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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
VISUAL EDGE SYSTEMS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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VISUAL EDGE SYSTEMS INC.
901 YAMATO ROAD, SUITE 175
BOCA RATON, FLORIDA 33431
CONSENT SOLICITATION STATEMENT
CONSENT OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING
JULY 28, 2000
This Consent Solicitation Statement and the accompanying form of consent
are being furnished to the stockholders of Visual Edge Systems Inc., a Delaware
corporation ("Visual Edge"), in connection with the solicitation of written
consents by the Board of Directors of Visual Edge for the taking of corporate
action by written consent in lieu of the annual meeting of stockholders. Only
stockholders of record as of the close of business on June 19, 2000 will be
entitled to notice of, and to consent to such actions in lieu of the annual
meeting.
This Consent Solicitation Statement and the accompanying written consent,
together with a copy of Visual Edge's Annual Report to Stockholders for the year
ended December 31, 1999, are being sent or given to the stockholders commencing
on or about July 28, 2000.
The actions proposed to be taken by written consent in lieu of an annual
meeting consist of:
1. electing three (3) directors of Visual Edge to serve until the next
annual meeting of stockholders and until their respective successors
are elected and qualified;
2. approving an amendment to Visual Edge's Certificate of Incorporation to
change our name from Visual Edge Systems Inc. to Edge Technology Group,
Inc.;
3. approving an amendment to Visual Edge's Certificate of Incorporation to
increase the authorized number of shares of common stock, $.01 par
value per share, of Visual Edge from 20,000,000 to 90,000,000;
4. approving a proposed amendment to Visual Edge's Certificate of
Designations of Series A-2 Convertible Preferred Stock, which would
entitle Visual Edge, at its option, to amend the conversion price of
the Series A-2 Preferred Stock;
5. approving amendments to Visual Edge's Amended and Restated 1996 Stock
Option Plan to
o increase the total number of shares of common stock reserved for
issuance under the stock option plan to 4,000,000,
o increase the maximum number of options that can be granted to an
employee under the stock option plan in a single year from 250,000
to 2,000,000, and
o authorize the Board of Directors or the committee administering
the stock option plan to determine and designate option awards to
non-employee directors.
6. approving a plan of internal restructuring to incorporate Visual Edge's
operations and to transfer some or substantially all of Visual Edge's
assets initially to directly or indirectly wholly-owned subsidiaries,
with the result that Visual Edge would become a holding company; and
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7. approving amendments to the Visual Edge's Certificate of Incorporation
to effect a reverse stock split of Visual Edge's common stock to
combine four (4) outstanding shares of common stock into one (1) share
of common stock.
The principal executive office of Visual Edge is located at 901 Yamato Road,
Suite 175, Boca Raton, Florida 33431, and Visual Edge's telephone number at that
address is (561) 750-7559. Visual Edge's Annual Report for the fiscal year ended
December 31, 1999 is being mailed to you together with the enclosed materials.
To assure the delivery of a sufficient number of consents, please complete,
date, sign and mail promptly the enclosed written consent, for which a return
envelope is provided. No postage need be affixed to the written consent if it is
mailed in the United States.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING FORM OF WRITTEN CONSENT AND RETURN IT PROMPTLY TO THE
COMPANY IN THE ENCLOSED POSTAGE PAID ENVELOPE
By Order of the Board of Directors,
/s/ Thomas Peters
Thomas Peters
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Boca Raton, Florida
July 28, 2000
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SOLICITATION OF WRITTEN CONSENTS
This Consent Solicitation Statement and the accompanying form of written
consent are furnished in connection with the solicitation of stockholder
consents by the Board of Directors of Visual Edge in lieu of an annual meeting
of stockholders, in connection with the matters set forth in this Consent
Solicitation Statement. Only stockholders of record on the books of Visual Edge
at the close of business on June 19, 2000 will be entitled to submit a consent.
It is anticipated that these consent solicitation materials will be mailed to
stockholders on or about July 28, 2000.
Visual Edge is incorporated in the State of Delaware and is therefore
subject to the Delaware General Corporation Law. Section 228 of the Delaware
General Corporation Law permits the stockholders of Visual Edge to take action
without a meeting, without prior notice and without a vote, if consents in
writing, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and are delivered to Visual Edge
by delivery to its registered office in the State of Delaware, the corporation's
principal place of business or an officer of agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
provided. Delivery made to Visual Edge's registered office is required to be
made by hand or by certified or registered mail, return receipt requested.
Written consents should be sent to the address indicated on the materials
sent to you with this Consent Solicitation Statement. You also may send your
written consent to Visual Edge at its principal place of business at 901 Yamato
Road, Suite 175, Boca Raton, Florida 33431, Attention: Secretary.
Furthermore, the Delaware General Corporation Law provides that no written
consent shall be effective to take the corporate action referred to in the
written consent unless, within 60 days of the earliest dated consent delivered
to the corporation, written consents signed by a sufficient number of holders to
take action are delivered to the corporation. As required by the Delaware
General Corporation Law, if the matters set forth herein are approved by the
holders of a sufficient number of Visual Edge's outstanding common stock, Visual
Edge will promptly notify the stockholders from whom consent has not been
received.
A consent executed by a stockholder may be revoked at any time provided
that a written, dated revocation is executed and delivered to Visual Edge on or
prior to the time at which Visual Edge receives written consents sufficient to
approve the matters set forth herein. A revocation may be in any written form
validly signed by the stockholder as long as it clearly states that the consent
previously given is no longer effective. The revocation should be sent to the
place fixed for receipt of consents. A written notice revoking a previously
executed written consent should be sent to Visual Edge at 901 Yamato Road, Suite
175, Boca Raton, Florida 33431, Attention: Secretary.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
Only holders of record of the common stock of Visual Edge, as of the close
of business on the record date, which is June 19, 2000, will be entitled to
deliver a written consent to the corporate actions in lieu of the annual
meeting. Each share of common stock entitles the registered holder thereof to
one vote on each matter. As of the close of business on the record date, there
were 19,993,927 shares of the common stock outstanding.
The following table sets forth certain information, as of June 19, 2000,
relating to the beneficial ownership of shares of Visual Edge's common stock by:
(i) each person or entity who is known by Visual Edge to own beneficially five
percent or more of Visual Edge's outstanding common stock; (ii) each of Visual
Edge's executive officers, directors and nominees as a director; and (iii) all
directors and executive officers of Visual Edge as a group.
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PERCENTAGE
BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP OF
BENEFICIAL HOLDER COMMON STOCK(1) COMMON STOCK(1)
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Infinity Investors Limited(2) 9,893,395 49.5%
Ronald F. Seale(3) 976,000 4.9%
Thomas Peters(4) 258,566 --
J. Keith Benedict(2) -- *
John Wagner(2) -- *
Earl Takefman(5) 1,696,960 8.3%
Richard Parker(5) 702,000 3.4%
All directors and executive officers
as a group (six persons)(2)(3)(4)(5) 3,633,526 16.9%
- ----------
* Less than 1%
(1) Unless otherwise indicated, Visual Edge believes that all persons named in
the table have sole voting and investment power with respect to all shares
of the common stock beneficially owned by them. A person is deemed to be
the beneficial owner of securities that may be acquired by such person
within 60 days from the record date upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that (a) options that are held by such person (but
not those held by any other person) and which are exercisable within 60
days of the record date have been exercised and (b) securities convertible
into shares of common stock that are held by such person (but not those
held by any other person) and which are convertible within 60 days of
record date have been converted.
(2) Includes shares beneficially owned by Infinity Emerging Holdings Subsidiary
Limited (as the transferee from IEO Holdings Limited), Glacier Capital
Limited and Summit Capital Limited, which entities have affirmed the
existence of a "group" as such term is used in Rule 13d-5 promulgated under
the Securities Exchange Act of 1934, as amended. For all of such entities,
excludes all shares underlying Notes and Preferred Stock held by such
entities. Information regarding these entities has been obtained from the
Schedule 13D, filed September 9, 1999, with respect to the "group" in which
these entities are included. Visual Edge has failed, among other matters,
to pay amounts owed to such holders under the terms of the convertible
securities issued to them and to maintain the listing of its common stock
on the Nasdaq SmallCap Market. As a result, an Event of Default exists
under the Infinity Financing, and the investment funds may convert each
share of Series A-2 Convertible Preferred Stock, as well as the Convertible
Notes, and all accrued interest and dividends payable thereon, into a
number of shares of common stock based on a formula using a percentage of
the market price of the common stock. If these entities converted their
shares of Visual Edge's Series A-2 Preferred Stock and Convertible Notes
based on this formula based on the market price as of the record date,
these entities would hold approximately 23 million additional shares of
common stock. J. Keith Benedict and John Wagner are representatives of the
investment manager (or its affiliates) of Infinity Investors Limited
("Infinity") and certain of the other funds in the group. The address of
each of the entities in this group is 1601 Elm Street, Suite 4000, Dallas,
Texas 75201.
(3) Includes 976,000 shares owned by Marion Interglobal, Ltd., a British Virgin
Islands corporation of which Mr. Seale is Senior Managing Director. The
address of Marion Interglobal, Ltd. is 12803 Water Point Blvd., Windermere,
Florida 34786. Mr. Seale resigned as a director and executive officer of
Visual Edge in July 2000.
(4) Includes exercisable options held by Mr. Peters to purchase 240,411 shares
of common stock and a warrant to purchase 5,000 shares of common stock. Mr.
