employment with the Company, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. EMPLOYMENT. The Company hereby employs Employee and Employee accepts such employment for the Term (as defined below) specified in Section 3 below. During the Term, Employee shall serve as the President of the Company, performing such duties as shall be reasonably required of such an employee of the Company, and shall have such other powers and perform such other additional executive duties as may from time to time be assigned to him by the Board of Directors of the Company (the "Board") or such other person or persons designated by the Board, including, without limitation, the Chief Executive Officer of the Company upon the hiring of a full time Chief Executive Officer, which the Board anticipates occurring during the Term. Until the Board names a permanent Chief Executive Officer, on an interim basis Employee shall carry the title of Chief Executive Officer in addition to President. The Company acknowledges that Employee's primary place of business shall be within the state of Texas and Employee acknowledges that Employee shall be required to travel throughout the United States and the remaining world as necessary to perform his duties hereunder. 2. PERFORMANCE. Employee will serve the Company faithfully and to the best of his ability and will devote substantially all of his time, energy, experience and talents during regular business hours and as otherwise reasonably necessary to such employment, to the exclusion of all other business activities. 3. EMPLOYMENT TERM. Except for earlier termination as provided in Section 6 hereof, Employee's employment under this Agreement shall be for a three (3) year term commencing on the Effective Date and ending three (3) years thereafter. The time during which Employee is employed by the Company shall be referred to herein as the "Term." 4. COMPENSATION. (a) SALARY. During the Term, the Company shall pay Employee a base salary (the "Base Salary") in the amount of $100,000 per Fiscal Year (as defined below), with such increases thereto as shall be determined in the sole discretion of the Board of Directors of the Company or, at the Board of Directors' discretion, the compensation committee of the Company. EMPLOYMENT AGREEMENT (PIERRE KOSHAKJI) 2 The Base Salary shall be payable in accordance with the then applicable payroll procedures of the Company and shall be subject to applicable withholding for taxes. The first Fiscal Year of the Term shall commence on the Effective Date, with each subsequent Fiscal Year commencing on the applicable anniversary date of the Effective Date (each, a "Fiscal Year"). (b) INITIAL FINANCING AND QUALIFYING TRANSACTIONS. (i) Commencing with the closing of the original private placement conducted by the Company in August 2000, if sources initiated exclusively by Employee, Media Trust, SA or their respective affiliates secure equity financing resulting in $3,000,000 in net proceeds to the Company (the "Initial Financing"), the Employee's Base Salary shall be increased to $150,000 per year, effective as of the closing date of such Initial Financing. (ii) Following the closing of the Initial Financing, in the event that the Company enters into financing transactions whereby the Company receives (A) an additional $2,000,000 in net proceeds from sources initiated exclusively by Employee, Media Trust, SA or their respective affiliates and (B) maintains a minimum market capitalization of at least $100,000,000 over the course of thirty (30) consecutive trading days (together, a "Qualifying Transaction"), Employee's Base Salary shall be increased to $175,000 per year, effective as of the date of achievement of such Qualifying Transaction. (c) INCENTIVE CASH COMPENSATION. For each Fiscal Year or portion thereof during the Term, Employee shall be eligible for discretionary bonuses payable by the Company on such terms and conditions, and subject to such standards, as shall be determined from time to time in the sole discretion of the Board of Directors of the Company or, at the Board of Directors' discretion, the compensation committee of the Company. (d) STOCK OPTIONS AND OTHER NON-CASH INCENTIVE COMPENSATION. (i) Stock Options. Employee will be granted options to purchase 300,000 shares of the Company's common stock (after giving effect to the 4 for 1 reverse stock split contemplated by the Company on or about the date hereof) (the "Stock Options"), at an exercise price of $2.00 per share. (ii) Vesting. The Stock Options shall vest as follows: 100,000 shares on the first anniversary of the Effective Date 100,000 shares on the second anniversary of the Effective Date 100,000 shares on the third anniversary of the Effective Date (iii) Stock Option Plans. The Stock Options shall be granted pursuant to the current stock option grant form and stock option plan of the Company and shall be subject to all terms and conditions thereof, copies of which are attached hereto as Exhibit A. 2 3 (e) MEDICAL AND DENTAL HEALTH AND OTHER BENEFITS. During the Term, Employee shall be entitled to medical and dental health and other benefits in accordance with the current procedures of the Company with respect to its executive level employees. (f) VACATION; SICK LEAVE. During the Term, Employee shall be entitled to up to three (3) weeks of vacation and shall be entitled to sick leave in accordance with the current procedures of the Company with respect to its executive level employees. 