Peters was elected as Chief Executive Officer and President of Visual Edge
in July 2000.
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(5) Messrs. Takefman and Parker ceased serving as directors and executive
officers of Visual Edge in 1999. Litigation between Visual Edge and Messrs.
Takefman and Parker has arisen out of the termination of their relationship
with Visual Edge. As a result of this dispute, Visual Edge has been unable
to obtain information from Messrs. Takefman and Parker regarding the number
of shares of common stock beneficially held by them. Consequently, this
table reflects the number of shares beneficially held by them as set forth
in Visual Edge's definitive Proxy Statement filed with the Commission in
1999. For Mr. Takefman, the information includes (i) 1,159,482 shares owned
by Status-One Investments Inc., a Delaware corporation owned by Earl
Takefman and certain family members ("Status-One"), and (ii) presently
exercisable options to acquire 537,478 shares of common stock, but does not
include 2,136 shares of common stock owned by Mr. Takefman's spouse, as to
which shares Mr. Takefman disclaims beneficial ownership. For Mr. Parker,
the information includes presently exercisable options to acquire 700,000
shares of Visual Edge's common stock.
VOTING
The written consent of a majority of the issued and outstanding shares of
Visual Edge's common stock is required for the election of directors. The
written consent of a majority of the issued and outstanding shares of Visual
Edge's common stock is required for each other proposal contained in this
document. Cumulative voting is not permitted in the election of directors.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Three (3) directors are to be elected to hold office until the next annual
meeting of stockholders and until their respective successors are elected and
qualified.
The following information is furnished with respect to the three (3)
nominees for election as directors, which constitute all of the directorships of
Visual Edge's Board of Directors. The Board of Directors has recommended the
nominees named below. Although such nominees have indicated that they will serve
as directors of Visual Edge, should any of them be unable or unwilling to serve,
the Board of Directors may recommend and nominate another person in the place
and stead of such person or the Board of Directors will elect to reduce the
number of directors constituting the Board of Directors. Under Section 211 of
the Delaware General Corporation Law, stockholders may act by written consent to
elect directors, but if the written consent is less than unanimous, such action
may be taken by written consent only if all the directorships to which directors
could be elected at an annual meeting held at the effective time of the written
consent are vacant and are filled by such action. As a result, the current
members of the Board of Directors will submit their resignations or be removed
at or before the time that these materials are sent to Visual Edge's
stockholders.
NOMINEES FOR DIRECTORS
THOMAS PETERS, age 55, has been a director of Visual Edge since June 1999,
although he was allegedly removed in August 1999 and later re-elected to the
Board of Directors. Mr. Peters has served as Visual Edge's Executive Vice
President and Chief Technology Officer from November 1999 to July 12, 2000, and
is now serving as the Chief Executive Officer, President and Secretary of Visual
Edge. Mr. Peters has also served as Visual Edge's Vice President of Operations
and Technology from May 1996 to November 1999. Since July 1992, Mr. Peters has
been the owner of Smart View, a company he founded to design and develop
computer golf software to be used by golf professionals when giving video golf
lessons. In March 1995, Smart View was engaged as an independent consultant to
Visual Edge and was principally responsible for the development of the software
used in Visual Edge's products. Smart View also developed operating systems used
by Golf Academy at PGA National and at the Doral Golf Learning Center, each in
Florida. Prior to forming Smart View, Mr. Peters, for 26 years, held various
positions at IBM Corporation, including Manager of Application Development from
July 1989 to July 1992 and Personal Computer Product Planning Manager from 1984
to 1989.
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J. KEITH BENEDICT, age 28, has been a director of Visual Edge since August
1999. Mr. Benedict has been Vice President of HW Partners, L.P., the investment
manager for several affiliated investment funds, which are stockholders of
Visual Edge, since April 1999. From September 1996 to April 1999, Mr. Benedict
served as a corporate and securities associate at the law firm of Bracewell &
Patterson, LLP. Mr. Benedict received his law degree from Washington & Lee
University in May 1996.
JOHN WAGNER, age 44, has been a director of Visual Edge since August 1999.
Mr. Wagner serves as President of the Hunt Sports Group, L.L.C., and has been an
officer of Hunt Sports Group, L.L.C. since January 1997. He is also the Chief
Operating Officer of Hunt Financial Group, L.L.C. Mr. Wagner is also a Vice
President of HW Partners, L.P., the investment manager for several affiliated
investment funds which are stockholders of Visual Edge. Prior to January 1997,
Mr. Wagner was a CPA and served 12 years in the public accounting industry,
predominantly with Coopers and Lybrand, L.L.P. His area of expertise was federal
and state tax issues for entreprenueurial- and sports-related interests.
VOTE REQUIRED FOR APPROVAL
The written consent of a majority of the issued and outstanding shares of
Visual Edge's common stock is required for election of these persons as
directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU CONSENT TO
THE ELECTION OF ITS NOMINEES TO THE BOARD OF DIRECTORS
COMPENSATION OF DIRECTORS
Visual Edge reimburses directors for reasonable travel expenses incurred in
connection with their activities on behalf of Visual Edge, but does not give its
directors additional compensation for serving as directors or for attending
Board of Directors meetings. Directors of Visual Edge may in the future receive
option grants to purchase common stock of Visual Edge under Visual Edge's
Amended and Restated 1996 Stock Option Plan.
BOARD AND COMMITTEE MEETINGS
Since September 1999, Visual Edge's Board of Directors met on two
occasions. All of the directors attended at least 75% of those two meetings of
the Board of Directors. Due to ongoing disputes between Visual Edge and its
former management, Visual Edge is unable to confirm the meetings held prior to
September 1999.
Nominees for election as a director of Visual Edge are selected by the full
Board of Directors, acting as a nominating committee.
Visual Edge has recently established an audit committee to comply with the
requirements of the Securities and Exchange Commission, but it has not appointed
members to that committee. Once members are appointed to the committee, the
audit committee will be generally responsible for recommending the appointment
of Visual Edge's independent auditors and overseeing the accounting and internal
audit functions of Visual Edge. It is expected that the audit committee members
will regularly talk with Visual Edge's financial management and independent
auditors to review the results of their examinations, the general scope of their
audit services and their opinions on the adequacy of internal controls and
quality of financial reporting.
Visual Edge does not currently have a compensation committee. The Board of
Directors intends to establish a compensation committee in the near future. It
is expected that the compensation committee will be responsible for reviewing
and making recommendations to the Board of Directors concerning remuneration of
Visual Edge's executive officers. It is expected that the compensation committee
also will administer the Amended and Restated 1996 Stock Option Plan and
determine the amounts of, and the individuals to whom, awards shall be made
thereunder.
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PROPOSAL NO. 2 -- APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO
CHANGE CORPORATION'S NAME
The Board of Directors unanimously approved an amendment to Visual Edge's
Certificate of Incorporation to change our name to Edge Technology Group, Inc.
This name change will be implemented by amending Visual Edge's Certificate of
Incorporation. The Board of Directors believes the new name will be more
descriptive of our business as it expands into other areas of operations,
although there can be no assurance that our business will be able to expand into
these other areas.
CONSENT REQUIRED FOR APPROVAL
In order to approve the amendment to Visual Edge's Certificate of
Incorporation, holders of a majority of the issued and outstanding shares of
Visual Edge's common stock must provide their written consent to such action.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU CONSENT TO THE CHANGE OF
OUR NAME TO EDGE TECHNOLOGY GROUP, INC.
PROPOSAL NO. 3-- APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
Visual Edge's Board of Directors has unanimously adopted an amendment to
Visual Edge's Certificate of Incorporation to increase the authorized number of
shares of Visual Edge's common stock from 20,000,000 shares to 90,000,000. As of
June 21, 2000, there were 19,993,927 shares of common stock outstanding.
The purpose of increasing the number of authorized shares of common stock
is to provide additional authorized shares which may be issued upon the
conversion of convertible securities previously issued by Visual Edge and the
exercise of options and warrants, as well as for such other corporate purposes
as the Board of Directors determines in its discretion. These corporate purposes
may include future stock splits, stock dividends or other distributions, future
financings, acquisitions and stock options and other equity benefits under
Visual Edge's employee benefit plans. The increase in the number of authorized
shares of common stock would enable Visual Edge to promptly take advantage of
market conditions and the availability of favorable opportunities without the
delay and expense associated with holding a special meeting of stockholders.
If the amendment is approved, the Board of Directors would be authorized to
issue any of the additional shares of common stock at such times, to such
persons and for such consideration as it may determine in its discretion, except
as may otherwise be required by applicable law or the rules of any exchange on
which the common stock may be listed. When and if they are issued, the
additional shares of common stock would have the same rights and privileges as
the presently outstanding shares of common stock.
One result of an increase in the number of shares of authorized common
stock may be to help the Board of Directors discourage or render more difficult
a change in control. For example, the additional shares could be issued to
dilute the voting power of, create voting impediments for, or otherwise
frustrate the efforts of, persons seeking to effect a takeover or gain control
of Visual Edge, whether or not the change of control is favored by a majority of
unaffiliated stockholders. Visual Edge could also privately place shares with
purchasers who might side with the Board of Directors in opposing a hostile
takeover bid. The issuance of any additional shares of common stock could also
have the effect of diluting the equity interests of existing stockholders and
the earnings per share of existing shares of common stock.
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CONSENT REQUIRED FOR APPROVAL
In order to approve the amendment to Visual Edge's Certificate of
Incorporation to increase the authorized number of shares of Visual Edge's
common stock, holders of a majority of the issued and outstanding shares of
Visual Edge's common stock must provide their written consent to such action.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU CONSENT TO THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED NUMBER OF SHARES OF VISUAL EDGE'S COMMON STOCK
PROPOSAL 4-- AMENDMENT OF CERTIFICATE OF DESIGNATIONS OF SERIES A-2
CONVERTIBLE PREFERRED STOCK
DESCRIPTION OF THE PROPOSED AMENDMENT
The Board of Directors has approved, and voted to recommend that Visual
Edge's stockholders approve, a proposed amendment to the Certificate of
Designations of Series A-2 Convertible Preferred Stock, which would entitle
Visual Edge, at its option to amend the conversion price of the Series A-2
Convertible Preferred Stock. Upon the filing of the amendment to the Certificate
of Designations, the conversion price would be changed so that each dollar value
of the Series A-2 Convertible Preferred Stock, based upon the liquidation
preference of each share of Series A-2 Convertible Preferred Stock, together
with the dollar value of all accrued and unpaid dividends thereon, will be
convertible into four (4) shares of Visual Edge common stock.
If the stockholders approve this proposal, the Certificate of Designations
for the Series A-2 Convertible Preferred Stock will be amended by adding the
following sentence to the end of Section 4.2 of the Certificate of Designations,
which provides the definition of the term "Conversion Price":
"Notwithstanding the foregoing provisions of this Section 4.2, if the
Closing occurs under the Agreement and Fourth Amendment to Bridge
Securities Purchase Agreement and Related Documents among the Holders
and Visual Edge, 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."
BACKGROUND OF THE PROPOSED AMENDMENT
In June 1997, Visual Edge arranged a three-year $7.5 million debt and
convertible equity facility, which is referred to as the "Infinity Financing",
with a group of investment funds, including Infinity Investors Limited, which
resulted in net proceeds to Visual Edge of approximately $7.2 million. Under the
Bridge Securities Purchase Agreement relating to the Infinity Financing,
including the amendments that have since been made to such agreement, Visual
Edge issued to the investment funds shares of common stock, shares of Series A-2
Convertible Preferred Stock and convertible notes. In August 1999, Infinity
converted 1,627 shares of the Series A-2 Convertible Preferred Stock into
9,594,857 shares of Visual Edge's common stock, which, after the dismissal of
litigation relating to the conversion, Visual Edge recognized in June 2000
effective as of August 13, 1999.
The principal amounts due under the convertible notes matured in June 2000,
and those amounts, as well as unpaid interest on the convertible notes and
dividends on the Series A-2 Convertible Preferred Stock, remain unpaid. As a
result of Visual Edge's failure, among other matters, to pay amounts of
principal, interest and dividend payments owed to the holders of the convertible
securities, consisting of the convertible notes and Series A-2 Convertible
Preferred Stock (collectively, "Convertible Securities"), events of default
exist under the Infinity Financing. Because of the existence of events of
default, the holders of the Convertible Securities may take any and all remedies
available to them under the Bridge
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Securities Purchase Agreement and related documents, including without
limitation the Security Agreement among Visual Edge and the holders of the
Convertible Securities, which grants to the holders a security interest in
substantially all of Visual Edge's assets.
Visual Edge has requested that the holders of the Convertible Securities
(i) loan to Visual Edge an additional $39,000, (ii) extend the maturity date of
the convertible notes and a loan in the amount of $180,000 and forbear from
exercising certain of their rights under the Bridge Securities Purchase
Agreement, (iii) agree to commit to convert, effective upon the satisfaction of
certain conditions described below, the Convertible Securities, together with
all accrued interest and dividends thereon, into shares of common stock, and
(iv) agree to a moratorium on the conversion of the Convertible Securities and
to the exercise of other remedies under the Bridge Securities Purchase Agreement
and related documents until August 9, 2000. The holders of the Convertible
Securities have entered into an Agreement and Fourth Amendment of Bridge
Securities Purchase Agreement with Visual Edge relating to these matters, which
contains certain conditions. The conditions Visual Edge must fulfill by August
9, 2000 include:
o Visual Edge must have effected a reverse stock split which converts at
least four (4) shares of Visual Edge's common stock into one (1) share of
its common stock, which is contemplated by Proposal number 7 of this proxy
statement.
o Visual Edge must have effected the sale and issuance of its securities to
investors providing net proceeds of at least $4.0 million to Visual Edge.
o Visual Edge must have secured the services of Pierre Koshakji and Johan
Schotte as officers of Visual Edge. Messrs. Koshakji and Schotte have
consented to serving in these positions, subject to Visual Edge fulfilling
certain conditions.
o Visual Edge must have paid Infinity approximately $39,000, an amount
advanced by Infinity to Visual Edge for working capital purposes.
o Visual Edge must have paid Infinity approximately $180,000, an amount
advanced by Infinity to Visual Edge for working capital purposes, or must
have restructured the terms of this advanced amount on terms acceptable to
Infinity.
o Visual Edge must have consummated its investment in Hencie.com, Inc., which
is further discussed in Item 5 of Visual Edge's Report on Form 8-K filed in
July 2000.
o Infinity must have transferred shares of Visual Edge common stock to
Entertainment Education Enterprises Corporation (or its designee), which is
referred to in this Report as E3. The number of shares that Infinity will
sell to E3 is approximately 27,473,413. As a result of this transfer of
securities, E3 will hold approximately 59% of Visual Edge's outstanding
common stock. If this transfer takes place, E3 will control Visual Edge.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
If the amendment to the Certificate of Designations is approved, all of
the issued and outstanding Convertible Securities would be converted into Visual
Edge common stock on the terms and at the rate provided in the amended
Certificate of Designations. If the amendment as proposed was not effected, then
the conversion price would be based upon 77.5% of the market price of Visual
Edge's common stock. Based on the market price of the common stock on the record
date, which is calculated based on the closing bid price of the common stock on
the five (5) previous trading days before the date as of which the price is
calculated, the holders could have converted their convertible securities,
together with all unpaid accrued interest and dividends, into approximately 23
million shares of common stock. If the amendment to the Certificate of
Designations is approved, the holders would be able to convert their Convertible
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Securities, together with all unpaid accrued interest and dividends, into
approximately 26,756,660 million shares of common stock.
BOARD RECOMMENDATION
The members of the Board of Directors, excluding for purposes of this
proposal any member affiliated with the holders of the Convertible Securities,
has considered the terms of the Agreement and Fourth Amendment to the Bridge
Securities Purchase Agreement and Related Documents among the holders of the
Convertible Securities and Visual Edge, including the amendment to the
conversion price of the Series A-2 Convertible Preferred Stock that is the
subject of this proposal, as well as a variety of other factors relating to
effect these actions will have upon the Visual Edge's stockholders, and after
taking the variety of considerations into account have approved the Agreement
and Fourth Amendment to the Bridge Securities Purchase Agreement and Related
Documents, including the amendment to the conversion price of the Series A-2
Convertible Preferred Stock.
CONSENT REQUIRED FOR APPROVAL
In order to approve the amendment to Visual Edge's Certificate of
Designations, holders of a majority of the issued and outstanding shares of
Visual Edge's common stock must provide their written consent to such action.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU CONSENT TO AMENDMENT TO
THE VISUAL EDGE'S CERTIFICATE OF DESIGNATIONS FOR ITS SERIES A-2
CONVERTIBLE PREFERRED STOCK
PROPOSAL NO. 5 -- APPROVAL OF AMENDMENTS TO THE VISUAL EDGE SYSTEMS
INC. AMENDED AND RESTATED 1996 STOCK OPTION PLAN
The Board of Directors of Visual Edge has approved amendments to the
Amended and Restated 1996 Stock Option Plan which will:
o increase the number of shares of common stock available for issuance under
the stock option plan to 4,000,000;
o increase the maximum number of shares of common stock for which options may
be awarded to any employee during a single calendar year to 2,000,000
shares; and
o authorize the Board of Directors or the committee administering the stock
option plan to award options to non-employee directors.
The Board of Directors has directed that these amendments be submitted to the
stockholders for approval.
The stock option plan was initially adopted in 1996. The stock option plan
was amended in 1998 to increase the number of shares of common stock authorized
for issuance to the greater of 2,000,000 shares or 20% of the outstanding shares
of common stock. As of December 31, 1999 and based on information available to
Visual Edge, there were 1,874,039 shares of common stock remaining available for
grant as awards under the stock option plan. If these amendments are approved by
the stockholders, there will be 2,125,961 shares of common stock available for
grant as awards under the stock option plan. In the opinion of the Board of
Directors, it is appropriate to amend the stock option plan to increase the
number of shares available for issuance to ensure that Visual Edge will be able
to attract and retain skilled employees, consultants and directors.
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation paid to specified executive officers to $1,000,000 per officer in
any one year. Compensation which qualifies as
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"performance-based compensation" is not taken into account for the purposes of
this limitation. The Board of Directors has determined that options issued under
the stock option plan with an exercise price at least equal to the fair market
value of Visual Edge's common stock on the date of grant, if awarded by a
compensation committee comprised of outside directors, should qualify as
"performance-based compensation." In order to qualify stock option awards under
the stock option plan as "performance-based compensation," the stockholders of
Visual Edge must approve a limit on the number of shares for which options may
be granted in any year to any employee. The stock option plan currently provides
that no employee may be granted, in any fiscal year of Visual Edge, options to
purchase more than 250,000 shares of common stock. The Board of Directors of
Visual Edge has approved an amendment to the stock option plan to increase this
limit to 2,000,000 shares. Section 162(m) of the Internal Revenue Code requires
that Visual Edge's stockholders approve this amendment.