5. EXPENSES. Employee shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Board of Directors of the Company from time to time and upon receipt of appropriate documentation. 6. TERMINATION. The employment of Employee hereunder may be terminated prior to the end of the Term, under the following circumstances: (a) DEATH OR DISABILITY. The Term of employment shall terminate upon the death or Disability of Employee. For purposes of this Agreement, "Disability" occurs if Employee is unable to perform his duties, pursuant to this Agreement, on a full-time basis because of mental or physical incapacity, including, without limitation, alcoholism or drug abuse, which requires a leave of absence in excess of ninety (90) days during any Fiscal Year. In the event Employee is a "Qualified Individual with a Disability," as such term is defined in the Americans with Disabilities Act, the Company shall not terminate Employee's employment hereunder if Employee is able to perform the essential functions of Employee's job with reasonable accommodation from the Company. (b) WITH "CAUSE." For purposes of this Agreement, the Company shall have "Cause" to terminate Employee's employment hereunder upon the occurrence of any of the following: (i) embezzlement, theft or other misappropriation of any property of the Company or any of its subsidiaries by Employee, (ii) gross or willful misconduct by Employee resulting in substantial loss to the Company or any of its subsidiaries or substantial damage to the reputation of the Company or any of its subsidiaries, (iii) any act by Employee involving moral turpitude that results in a conviction of, or a pleading nolo contendere to, a felony or other crime involving moral turpitude, fraud or misrepresentation, (iv) willful and continued failure or neglect by Employee to substantially perform his assigned duties to the Company or any of its subsidiaries, (v) gross breach of Employee's fiduciary obligations to the Company or any of its subsidiaries, (vi) any chemical dependence which materially affects the performance of Employee's duties and responsibilities to the Company or any of its subsidiaries, or (vii) commission of a felony or a crime by Employee involving moral turpitude or the commission of any other significant act by Employee involving dishonesty, disloyalty or fraud with respect to the Company; provided, that in the case of the misconduct set forth in clauses (iv) and (vi) above, such misconduct shall continue for a period of five (5) days following written notice thereof by the Company to Employee. (c) WITHOUT "CAUSE." Notwithstanding any provisions of this Agreement to the contrary, the Company may terminate Employee's employment hereunder for any reason other 3 4 than those specified in the foregoing paragraphs (a) and (b), or for no reason, at any time during the Term, effective upon delivery of two (2) day's notice by the Company. (d) VOLUNTARY RESIGNATION. Employee may terminate his employment hereunder at any time during the Term subject only to the requirement that Employee shall provide the Company with a minimum of thirty (30) days prior written notice (a "Voluntary Resignation"). (e) WITH "GOOD REASON." Notwithstanding any provision of this Agreement to the contrary, Employee may terminate his employment hereunder for Good Reason, subject to the requirement that Employee shall provide the Company with a minimum of thirty (30) days prior written notice. For purposes of this Agreement, Employee shall have "Good Reason" to terminate his employment hereunder upon the occurrence, without Employee's written consent, of any of the following: (i) a failure by the Company to pay to Employee any amounts due under this Agreement in accordance with the terms hereof, which failure is not cured within thirty (30) days following receipt by the Company of written notice from Employee of such failure; (ii) demotion of Employee from his position as President of the Company; or (ii) any other material breach by the Company of this Agreement that remains uncured for thirty (30) days after written notice thereof by Employee to the Company. Employee hereby acknowledges that his position as Chief Executive Officer shall be on an interim basis and that the hiring of a permanent Chief Executive Officer by the Board (who shall be chosen in the Board's sole discretion) is contemplated to occur during the Term. Employee further acknowledges that neither the removal of the title Chief Executive Officer upon the hiring of a permanent Chief Executive Officer nor the requirement that Employee report to a new Chief Executive Officer shall be "Good Reason" for Employee to terminate his employment. (f) TERMINATION AFTER CHANGE OF CONTROL. Employee may terminate Employee's employment and this Agreement for Good Reason within ninety (90) days of a Change of Control upon thirty (30) days' written notice to the Company. For purposes of this Agreement, a "Change of Control" shall be deemed to exist upon the occurrence of any of the following: (i) any "person" as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than (a) Permitted Assignees, (b) the Company, (c) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, (d) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company, or (e) any entity holding non-participating shares of an entity which is a stockholder of the Company or which owns or controls, directly or indirectly, a stockholder of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing fifty percent (50 %) or more of the combined voting power of the Company's then outstanding securities. "Permitted Assignees" shall mean the holders of the equity 4 5 securities (whether or not voting) of any shareholder of the Company owning more than fifteen percent (15%) of the Company on the date after the date of execution of this Agreement; (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board; (iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; and provided, further, a merger or consolidation in which the Company is the surviving entity (other than as a wholly owned subsidiary or another entity) and in which the Board of the Company after giving effect to the merger or consolidation is comprised of a majority of members who are either (x) directors of the Company immediately preceding the merger or consolidation, or (y) appointed to the Board of the Company by the Company (or its Board) as an integral part of such merger or consolidation, shall not constitute a Change in Control of the Company; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company's assets other than (x) the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least fifty percent (50%) or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale or (y) pursuant to a dividend in kind or spin-off type transactions, directly or indirectly, of such assets to the stockholders of the Company. 5 6 Notwithstanding the foregoing, a "Change of Control" shall not be deemed to occur as a result of the closing of the conversion of the convertible instruments as contemplated by the Agreement and Fourth Amendment to Bridge Securities Purchase Agreement dated July 13, 2000 by and between the Company, Infinity Investors Limited, Summit Capital Limited and Glacier Capital Limited. 7. COMPENSATION UPON TERMINATION. Employee shall be entitled to the following compensation from Company, in lieu of all other sums or benefits owed or payable to Employee hereunder, upon the termination of Employee's employment during the Term. (a) DEATH OR DISABILITY. In the event of the death or Disability of Employee during the Term of this Agreement, except for amounts of Base Salary and accrued vacation time earned by Employee as of the date of termination but not yet paid by the Company, the Company shall have no obligation to make payments to Employee or his estate, in accordance with the provisions of Section 4, for the periods after the date Employee's employment with the Company terminates on account of death or Disability; provided, however, that the Company agrees to use reasonable efforts to secure death and disability insurance (an "Insurance Policy") for Employee. If the Company is unable to secure such an Insurance Policy, then in the event of the death or disability of Employee during the Term of this Agreement, Employee or his estate shall receive a severance payment equal to six (6) months of Employee's Base Salary. (b) WITH CAUSE. In the event that Employee's employment is terminated by the Company for Cause, except for the amounts of Base Salary and accrued vacation time earned by Employee as of the date of termination but not yet paid by the Company, the Company shall have no obligation to make payments to Employee, in accordance with the provisions of Section 4, for the periods after the date Employee's employment with the Company terminates for Cause. (c) WITHOUT CAUSE. In the event that Employee's employment is terminated by the Company without Cause at any time during the Term, Employee shall be entitled to receive (i) an amount equal to his Base Salary, then in effect, for the shorter of the remainder of the Term or for one (1) year (the "Severance Period"), such amount to be payable, at the Company's option, in a lump sum on the date of termination, or ratably over the Severance Period, (ii) the amounts of Base Salary and accrued vacation time earned by Employee as of the date of termination but not yet paid by the Company pursuant to Section 4, and (iii) the Stock Options shall be deemed fully vested as of the date of termination. (d) VOLUNTARY RESIGNATION. (i) Without Good Reason. In the event that Employee's employment is terminated by Employee as a Voluntary Resignation pursuant to Section 6(d) except for amounts of Base Salary earned by Employee as of the date of termination, but not yet paid by the Company pursuant to Section 4, the Company shall have no obligation to make payments to Employee, in accordance to the provisions of Section 4, for the periods after the date Employee's employment with the Company terminates on account of Voluntary Resignation. 