The following description of the stock option plan is qualified in its
entirety by reference to the full text of the Amended and Restated 1996 Stock
Option Plan, a copy of which is attached as Appendix "A" to this Consent
Solicitation Statement in the form as amended pursuant to this proposal.
Purpose. The purpose of the stock option plan is to secure for Visual Edge
and its stockholders the benefits arising from stock ownership by selected
employees, consultants and non-employee directors of Visual Edge or its
subsidiaries as the Board of Directors of Visual Edge, or a committee
constituted for such purpose, may from time to time determine. Visual Edge
believes that the possibility of participation in the stock option plan through
receipt of incentive options and nonqualified options will provide participants
an incentive to perform more effectively and will assist Visual Edge in
attracting and retaining people of outstanding talent and ability. Incentive
options and nonqualified options are referred to as stock options.
Term. The stock option plan was initially adopted in 1996 with an
indefinite term. As amended by the Board of Directors, subject to stockholder
approval, awards of incentive options under the stock option plan may be made
until the date that is ten years after the Board's amendment to the stock option
plan. However, the Board may terminate the stock option plan at any time so long
as such action does not impair the rights of any holder of outstanding options.
Administration. The stock option plan is administered by the Board of
Directors or the Compensation Committee. The administrative body for the stock
option plan is referred to in these materials as the committee. All questions of
interpretation and application of the stock option plan are determined by the
Board of Directors or the committee.
Participation. All employees, consultants and non-employee directors of
Visual Edge or any subsidiary of Visual Edge are eligible to receive option
awards under the stock option plan. The Board of Directors or the committee
shall determine from time to time the individuals who are to receive stock
options under the stock option plan. During the lifetime of participants,
incentive options shall be exercisable only by the optionee, and no incentive
options will be transferable other than by will or the laws of descent and
distribution. The committee may permit an optionee to transfer a nonqualified
option to a family member or a trust benefiting family members.
Shares of Stock Available for Grant. As of December 31, 1999, a total of
1,874,039 shares of Visual Edge's common stock are currently available for
issuance under the stock option plan. If these amendments are approved by the
stockholders, a total of 2,125,961 shares of Visual Edge's common stock will be
available for issuance under the stock option plan. The shares may be either
authorized and unissued shares or authorized and issued and outstanding shares
(including, in the discretion of the Board, shares purchased in the market). In
the event a stock option expires unexercised, is terminated, or is canceled or
forfeited, the shares of common stock allocable to the unexercised portion of
that stock option may again be subject to a stock option under the stock option
plan.
The stock option plan provides that in the event of any change in the
outstanding shares of stock of Visual Edge by reason of any stock dividend,
split, spinoff, recapitalization, merger, consolidation,
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combination, exchange of shares of other similar change, the aggregate number of
shares of stock with respect to which awards may be made under the stock option
plan, the terms and the number of shares of any outstanding stock options, and
the purchase price of a share of stock under stock options, shall be equitably
adjusted by the committee.
Stock Options. The committee may designate a stock option as an incentive
option or a nonqualified option. Incentive options may only be awarded to
employees. The terms of each stock option shall be set out in a written option
agreement which incorporates the terms of the stock option plan.
The purchase price per share of common stock (the "Purchase Price") under
each stock option shall be determined by the committee, and in the case of
incentive options, may not be less than the fair market value of a share of
common stock on the date of grant. Stock options may not be exercisable after
ten (10) years from the date of grant. Additionally, the grant of incentive
options to an employee owning over 10% of the voting stock of Visual Edge must
be at an exercise price of not less than 110% of the fair market value of the
stock on the date of grant, and the incentive option may not be exercisable
after five (5) years from the date of grant. The aggregate fair market value of
all shares of common stock with respect to which incentive options are
exercisable for the first time by any optionee during any one calendar year
shall not exceed $100,000. On July 11, 2000, the closing price of the common
stock was $.70 per share.
Stock options may be exercised by payment of the stock option price in cash
or, with approval of the committee, in shares of common stock valued at fair
market value on the date of exercise or by delivery of a promissory note. An
optionee may also make payment by delivering to Visual Edge a properly executed
exercise notice together with irrevocable instructions to a broker approved by
Visual Edge that upon such broker's sale of shares with respect to which such
option is exercised, it is to deliver promptly to Visual Edge the amount of
sales proceeds necessary to satisfy the option exercise price and any required
withholding taxes. Special rules apply which limit the time of exercise of a
stock option following an employee's termination of employment.
Grants of Nonqualified Options to Nonemployee Directors. The stock option
plan currently provides for the automatic grant of nonqualified options for
5,000 shares to newly elected nonemployee directors, and for the automatic
annual grant of nonqualified options for 2,500 shares each year for continuing
nonemployee directors. The Board of Directors has approved an amendment to the
stock option plan that authorizes the committee to award options in its
discretion to nonemployee directors. Under the amendment, the committee may
direct that an annual grant of nonqualified options will be made to all
nonemployee directors. Options awarded to nonemployee directors must have an
exercise price equal to the fair market value of the common stock at the date of
grant. Nonemployee directors'stock options may be exercised through payment of
the exercise price in cash or in shares of common stock valued at fair market
value on the date of exercise.
Amendment of the Stock Option Plan. The Board of Directors may amend,
suspend or terminate the stock option plan at any time. If stockholder approval
of any amendment to the stock option plan is necessary or desirable under the
Securities Exchange Act of 1934, as amended, or the Internal Revenue Code, then
the effectiveness of any such amendment may be conditioned upon its approval by
the affirmative votes of the holders of a majority of the outstanding voting
stock of Visual Edge. No change may be made in, and no amendment, rescission,
suspension or termination of the stock option plan shall impair or alter the
rights or obligations of holders of outstanding stock options except with their
consent.
Change in Control. Upon a Change in Control (as defined in the stock option
plan) of Visual Edge, all outstanding stock options shall become fully vested
and exercisable (unless otherwise provided in the optionee's stock option
agreement).
Federal Tax Consequences. The grant of incentive options to an employee
does not result in any income tax consequences. The exercise of an incentive
option generally does not result in any income tax consequences to an employee
if (i) the incentive option is exercised by the employee during his employment
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with Visual Edge or a subsidiary of Visual Edge, or within a specified period
after termination of employment, and (ii) the employee does not dispose of
shares acquired pursuant to the exercise of an incentive option before the
expiration of two years from the date of grant of the incentive option or one
year after exercise and the transfer of the shares to him, whichever is later.
This time period is referred to as the holding period. However, the excess of
the fair market value of the shares of common stock as of the date of exercise
over the option exercise price is includable in an employee's alternative
minimum taxable income in the year of exercise.
An employee who disposes of his incentive option shares prior to the
expiration of the holding period described in the preceding paragraph, which is
referred to as an early disposition, generally will recognize ordinary income in
the year of sale in an amount equal to the excess, if any, of (a) the lesser of
(i) the fair market value of the shares as of the date of exercise or (ii) the
amount realized on the sale, over (b) the incentive option price. Any additional
amount realized on an early disposition should be treated as capital gain to the
employee, short or long term, depending on the employee's holding period for the
shares.
Visual Edge will not be entitled to a deduction as a result of the grant of
an incentive option, the exercise of an incentive option, or the sale of
incentive option shares after the holding period. If an employee disposes of
incentive option shares in an early disposition, Visual Edge would be entitled
to deduct the amount of ordinary income recognized by the employee.
The grant of nonqualified options under the stock option plan will not
result in the recognition of any taxable income by the optionee. An optionee
will recognize ordinary income on the date of exercise of the nonqualified
option equal to the excess, if any, of (i) the fair market value of the shares
acquired as of the exercise date, over (ii) the exercise price. The income
reportable on exercise of a nonqualified option is subject to federal income and
employment tax withholding. Generally, Visual Edge will be entitled to a
deduction for its taxable year within which the optionee recognizes compensation
income in a corresponding amount.
Section 162(m). Section 162(m) of the Internal Revenue Code places a limit
on the deductibility for federal income tax purposes of the compensation paid to
certain executive officers of Visual Edge. Certain performance-based
compensation (such as the compensation recognized upon exercise of nonqualified
options awarded by a compensation committee comprised of outside directors under
the stock option plan) is not subject to this deduction limit.
Grants under the Plan. There have been no grants under the stock option
plan since the Board approved these amendments set forth in this proposal;
accordingly, the benefits or amounts that will be received as a result of these
amendments are not currently determinable.
In fiscal 1999 there were no stock option awards made to the executive
officers or directors of Visual Edge.
CONSENT REQUIRED FOR APPROVAL
The written consent of the holders of a majority of the outstanding shares
of Visual Edge's common stock is required to approve the amendments to the
Amended and Restated 1996 Stock Option Plan.
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS CONSENT TO THE
AMENDMENTS TO THE AMENDED AND RESTATED
1996 STOCK OPTION PLAN
PROPOSAL NO. 6 -- PLAN OF INTERNAL RESTRUCTURING
INTRODUCTION
Visual Edge currently operates as a single entity, holding its assets
directly. The Board of Directors has determined that it would be in the best
interests of Visual Edge and its stockholders for the Board of Directors to have
the flexibility to incorporate Visual Edge's operations and to transfer some or
substantially all of Visual Edge's assets initially to directly or indirectly
wholly-owned subsidiaries, with the result that Visual Edge would become a
holding company. Visual Edge has no current plan or intention to hold less than
100% of the stock of its subsidiaries either directly or indirectly. However, it
is possible that Visual Edge may not hold 100% of such stock in the future.