6 7 (ii) With Good Reason. Notwithstanding any provision of this Agreement to the contrary, if Employee's employment with the Company terminates on account of Voluntary Resignation for Good Reason, Employee shall be entitled to receive (A) an amount equal to his Base Salary, then in effect, for the Severance Period, such amount to be payable, at the Company's option, in a lump sum on the date of termination, or ratably over the Severance Period, (B) the amounts of Base Salary and accrued vacation time earned by Employee as of the date of termination but not yet paid by the Company pursuant to Section 4 and (C) the Stock Options shall be deemed fully vested as of the date of Employee's Voluntary Resignation for Good Reason. (e) CHANGE OF CONTROL. If Employee's employment and this Agreement is terminated as a result of a Change of Control, the Company will pay Employee (i) his Base Salary in effect on the date of termination through the date of termination, prorated for any partial payroll period, (ii) an amount equal to his Base Salary, then in effect, for the Severance Period and (iii) 100% of the Stock Options shall become fully vested on such date. 8. CONFIDENTIAL INFORMATION - NON-DISCLOSURE. (a) RECOGNITION OF THE COMPANY'S RIGHTS: NONDISCLOSURE. Employee understands that the Company possesses Proprietary Information (as defined below), which the Company agrees to disclose to Employee for the purpose of performing his duties under this Agreement. (i) "Proprietary Information" shall mean Information (as defined below) of value to the Company that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by the Company including, for example, but not limited to, any trade secret, know-how, show-how and other proprietary information, irrespective of (A) whether in tangible or non-tangible form, (B) whether patentable or copyrighted or subject to confidentiality, (C) its media, (D) whether solely or jointly created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Employee and/or one or more other persons, or (E) whether created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned before, during or after the Term. Proprietary Information does not include Information (as defined below) that Employee develops entirely on his own time without using the Company's equipment, supplies, facilities, Proprietary Information or trade secret information except for such Information that either relates at the time of conception or reduction to practice of the Information to the Company's business, or actual or demonstrably anticipated research or development of the Company, or results from any work performed by Employee for the Company. (ii) "Information" shall mean any list, schematic, diagram, circuitry, technology, inventory, invention, idea, discovery, improvement, design, concept, technique, algorithm, formula, method, process, configuration, tooling, mechanism, manufacture, assembly, installation, model, apparatus, product, device, system, network, data, plan, library, work of authorship, file, media, record, report, copy, pictorial work, 7 8 graphic work, audiovisual work, hardware, firmware, computer interface (including for example but not limited to programming interfaces), computer language, computer protocol, computer software program or application (irrespective of whether source code or object code), flow chart, blueprint, drawing, photograph, chart, graph, notebook, book, computer disk, tape, storage media, printout, sound recording, note, memorandum, specification, paper, document (irrespective of whether printed, typewritten, handwritten or otherwise), information, material, account, business plan, business operation, business method, business practice, business strategy, research, development, marketing, revenue, sale, forecast, budget, finance, license, price, cost, salary, compensation, knowledge about suppliers, knowledge about available skills and knowledge about actual and/or prospective employees, clients and/or customers (including for example but not limited to their names, addresses and telephone numbers). (iii) "Non-party Information" shall mean Information discovered, received, or learned by the Company from non-parties with respect to which the Company is subject to a duty to maintain confidentiality or to use only for certain limited purposes. (b) EMPLOYEE COVENANT. In consideration of the Company's entering into this Agreement, the Company's agreement to provide Employee