Toward that end, the Board of Directors has unanimously adopted a plan of
internal restructuring, referred to in this proxy statement as the Restructuring
Plan, providing for Visual Edge to transfer its golf video lessons operations to
a new, wholly-owned subsidiary. The Board of Directors, however, would have the
discretion to determine when and whether to make such transfers.
The implementation of the Restructuring Plan will not have a material
effect on the consolidated financial statements of Visual Edge, nor will it
alter stockholders' percentage ownership interests. Similarly, the stockholders
will have the same voting, dividend and liquidation rights in Visual Edge after
consummation of the Restructuring Plan as they currently enjoy.
The Restructuring Plan is attached hereto as Exhibit B, and the discussion
of the Restructuring Plan is qualified in its entirety by reference thereto. If
the Restructuring Plan were to be fully implemented, Visual Edge would transfer
its golf video lesson operating assets to a newly-formed subsidiary corporation
at such time as the Board of Directors deems appropriate. However, the Board of
Directors may choose to implement the entire Restructuring Plan or a portion of
the Restructuring Plan, or the Board of Directors may elect not to effect the
Restructuring Plan at all.
Although Delaware law is not clear that implementation of the Restructuring
Plan requires stockholder approval, Visual Edge nonetheless has determined to
submit the Restructuring Plan to a binding stockholder vote. If the stockholders
do not approve the Restructuring Plan, it will not be consummated. However, the
submission of the Restructuring Plan to stockholders is not intended to affect
Visual Edge's right, under applicable Delaware law, to dispose of less than all
or substantially all of its assets without stockholder approval. Thus, even if
the Restructuring Plan is not approved by the stockholders, Visual Edge may from
time to time in the future transfer portions of its assets to subsidiaries or to
third parties on terms and for consideration approved by the Board of Directors,
subject to applicable Delaware law, without seeking stockholder approval.
Approval of the Restructuring Plan by the stockholders will not preclude the
stockholders' right to challenge any future dispositions by Visual Edge of the
stock or assets of the subsidiaries, if such dispositions are not made in
compliance with the Restructuring Plan or applicable Delaware laws.
REASONS FOR THE INTERNAL RESTRUCTURING
If the Restructuring Plan is fully implemented, Visual Edge's current
principal operations would be conducted by a newly-formed subsidiary of Visual
Edge. The new structure would permit greater flexibility in the management and
financing of new and existing business operations. The new holding company
structure would also facilitate Visual Edge's entry into new businesses, the
disposition of existing businesses and the formation of joint ventures or other
business combinations with third parties. It is contemplated that the
restructuring would further the objective of operating Visual Edge's businesses,
and any additional businesses acquired in the future, on a more self-sufficient,
independent economic basis. In addition, a
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holding company structure would permit improved delineation of administrative
and other responsibilities within the corporate structure and would allow a
designated group of executive employees to concentrate their efforts on the
concerns of the consolidated enterprise as a whole. Moreover, the holding
company structure will facilitate a focus on targeted objectives by
subsidiaries. Finally, a holding company structure may achieve certain other
benefits through the reallocation of assets and business functions in separate
subsidiary corporations.
Although the Board of Directors has not yet determined whether or when to
transfer Visual Edge's golf video lesson operations or any other operations to
subsidiaries, the Board of Directors will have the right to effect such a
transfer within five (5) years if the Restructuring Plan is approved by
stockholders.
EFFECT ON STOCKHOLDERS' RIGHTS
The outstanding stock of Visual Edge will not be affected by the proposed
Restructuring Plan. The stockholders of Visual Edge will continue as such, with
the same voting, dividend and liquidation rights and ownership interests as
before.
As a result of the proposed Restructuring Plan, the stockholders of Visual
Edge will not directly elect the board of directors of the new operating
subsidiaries. Members of the boards of directors of these subsidiaries will be
elected by the Board of Directors of Visual Edge (or boards of the immediate
parent of such subsidiaries), which will be the sole stockholder of these
subsidiaries. Notwithstanding that fact, however, the overall management of the
affairs and operations of Visual Edge will be under the direction of the Board
of Directors.
In the event that Visual Edge proposes to make a further disposition of the
stock of any of the new or existing subsidiaries or if any such subsidiary
disposes of its assets, in either case to an unrelated third party or affiliate
other than a subsidiary, Visual Edge will seek stockholder approval for such
transaction if Delaware law requires and the stock or assets involved constitute
substantially all of the assets of Visual Edge and its consolidated subsidiaries
taken as a whole.
For this reason, the restructuring does not alter stockholders' rights to
approve such dispositions. Visual Edge has no present intention to cause any
subsidiary to make a further transfer of assets to an affiliate (other than
wholly-owned subsidiaries) or to an unrelated third party. Visual Edge does not
intend to seek stockholder approval of any subsequent dispositions of assets by
a subsidiary or of the stock of any subsidiary, unless Delaware law requires and
such assets or stock to be transferred constitutes all or substantially all of
the assets of Visual Edge and its subsidiaries as a whole.
EFFECT ON VISUAL EDGE'S FINANCIAL STATEMENTS
The implementation of the Restructuring Plan will not have a material
effect on the consolidated financial statements of Visual Edge. Notwithstanding
the new structure, Visual Edge will continue to report its financial operations
and condition on a consolidated basis.
OTHER EFFECTS ON VISUAL EDGE AND ITS STOCKHOLDERS
Except for the structural changes described herein, consummation of the
proposed internal restructuring is not expected to result in any material change
in the overall operations of Visual Edge.
While the transactions presently contemplated under the Restructuring Plan
do not create any conflict of interests between Visual Edge and its
stockholders, in the event that any of the subsidiaries, through public or
private sale, should be owned in part by persons other than Visual Edge or its
stockholders, such conflicts could arise.
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Some possible disadvantages of this proposal to Visual Edge include the
requirement for observing corporate formalities between and among Visual Edge
and the various subsidiaries, together with some possible increases in
accounting and administrative costs and possible duplication of some
administrative functions. The Board of Directors believes that these
disadvantages are not significant or material and will be offset by the
increased focus on asset utilization and responsibility expected to flow from
the implementation of the Restructuring Plan.
Stockholders of Visual Edge will continue to have the same voting, dividend
and liquidation rights before and after implementation of the Restructuring
Plan. However, as discussed above under "Effect on Stockholder's Rights,"
stockholders of Visual Edge will not be entitled to elect the directors of the
operating subsidiaries. Instead, stockholders of Visual Edge will elect the
directors of Visual Edge, who will have overall responsibility for the
management of Visual Edge and its subsidiaries. Similarly, the stockholders'
statutory right to inspect the books and records of Visual Edge under applicable
Delaware law may not extend to the books and records of the operating
subsidiaries. However, because Visual Edge is a public company subject to the
reporting requirements of the Securities Exchange Act of 1934, information
regarding Visual Edge and its subsidiaries is available to stockholders without
resort to their statutory right to inspect Visual Edge's books and records.
The Board of Directors believes that the advantages of the Proposal, as
described under "Reasons for the Internal Restructuring" above, outweigh the
possible disadvantages as described above. For that reason, the Board of
Directors has adopted and recommends approval of the Restructuring Plan.
FEDERAL TAX CONSEQUENCES OF THE INTERNAL RESTRUCTURING
Any assets transferred pursuant to the Restructuring Plan will be conveyed
to the appropriate subsidiary on a tax-free basis pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended. It is anticipated that Visual Edge
will recognize gain or income for federal income tax purpose as a result of the
Restructuring Plan. Visual Edge has no current plan or intention to hold less
than 100% of the stock of its subsidiaries, either directly or indirectly.
However, it is possible that Visual Edge may not hold 100% of such stock in the
future. Although, Visual Edge has no present plan affecting the ownership of the
subsidiaries, it is possible that some subsidiaries may not be wholly-owned in
the future.
CONDITIONS TO IMPLEMENTATION OF THE RESTRUCTURING PLAN
In addition to being subject to the discretion of the Board of Directors,
the implementation of the Restructuring Plan is subject to Visual Edge's receipt
of all necessary consents and approvals, if any, of lenders, lessors and other
parties as well as completion of various administrative requirements. No federal
or state regulatory requirements must be complied with, nor must any
governmental approval be obtained.
RIGHTS OF DISSENTING STOCKHOLDERS
If the proposed internal restructuring is consummated, a stockholder
objecting to its terms or voting against the Restructuring Plan is not entitled
to any appraisal or similar rights under Delaware law.
CONSENT REQUIRED FOR APPROVAL
The written consent of the holders of a majority of the outstanding shares
of Visual Edge's common stock is required to approve the reverse stock split.
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PROPOSAL NO. 7 -- PROPOSAL FOR REVERSE STOCK SPLIT
GENERAL
The Board of Directors has adopted a resolution proposing that the
Certificate of Incorporation of Visual Edge be amended to effect a 4:1 reverse
stock split of the issued and outstanding shares of Visual Edge's common stock.