with Proprietary Information and specialized training, and the Company's agreement to provide the Base Salary and other benefits to Employee, the receipt and sufficiency of which are hereby acknowledged by Employee, Employee covenants as follows: (i) Non-Disclosure of Proprietary Information and Non-Party Information. At all times during the Term and thereafter in perpetuity, Employee shall hold all Proprietary Information and Non-party Information in strictest trust and confidence and shall neither disclose (to anyone other than the Company personnel having a need to know such Information in connection with their activities for the Company) nor use (except insofar as required by Employee's activities for the Company under this Agreement or in conducting the business of the Company) any Proprietary Information or any Non-party Information, unless: (A) Employee is expressly authorized in writing to the contrary by a duly authorized officer of the Company; (B) absent breach or violation of this Agreement, such Information is or becomes generally known to the public or available to the public, as evidenced by a printed publication or other equally conclusive evidence; (C) absent breach or violation of this Agreement, such Information is rightfully received absent any confidentiality obligation by Employee from a non-party outside of the Company, as evidenced by a dated and witnessed writing prepared in the normal course of business or other equally conclusive evidence; or (D) is required to be disclosed pursuant to a valid order by a court or other governmental body or otherwise required by law, provided that Employee informs the Company immediately upon Employee's receipt of notice, in any form, that disclosure pursuant to this section may be required so that the Company may oppose any compelled disclosure of its Proprietary Information. Employee further agrees not to disclose any Proprietary Information pursuant to this section unless and until he is informed that the Company will not oppose such disclosure or that the Company's attempt to oppose such disclosure has been denied. 8 9 (ii) Trade Secrets. All trade secrets of the Company will be entitled to all of the protection and benefits under all applicable federal and state trade secrets law. If any information that the Company deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Proprietary Information for purposes of this Agreement. Employee hereby waives any requirement that the Company submit proof of the economic value of any trade secret or post a bond or other security. (c) ASSIGNMENT OF INVENTIONS. (i) Definitions. (A) "Moral Rights" shall mean (I) any right of paternity or integrity, (II) any right to claim authorship or require authorship identification, (III) any right to object to distortion, mutilation or other modification of, or other derogatory action in relation to, a work of authorship, and (IV) any similar right existing under judicial or statutory law of the United States of America or any State thereof irrespective of whether such right is generally referred to as a "moral right." (B) "Proprietary Rights" shall mean any patent, trade secret, confidentiality protection, know-how right, show-how right, mask work right, copyright (e.g., including but not limited to any Moral Right), and any other intellectual property protection and intangible interests and legal rights of exclusion, of any and all countries, including for example but not limited to (I) any person's publicity or privacy right, (II) any utility model or application therefor, (III) any industrial model or application therefor, (IV) any certificate of invention or application therefor, (V) any application for patent, including, for example, but not limited to, any provisional, divisional, reissue, reexamination or continuation application, (VI) any substitute, renewal or extension of any such application, and (VII) any right of priority resulting from the filing of any such application. (C) "The Company Inventions" shall mean (I) any and all Proprietary Information that is created, invented, developed, prepared, conceived, reduced to practice, made, suggested, discovered, received or learned by Employee, either alone or jointly with one or more other persons, during the Term, and (II) any and all Proprietary Rights that may be available in such Proprietary Information or result therefrom. (ii) Employee's Covenant. Employee does hereby, without reservation, irrevocably: (A) sell, assign, grant, transfer and convey to the Company (and the Company's successors and assigns): Employee's entire right, title and interest (present and future and throughout the world) in and to all the Company Inventions; provided, however, that, to the extent that any one or more the 9 10 Company Inventions includes a work of authorship created by Employee (solely, or jointly with others), each such work of authorship shall automatically be deemed to be created as a "work made for hire" (as that term is defined in the United States Copyright Act (17 U.S.C. Section 101)) that is owned solely by the Company (as between Employee and the Company); and (B) acknowledge and agree that, as between the Company and Employee, (I) all the Company Inventions shall be the sole and exclusive property of the Company, its successors and assigns, and (II) the Company, its successors and assigns shall be the sole and exclusive owner of all the Company Inventions. (iii) Enforcement of Proprietary Rights. (A) Employee will assist the Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end, Employee will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Employee will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Employee's obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the Term, but the Company shall compensate Employee at a reasonable rate after his termination for the time actually spent by him at the Company's request on such assistance which occurs after the end of the Term. (B) In the event the Company is unable for any reason, after reasonable effort, to secure Employee's signature on any document needed in connection with the actions specified in the preceding paragraph, Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and on his behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph thereon with the same legal force and effect as if executed by Employee. Employee hereby waives and quitclaims to the Company any and all claims, of any nature whatsoever, that Employee now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company. (d) REFERENCES TO COMPANY. All references to the Company set forth in this Section 8 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company. 10 11 9. NON-COMPETITION AND NON-INTERFERENCE. (a) COVENANT OF EMPLOYEE. In consideration of the Company's entering into this Agreement, the Company's agreement to provide Employee with Proprietary Information and specialized training, and the Company's agreement to provide the Base Salary and other benefits to Employee, the receipt and sufficiency of which are hereby acknowledged by Employee, Employee covenants as follows: (i) Non-Competition While Employed. While Employee is an employee of the Company, in the Restricted Area (as defined below) Employee will not, directly or indirectly, participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise (as defined below) nor shall Employee engage in any such other activities that conflict with Employee's obligations to the Company. (ii) Non-Competition After Employment. For a period commencing form the end of Employee's employment with the Company and continuing for a period of twelve (12) months after the date that Employee ceases receiving compensation under Section 7 of this Agreement, Employee will not, directly or indirectly participate in the ownership, management, operation, financing or control of, or be employed by or consult for or otherwise render services to, any person, corporation, firm or other entity that is a Competing Enterprise in the Restricted Area. (iii) The "Restricted Area" means all areas of the world in which the Company provides products, goods or services, determined at all times throughout the Term. A "Competing Enterprise" means any person, corporation, firm or other entity that provides products, goods or services similar to, or competitive with, directly or indirectly, the products, goods or services provided by the Company, determined at all times throughout the Term. Notwithstanding the foregoing, Employee is permitted to own up to five percent (5%) of any class of securities of any corporation that is traded on a national securities exchange or through Nasdaq. (iv) Non-solicitation. During the Term and for a period of twenty-four (24) months thereafter, Employee shall not, either for himself or for any other person, firm, corporation, or other entity, directly or indirectly, or by action in concert with others: (A) Individually or on behalf of any other person or entity, directly or indirectly, solicit or encourage any employee or contractor of the Company (with the exception of his personal assistant) to terminate his or her employment or engagement with the Company or hire or solicit the employment services of any employee of the Company unless such employee's employment has been terminated by the Company. This provision shall not preclude Employee from responding to or talking with such employee or contractor, provided Employee does not attempt to solicit or encourage Employee or contractor to terminate his or her employment or engagement with the Company. 