If this reverse stock split is approved by the requisite vote of Visual Edge's
stockholders, upon the filing of an amendment to Visual Edge's certificate of
incorporation with the Delaware Secretary of State, the reverse stock split will
be deemed effective, and each certificate representing shares of Visual Edge's
common stock outstanding immediately prior to the reverse stock split (which are
referred to in this document as the old shares), will be deemed automatically,
without any action on the part of the stockholders, to represent 1/4 of the
number of shares of common stock after the reverse stock split (which are
referred to in this document as the new shares); provided, however, that no
fractional new shares will be issued as a result of the reverse stock split. In
lieu thereof, each stockholder whose old shares are not evenly divisible by four
(4) will receive one additional new share for the fractional new share that such
stockholder would otherwise be entitled to receive as a result of the reverse
stock split. After the reverse stock split becomes effective, stockholders will
be asked to surrender certificates representing old shares in accordance with
the procedures set forth in a letter of transmittal to be sent by Visual Edge.
Upon such surrender, a certificate representing the new shares will be issued
and forwarded to the stockholders. However, each certificate representing old
shares will continue to be valid and represent new shares equal to 1/4 the
number of old shares (plus one additional new share where such old shares are
not evenly divisible by four (4)).
The number of shares of common stock authorized by Visual Edge's
certificate of incorporation will be reduced from 90,000,000 to 22,500,000 as a
result of the proposed reverse stock split. Accordingly, the number of shares of
common stock into which each share of Preferred Stock is convertible will be
proportionately reduced. The common stock issued pursuant to the reverse stock
split will be fully paid and nonassessable. The voting and other rights that
presently characterize the common stock will not be altered by the reverse stock
split.
PURPOSES OF THE PROPOSED REVERSE STOCK SPLIT
The Board of Directors believes the reverse stock split is desirable for
several reasons. The reverse stock split should enhance the acceptability and
marketability of the common stock by the financial community and investing
public. The reduction in the number of issued and outstanding shares of common
stock caused by the reverse stock split is expected to result in a broader
market for the common stock than that which currently exists.
A variety of brokerage house policies and practices tend to discourage
individual brokers within those firms from dealing with lower priced stocks.
Some of those policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function to make the handling
of lower priced stocks economically unattractive to brokers. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of lower priced stock because the brokerage commission on a sale of
lower priced stock generally represents a higher percentage of the sales price
than the commission on a relatively higher priced issue. The Board of Directors
believes that the proposed reverse stock split should result in a price level
for the common stock that will reduce, to some extent, the effect of the
above-referenced policies and practices of brokerage firms and diminish the
adverse impact of trading commissions on the market for the common stock. (Any
reduction in brokerage commissions resulting from a reverse stock split may be
offset, however, in whole or in part, by increased brokerage commissions
required to be paid by stockholders selling "odd lots"created by the reverse
stock split.) The expected increased price level may also encourage interest and
trading in the common stock and possibly promote greater liquidity for Visual
Edge's stockholders.
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Currently, Visual Edge's shares of common stock are traded on the NASD
Electronic Bulletin Board. The Board of Directors believes that the reverse
stock split is an important step in Visual Edge's effort to meet the initial
listing application requirements maintained by Nasdaq SmallCap Market. The
reverse stock split is expected to enhance Visual Edge's ability to seek
investment capital, which in turn, should put Visual Edge in a position to apply
to have its common stock listed on the Nasdaq SmallCap Market.
However, no assurance can be given that any or all of these effects will
occur; including, without limitation, that the market price per new share of
common stock after the reverse stock split will be four (4) times the market
price per old share of common stock before the reverse stock split, or that such
price will either exceed or remain in excess of the current market price.
Further, no assurance can be given that the market for the common stock will be
improved. Stockholders should note that the Board of Directors cannot predict
what effect the reverse stock split will have on the market price of the common
stock.
CHANGES AFFECTING CAPITAL STOCK
The number of shares of common stock authorized and outstanding will be
reduced from 90,000,000 to 22,500,000 and from 19,993,297 to 4,998,325
respectively. Also, the number of shares of common stock into which each share
of preferred stock is convertible will be proportionately reduced.
Visual Edge's common stock is currently registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended, and, as a result, Visual Edge
is subject to the periodic reporting and other requirements of this Act. The
reverse stock split will not affect the registration of the common stock under
this Act.
IMPLEMENTATION OF REVERSE STOCK SPLIT
The reverse stock split will be effected by filing the amendment to Visual
Edge's certificate of incorporation with the Delaware Secretary of State.
Assuming approval of the reverse stock split by the requisite vote of the
stockholders, the amendment to the certificate of incorporation will thereafter
be filed with the Delaware Secretary of State as promptly as practicable and the
reverse stock split will become effective on the date of such filing. Without
any further action on the part of Visual Edge or the stockholders, after the
effective date of the reverse stock split, the certificates representing old
shares will be deemed to represent 1/4 of the number of new shares (plus one
additional new share where such old shares are not evenly divisible by four
(4)).
As soon as practicable after the effective date of the reverse stock split,
Visual Edge will send a letter of transmittal to each holder of record of old
shares of common stock outstanding on the effective date of the reverse stock
split. The letter of transmittal will contain instructions for the surrender of
certificate(s) representing such old shares to American Stock Transfer & Trust
Company, Visual Edge's exchange agent. Upon proper completion and execution of
the letter of transmittal and return thereof to American Stock Transfer & Trust
Company, together with the certificate(s) representing old shares, a stockholder
will be entitled to receive a certificate representing the number of new shares
of common stock into which his old shares have been reclassified and changed as
a result of the reverse stock split.
STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO.
NO NEW CERTIFICATE WILL BE ISSUED TO A STOCKHOLDER UNTIL HE HAS SURRENDERED HIS
OUTSTANDING CERTIFICATE(S) TOGETHER WITH THE PROPERLY COMPLETED AND EXECUTED
LETTER OF TRANSMITTAL TO THE AMERICAN STOCK TRANSFER & TRUST COMPANY.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
Visual Edge has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the reverse stock split. Visual Edge, however, believes that the
reverse stock split will constitute a reorganization pursuant to Section
368(a)(1)(E) of the Internal Review Code of 1986, as amended, and that because
the reverse stock split is
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not part of a plan to periodically increase a stockholder's proportionate
interest in the assets or earnings and profits of Visual Edge, the reverse stock
split will have the following federal income tax effects:
1. A stockholder will not recognize gain or loss on the exchange. In the
aggregate, the stockholder's basis in the new shares will equal his
basis in the old shares.
2. A stockholder's holding period for the new shares will be the same as
the holding period of the old shares exchanged therefor.
3. Visual Edge will not recognize any gain or loss as a result of the
reverse stock split.
MISCELLANEOUS
The Board of Directors may abandon the proposed reverse stock split at any
time prior to the effective date if for any reason the Board of Directors deems
it advisable to abandon the proposal. The Board of Directors may consider
abandoning the proposed reverse stock split if it determines, in its sole
discretion, that the reverse stock split would adversely affect the ability of
Visual Edge to raise capital or the liquidity of the common stock, among other
matters. The Board of Directors may make any and all changes to the amendment to
Visual Edge's certificate of incorporation that it deems necessary to file the
amendment to the certificate with the Delaware Secretary of State and give
effect to the reverse stock split.
CONSENT REQUIRED FOR APPROVAL
The written consent of the holders of a majority of the outstanding shares
of Visual Edge's common stock is required to approve the reverse stock split.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS CONSENT TO THE
REVERSE STOCK SPLIT
EXECUTIVE OFFICERS
The executive officers of Visual Edge are appointed by the Board of
Directors of Visual Edge and serve at the discretion of the Board of Directors.
Thomas Peters is the Chief Executive Officer, President, and Secretary of Visual
Edge. Biographical information concerning Mr. Peters is set forth under the
heading "Election of Directors."
EXECUTIVE COMPENSATION
The following table sets forth for the periods indicated the compensation
earned by (a) each person that served as Visual Edge's Chief Executive Officer
during the fiscal year ended December 31, 1999 (b) the other executive officer
whose salary and bonus for the fiscal year ended December 31, 1999 was in excess
of $100,000 for services rendered in all capacities to Visual Edge for that year
and (c) the individual for whom disclosure would have been provided pursuant to
clause (b) but for the fact that the individual was not serving as an executive
officer of Visual Edge on December 31, 1999 (collectively, the "Named Executive
Officers"):
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SECURITIES
UNDERLYING
SALARY OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) (1)
- --------------------------- ---- ------- ----------
Ronald F. Seale(2) 1999 -- --
1998 -- --
1997 -- --
Earl Takefman(3)(4) 1999 157,050 --
1998 164,867 250,000(5)
1997 170,333 --
Thomas Peters 1999 150,300 --
Chief Executive Officer,
President and Secretary 1998 125,283 200,000(5)
1997 115,366 20,000
Richard Parker(3)(4) 1999 157,050 --
1998 164,867 600,000(5)
1997 171,698 50,000
- -------
(1) In accordance with the rules of the Securities and Exchange Commission the
compensation described in this table does not include medical, group life
insurance or other benefits received by the Named Executive Officers that
are available generally to all salaried employees of Visual Edge, and
certain perquisites and other personal benefits received by the Named
Executive Officers that do not exceed the lesser of $50,000 or ten percent
(10%) of any such officer's salary and bonus disclosed in the table.
(2) Mr. Seale became Chief Executive Officer and President of Visual Edge in
November 1999. Mr. Seale resigned as director and executive officer of
Visual Edge in July 2000.
(3) Messrs. Takefman and Parker were removed from their positions with Visual
Edge in August 1999.
(4) The salaries of Messrs. Takefman, Peters and Parker were paid in accordance
with the terms of their respective employment agreements.