11 12 (B) Take away or attempt to take away, or solicit or attempt to solicit, any existing or Potential Customer, as defined below, of the Company (whether or not such customer is actually a customer of the Company as of the date hereof, including without limitation any customer solicited by Employee or which became known by Employee prior to the date hereof) with the purpose of obtaining such person as an employee or customer for a business competitive with the Company's business. This provision shall not preclude Employee from responding to or talking with such Potential Customer, provided Employee does not attempt to take away, or solicit or attempt to solicit the Potential Customer for, a business competitive with the Company's business. (C) For purposes of this Section, "Potential Customer" means any person, corporation, firm or other entity actually solicited by the Company at any time during the Term. (v) Organizing Competitive Business. Without limiting any of the other provisions contained in this Section 9, during the Term, Employee shall not undertake planning for or organization of any business activity competitive with the business of the Company, or conspire with agents, employees, consultants or other representatives of the Company for the purpose of organizing any such competitive business activity. (b) REFERENCES TO COMPANY. All references to the Company set forth in this Section 9 shall be deemed to include all subsidiaries or other entities that are controlled by, or under common control with, the Company. 10. MEDIATION. In the event a dispute arises under this Agreement, the parties agree, based upon good and valuable consideration, the sufficiency of which is hereby acknowledged, to mediate in Dallas, Texas, any and all disputes prior to the filing of any cause of action in state or Federal court. The mediator shall be chosen by the presiding judge of the Dallas County Civil Judicial Courts, and the parties agree to use commercially reasonable efforts to resolve their issues. Costs for mediation shall be borne by the non-prevailing party. 11. NOTICE. Any notices required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered or when mailed, certified or registered mail, postage prepaid, to the following addresses: If to Employee: Pierre Koshakji 4515 Laren Lane Dallas, Texas 75244 12 13 If to the Company: Edge Technology Group, Inc. 901 Yamato Road Suite 175 Boca Raton, Florida 33431 12. GENERAL. (a) CONSTRUCTION AND SEVERABILITY. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts that are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions that would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated therein. (b) ASSIGNABILITY. Employee may not assign his interest in or delegate his duties under this Agreement. Notwithstanding anything else in this Agreement to the contrary, the Company may assign this Agreement to and all rights hereunder shall inure to the benefit of any person, firm or corporation succeeding to all or substantially all of the business or assets of the Company by purchase, merger or consolidation. (c) GOVERNING LAW. This Agreement shall be governed in all respects, including as to validity, interpretation, construction, performance and effect, by the laws of the State of Texas applicable to contracts executed and is to be performed entirely within said State. Venue shall be exclusively in Dallas County, Texas. (d) ATTORNEYS FEES. All legal fees and costs incurred in connection with the resolution of any dispute or controversy under or in connection with this Agreement shall be borne by the non-prevailing party. (e) BINDING EFFECT. This Agreement is for the employment of Employee, personally, and for the services to be rendered by him, which must be rendered by him and no other person. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns. (f) ENTIRE AGREEMENT; MODIFICATION. This Agreement of the parties hereto with respect to the subject matter hereof and may not be modified or amended in any way except in a written instrument signed by the parties hereto. (g) DURATION. Notwithstanding the term of employment hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement. (h) SURVIVAL. The covenants set forth in Sections 6, 8 and 9 of this Agreement shall survive and shall continue to be binding upon Employee notwithstanding the termination of 13 14 this Agreement for any reason whatsoever. The covenants set forth in Sections 6, 8 and 9 of this Agreement shall be deemed and construed as separate agreements independent of any other provision of this Agreement. The existence of any claim or cause of action by Employee against Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of any or all covenants. It is expressly agreed that the remedy at law for the breach or any such covenant is inadequate and that injunctive relief shall be available to prevent the breach or any threatened breach thereof. (signature page follows) 14 15 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement the day and year first written above. EDGE TECHNOLOGY GROUP, INC. By: /s/ Thomas Peters --------------------------------- Name: Thomas Peters ------------------------------- Title: Executive Vice President ------------------------------ EMPLOYEE /s/ Pierre Koshakji ------------------------------------ PIERRE KOSHAKJI 15 16 EXHIBIT A [ATTACH STOCK OPTION GRANT FORM AND STOCK OPTION PLAN] FORM OF EMPLOYMENT AGREEMENT - EXHIBIT A EX-99.1 6 d80199ex99-1.txt PRESS RELEASE DATED SEPTEMBER 5, 2000 1 EXHIBIT 99.1 September 05, 2000 20:33 VISUAL EDGE SYSTEMS INC. COMPLETES REORGANIZATION AND CAPITAL RAISE AND CHANGES NAME TO EDGE TECHNOLOGY GROUP, INC. BOCA RATON, Fla., Sept. 5/PRNewswire/ -- Edge Technology Group, Inc., formerly known as Visual Edge Systems Inc., (OTC Bulletin Board: EDGE) announced today that it has completed its reorganization previously announced in the company's press release on July 13, 2000 and Form 8-K filed on July 17,2000. The reorganization includes the issuance of common stock of the company in a capital raise of approximately $6.29 million, including $1.92 million in cash and $4.37 million in securities representing approximately 19.8% ownership of PurchasePooling.com, Inc., a web-based demand aggregator. Effective with the reorganization, Visual Edge Systems Inc. changed its name to Edge Technology Group, Inc. to reflect the new business strategy. With the completion of the reorganization, Edge is executing its new business strategy of operating, financing and developing technology-oriented companies. The reorganization includes a four for one reverse stock split that was approved by the shareholders of Edge and which will be effective at the beginning of trading on Wednesday, September 6, 2000. In order to signify the significant corporate changes to Visual Edge, the Company's common stock will trade under the ticker symbol "EDGE.D" for twenty trading days starting on September 6, 2000. After that time, the additional letter "D" will be removed and the Company's ticker symbol will return to "EDGE". The Board of Directors of the Edge has been expanded to five members with the addition of Messrs. Johan Schotte and Pierre Koshakji. Mr. Schotte was elected Chairman of the Board of Edge. Mr. Koshakji was elected President and Chief Executive Officer of Edge. As part of the reorganization, the holders of Edge's convertible notes and Series A-2 Convertible Preferred Stock converted all their convertible securities into 6,869,854 shares of common stock of Edge on a post-reverse split basis. This conversion and the repayment of certain working capital loans will eliminate Edge's long term debt and enhance future opportunities to raise new capital. 2 The capital raise of $6.29 million consists of cash and securities as proceeds to Edge. After giving effect to the four for one reverse stock split, Edge issued 1,276,668 shares of common stock at $1.50 per share and issued warrants to purchase 596,667 shares of common stock at $3.00 per share for proceeds of $1.92 million to Edge. Edge issued 2,913,630 shares of common stock as consideration for the contribution of 10,568,824 shares of Series A Convertible Preferred Stock representing approximately 19.8% ownership of PurchasePooling.com, Inc. Based in Dallas, PurchasePooling (www.purchasepooling.com) is the first web-based demand aggregator enabling governmental and educational entities as well as businesses to save significantly on large-ticket capital items by combining their purchasing power nationwide and globally. PurchasePooling, formed in 1999, focuses primarily on state and local government purchases of goods and services, an estimated $1.6 trillion market segment. Governmental entities can use PurchasePooling to achieve volume discounts on capital equipment including administrative and police vehicles; special service vehicles such as fire trucks, rail cars, transit buses, school buses, aerial lift trucks, traffic equipment, ambulances and construction equipment; and elevators and escalators, HVAC, boilers, valves, controls and concrete conduit. In addition to anonymous, secure and confidential buying collaboration, PurchasePooling offers buyers financing and leasing options, after-market parts and service options and online auctions to dispose of surplus equipment. A condition to the closing of the reorganization was the closing of an investment in Hencie, Inc. Edge remains in negotiations with Hencie, Inc. to close the proposed investment in Hencie, Inc. This statement contains references to future events and results, including anticipated transactions involving Edge Technology Group, Inc. These statements are forward-looking statements regarding future events and the future financial performance of Edge, and no assurances can be made regarding their eventual occurrence. Actual occurrences and results may differ substantially and materially from those projected as a result of risks and uncertainties detailed in Edge's periodic reports and registration statements filed with the Securities and Exchange Commission (viewable at www.sec.gov ;), including its Form 10-K for the year ended December 31,1999, and the Form 8-K filed in connection with the transactions described or contemplated in this statement. SOURCE: Visual Edge Systems Inc. /CONTACT: Corporate Image Bureau, 407-774-8937, for Visual Edge/ /Web site: http://www.purchasepooling.com/ (EDGE) -----END PRIVACY-ENHANCED MESSAGE-----