(5) In December 1998, Visual Edge entered into a Third Amendment to the Bridge
Securities Purchase Agreement with a group of investment funds, which is
further described below. See "Related Party Transactions --Infinity
Financing." As a means of retaining Visual Edge's management and as an
incentive for such management to pursue Visual Edge's long-term goals, the
Third Amendment provided that all outstanding stock options granted to
Messrs. Takefman, Parker and Peters be repriced to $1.00 per share and that
all such options be immediately vested.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during the
fiscal year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
The following table shows, with respect to the Named Executive Officers,
information with respect to the unexercised options to purchase shares of the
common stock granted under the Amended and Restated 1996 Stock Option Plan and
held as of December 31, 1999. None of the Named Executive Officers exercised
options during the year ended December 31, 1999, and as of December 31, 1999, no
options
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granted to the Named Executive Officers were in-the-money, which means that the
exercise price of all such options exceeded the market price for the underlying
securities.
DECEMBER 31, 1999
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------
Ronald F. Seale (3) -- --
Thomas Peters 240,411 --
Earl Takefman (2) 537,478 --
Richard Parker 700,000 --
- ---------
(1) In December 1998, Visual Edge entered into a Third Amendment to the Bridge
Securities Purchase Agreement with a group of investment funds, which is
further described below. See "Related Party Transactions -- Infinity
Financing." As a means of retaining Visual Edge's management and as an
incentive for such management to pursue Visual Edge's long-term goals, the
Third Amendment provided that all outstanding stock options granted to
Messrs. Takefman, Parker and Peters be repriced to $1.00 per share and that
all such options be immediately vested.
(2) Excludes (i) 10,000 warrants owned by Mr. Takefman to acquire shares of the
common stock, which were purchased by Mr. Takefman upon the same terms as
other unaffiliated investors in a Bridge Financing consummated by Visual
Edge in March 1997, and (ii) 5,832 shares underlying options owned by Mr.
Takefman's spouse as to which shares Mr. Takefman disclaims beneficial
ownership.
(3) Mr. Seale resigned as the Chairman of the Board, Chief Executive Officer
and President of Visual Edge in July 2000.
EMPLOYMENT AGREEMENT
As of May 1, 1996, Visual Edge entered into a two-year employment agreement
with Thomas Peters, pursuant to which Mr. Peters originally served as Director
Software Development and now serves as the Chief Executive Officer, President,
and Secretary of Visual Edge. This Agreement was amended on April 14, 1998 and
extended until December 31, 2000. Mr. Peters is entitled to receive a base
salary of $130,000 under the agreement for 1998, subject to increase to $140,000
for 1999 and to $150,000 for 2000. Pursuant to the agreement, Mr. Peters will
also be eligible to receive a bonus based on Visual Edge's performance, as
determined by the Board of Directors. The agreement is automatically renewed for
additional one-year periods unless Mr. Peters or Visual Edge provides notice to
the other of its termination. In the event that Mr. Peters is terminated without
cause, he will be entitled to receive as severance the amount of his base salary
for three months.
RELATED PARTY TRANSACTIONS
INFINITY FINANCING.
On June 13, 1997, Visual Edge arranged a three-year $7.5 million debt and
convertible equity facility (the "Infinity Financing") with a group of
investment funds, which resulted in net proceeds to Visual Edge of approximately
$7.2 million. Under the Securities Purchase Agreement dated June 13, 1997,
including the amendments that have since been made to this agreement, Visual
Edge issued to the investment funds 1,039,388 shares of common stock, 6,000
shares of Series A-2 Convertible Preferred Stock with a liquidation preference
of $1,000 per share and 8.25% Convertible Notes in the original principal amount
of $1.5 million. As of June 21, 2000, the investment funds hold of record
9,893,395 shares of our common stock after taking into effect the recognition of
the conversion by Infinity of 1,627 shares of Series A-2 Convertible Preferred
Stock, which is described below. Because Visual Edge has failed, among other
matters, to pay amounts owed to such holders under the terms of the convertible
securities issued to them
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and to maintain the listing of its common stock on the Nasdaq SmallCap Market,
an Event of Default exists under the Infinity Financing. As a result, the
investment funds may, among other remedies, convert each share of Series A-2
Convertible Preferred Stock into a number of shares of common stock based on a
formula using a percentage of the market price of the common stock. In August
1999, one of the investment funds delivered a notice of conversion to Visual
Edge, to convert 1,627 of its 4,400 shares of our Series A-2 Convertible
Preferred Stock into 9,594,857 shares of our common stock. The conversion was
disputed, and litigation ensued in the Delaware Court of Chancery. In January
2000, the court dismissed the action, stating that the claim relating to the
conversion was moot because parties to the dispute had resigned from their
positions with Visual Edge. Visual Edge has approved this conversion of Series
A-2 Preferred Stock and the issuance of Visual Edge's common stock as a result
of this conversion effective August 13, 1999.
Visual Edge has outstanding $1,500,000 face amount of convertible notes
held by Infinity, Summit Capital Limited and Glacier Capital Limited
(collectively, "Convertible Notes"). The principal amount on these Convertible
Notes matured in June 2000, and interest on the Convertible Notes is payable
quarterly. Visual Edge has not made interest payments on the Convertible Notes
for interest accruing during the second and third quarters of 1999 and during
2000. The non-payment of such interest constitutes and Event of Default under
the Convertible Notes and related agreements. As of the date of this filing, the
holders of the Convertible Notes have neither declared a default or exercised
the remedies available under the Convertible Notes.
Visual Edge and holders of the Convertible Securities have entered into an
Agreement and Fourth Amendment of Bridge Securities Purchase Agreement as
further described in Proposal 4.
MARION EQUITY FINANCING.
In March 1998, Visual Edge entered into a Purchase Agreement with Marion
Interglobal, Ltd., an investment group owned by Ronald Seale, a former director
and executive officer of Visual Edge. Under this agreement, Marion agreed to
invest up to $11 million in exchange for up to 5,200,000 shares of common stock
in three separate phases. In connection with the first two phases, Visual Edge
issued to Marion an aggregate of two million (2,000,000) shares of common stock
for $5 million. Marion opted not to proceed with the third phase. Visual Edge
paid certain transaction fees to Marion totaling two million (2,000,000)
additional shares of common stock upon the completion of the first two phases.
As of December 31, 1999, Marion beneficially owns 976,000 shares of common stock
for its own account.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities and Exchange Act of 1934, Visual
Edge's directors, executive officers and holders of more than 10% of the common
stock are required to report their initial ownership of Visual Edge's equity
securities and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established,
and Visual Edge is required to disclose any failure to file by these dates with
respect to 1999. Based on representations of its directors and executive
officers and copies of reports they have filed with the Securities and Exchange
Commission, there were no late reports filed for 1999, except that Tom Peters
failed to file a Form 3 upon his election as a director of Visual Edge in June
1999. However, during 1999 Beryl Artz and Mark Hershhorn resigned as directors
of Visual Edge and Earl Takefman and Richard Parker ceased serving as directors
and executive officers of Visual Edge. These persons have not filed a Form 5 for
1999 with respect to Visual Edge, and Visual Edge has not received a written
representation from them that these persons were not required to file a Form 5
with respect to Visual Edge for 1999.
INDEPENDENT ACCOUNTANTS
Visual Edge's former accountants, Arthur Andersen LLP, resigned in June
2000. Arthur Andersen's report on Visual Edge's financial statements as of and
for the fiscal years ended December 31, 1998 did not
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contain any adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting principles. Arthur
Andersen's report on Visual Edge's financial statements as of and for the fiscal
year ended December 31, 1999, contained an explanatory fourth paragraph which
expressed substantial doubt regarding Visual Edge's ability to continue as a
going concern. Visual Edge's Board of Directors approved the resignation of
Arthur Andersen LLP as accountants for Visual Edge in June 2000. During the
fiscal years ended December 31, 1998 and December 31, 1999, and all subsequent
interim periods through March 31, 2000, there were no reportable events or
disagreements with Visual Edge's former accountants, Arthur Andersen, on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Arthur Andersen, would have caused Arthur Andersen to make a
reference to the subject matter of the disagreement in connection with Arthur
Andersen's reports.
The Board of Directors has not selected an independent public accountant
for fiscal 2000.
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STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE
2001 ANNUAL MEETING OF STOCKHOLDERS
To be included in Visual Edge's proxy materials relating to that meeting,
stockholder proposals to be presented at the 2001 Annual Meeting of Stockholders
must be received, in writing, by the Secretary of Visual Edge at Visual Edge's
principal executive offices no later than a reasonable time before the date
Visual Edge begins to print and mail its proxy materials for its 2001 Annual
Meeting of Stockholders. Additionally, the proxy for the 2001 Annual Meeting of
Stockholders may confer discretionary authority to Visual Edge to vote on any
matter at its 2001 Annual Meeting of Stockholders if Visual Edge did not have
notice of the matter a reasonable time before the date Visual Edge begins to
print and mail its proxy materials for its 2001 Annual Meeting of Stockholders.
REPORT ON FORM 10-KSB
VISUAL EDGE'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE TO STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO VISUAL EDGE SYSTEMS INC., 901 YAMATO ROAD, SUITE
175, BOCA RATON, FLORIDA 33431, ATTENTION: SECRETARY.
SOLICITATION OF WRITTEN CONSENTS
The accompanying written consent is solicited by the Board of Directors,
and the cost of such solicitation will be borne by Visual Edge. Written consents
may be solicited by directors, officers and employees of Visual Edge, none of
whom will receive any additional compensation for his or her services.
Solicitation of written consents may be made personally or by mail, telephone,
telegraph, facsimile or messenger. Visual Edge will pay persons holding shares
of the common stock in their names or in the names of nominees, but not owning
such shares beneficially, such as brokerage houses, banks and other fiduciaries,
for the reasonable expense of forwarding soliciting materials to their
principals.
By Order of the Board of Directors
/s/ Thomas Peters
Thomas Peters
Chief Executive Officer and
President
Boca Raton, Florida
July 28, 2000
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EXHIBIT A
VISUAL EDGE SYSTEMS INC.
SECOND AMENDED AND RESTATED 1996 STOCK OPTION PLAN
Section 1. Purpose
The Plan authorizes the Committee to provide to Employees, Consultants and
Non-Employee Directors of the Corporation and its Subsidiaries, who are in a
position to contribute materially to the long-term success of the Corporation,
with options to acquire Stock of the Corporation in accordance with the terms
specified herein. The Corporation believes that this incentive program will
cause those persons to increase their interest in the Corporation's welfare, and
aid in attracting and retaining Employees, Consultants and Directors of
outstanding ability.
Section 2. Definitions
Unless the context clearly indicates otherwise, the following terms, when
used in this Plan, shall have the meanings set forth in this Section:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) A "Change in Control" shall be deemed to have occurred if:
(i) any person (as defined in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act), other than the Corporation or an employee benefit plan
of the Corporation, acquires directly or indirectly the Beneficial
Ownership (within the meaning of Rule 13d-3 promulgated pursuant to the
Exchange Act) of any voting security of the Corporation and immediately
after such acquisition such Person is, directly or indirectly, the
Beneficial Owner of voting securities representing 30% or more of the
total voting power of all of the then-outstanding voting securities of
the Corporation;
(ii) the individuals (A) who, as of the closing date of the Initial
Public Offering, constitute the Board (the "Original Directors") or (B)
who thereafter are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of at
least two-thirds (2/3) of the Original Directors then still in office
(such directors becoming "Additional Original Directors" immediately
following their election) or (C) who are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board;
(iii) the stockholders of the Corporation shall approve a merger,
consolidation, recapitalization, or reorganization of the Corporation,
a reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of the Corporation immediately prior to
the transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of the Corporation shall approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or a substantial portion of the
Corporation's assets (i.e., 50% or more of the total assets of the
corporation).
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(c) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
(d) "Committee" shall mean the Board, or any Committee of two or more
Directors that may be designated by the Board to administer the stock
option plan.
(e) "Consultant" shall mean (i) any person who is engaged to perform
services for the Corporation or its Subsidiaries, other than as an
Employee or Director, or (ii) any person who has agreed to become a
consultant within the meaning of clause (i).
(f) "Control Person" shall mean any person who, as of the date of grant of
an Option, owns (within the meaning of Section 422(b)(6) of the Code)
stock possessing more than ten percent (10%) of the total combined
voting power or value of all classes of Stock of the Corporation or of
any parent or Subsidiary.
(g) "Corporation" shall mean Visual Edge Systems Inc., a Delaware
corporation.
(h) "Director" shall mean any member of the Board.
(i) "Disability" shall mean permanent and total disability as defined in
Section 22(e)(3) of the Code.
(j) "Employee" shall mean (i) any full-time employee of the Corporation or
its Subsidiaries (including Directors who are otherwise employed on a
full-time basis by the Corporation or its Subsidiaries), or (ii) any
person who has agreed to become an employee within the meaning of
clause (i).
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as it
may be amended from time to time.
(l) "Fair Market Value" of the Stock on a given date shall be based upon:
(i) if the Stock is listed on a national securities exchange or quoted
in an interdealer quotation system, the last sales price or, if
unavailable, the average of the closing bid and asked prices per share
of the Stock on such date (or, if there was no trading or quotation in
the Stock on such date, on the next preceding date on which there was
trading or quotation) as provided by one of such organizations; or (ii)
if the Stock is not listed on a national securities exchange or quoted
in an interdealer quotation system, as determined by the Board in good
faith in its sole discretion; provided, however, that the "fair market
value"of Stock on the date on which shares of Stock are first issued
and sold pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission shall be the
Initial Public offering price of the shares so issued and sold, as set
forth in the first final prospectus used in such offering.
(m) "Grantee" shall mean a person granted an option under the stock option
plan.
(n) "Initial Public Offering" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the
Securities and Exchange Commission in compliance with the provisions of
the 1933 Act.
(o) "ISO" shall mean an Option granted pursuant to the stock option plan to
purchase shares of the Stock and intended to qualify as an incentive
stock option under Section 422 of the Code, as now or hereafter
constituted.
(p) "1933 Act" shall mean the Securities Act of 1933, as amended.
(q) "Non-Employee Director" shall mean a Director of the Corporation who is
not an Employee, nor has been an Employee at any time during the prior
one-year period.
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(r) "NQSO" shall mean an Option granted pursuant to the stock option plan
to purchase shares of Stock that is not an ISO.
(s) "Options" shall refer collectively to NQSOs and ISOs issued under and
subject to the stock option plan.
(t) "Parent" shall mean any parent corporation as defined in Section 424 of
the Code.
(u) "Plan" shall mean this Amended and Restated 1996 Stock Option Plan as
set forth herein and as amended from time to time.
(v) "Stock" shall mean shares of the common stock of the Corporation, par
value $0.01 per share.
(w) "Stock Option Agreement" shall mean a written agreement between the
Corporation and the Grantee, or a certificate accepted by the Grantee,
evidencing the grant of an option hereunder and containing such terms
and conditions, not inconsistent with the stock option plan, as the
Committee shall approve.
(x) "Subsidiary" shall mean (i) any corporation with respect to which the
Corporation owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation, or
(ii) any entity which the Committee reasonably expects to become a
subsidiary within the meaning of clause (i).
Section 3. Shares of Stock Subject to the stock option plan
The total amount of Stock that may be subject to outstanding Options,
determined immediately after the grant of any Option, shall not exceed 4,000,000
shares, subject to adjustment pursuant to Section 10. If for any reason, any
Option awarded under the stock option plan, or any portion thereof, shall
expire, terminate or be forfeited or cancelled, and therefore, any such shares
are no longer distributable under the Option, such shares of Stock shall again
be available for award under the stock option plan. Any shares of Stock
delivered pursuant to an Option may consist, in whole or in part, of authorized
and unissued shares or treasury shares (including, in the discretion of the
Board, shares purchased in the market).
Section 4. Administration of the stock option plan
The Plan shall be administered by the Committee. Subject to the express
provisions of the stock option plan, the Committee shall have the authority to
interpret the stock option plan, to prescribe, amend and rescind rules and
regulations relating to the stock option plan, to determine the terms and
provisions of Stock Option Agreements thereunder and to make all other
determinations necessary or advisable for the administration of the stock option
plan. Any controversy or claim arising out of or related to this Plan or the
Options granted thereunder shall be determined unilaterally by, and at the sole
discretion of, the Committee. Any action of the Committee with respect to the
stock option plan shall be final conclusive, and binding on all persons,
including the Corporation, subsidiaries of the Corporation, Grantees, any person
claiming any rights under the stock option plan from or through any Grantee, and
stockholders. The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may delegate to officers or
managers of the Corporation or any Subsidiary the authority, subject to such
terms as the Committee shall determine, to perform administrative functions and
to perform such other functions as the Committee may determine, to the extent
permitted under Rule 16b-3, if applicable, and other applicable law.
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Section 5. Types of Options
Options granted under the stock option plan may be of two types: ISOs or
NQSOs. The Committee shall have the authority and discretion to grant to an
eligible Employee either ISOs, NQSOs or both, but shall clearly designate the
nature of each Option at the time of grant in the Stock Option Agreement.
Grantees who are not Employees (determined with reference to Section 2(j)(i)
only) of the Corporation or a Subsidiary (determined with reference to Section
2(x)(i) only) on the date an option is granted, including Non-Employee
Directors, shall only receive NQSOs.
Section 6. Grant of Options to Employees and Consultants
(a) Employees and Consultants of the Corporation and its Subsidiaries shall
be eligible to receive options under the stock option plan.
(b) The exercise price per share of Stock subject to an option granted to
an Employee or Consultant shall be determined by the Committee and
specified in the Stock Option Agreement; provided, however, that the
exercise price of each share subject to an ISO shall be not less than
100%, or, in the case of an ISO granted to a Control Person, 110%, of
the Fair Market Value of a share of the Stock on the date such Option
is granted.
(c) The term of each Option granted to an Employee or Consultant shall be
determined by the Committee and specified in a Stock Option Agreement,
provided that no option shall be exercisable more than ten years from
the date such option is granted, and provided further that no ISO
granted to a Control Person shall be exercisable more than five years
from the date of option grant.
(d) The Committee shall determine and designate from time to time Grantees
who are to be granted Options, and shall specify in the Stock Option
Agreement the nature of each Option granted and the number of shares of
Stock subject to each such option, provided, however, that in any
calendar year, no Employee may be granted an Option to purchase more
than 2,000,000 shares of Stock (determined without regard to when such
option is exercisable), subject to adjustment pursuant to Section 10.
(e) Notwithstanding any other provisions hereof, the aggregate Fair Market
Value (determined at the time the ISO is granted) of the Stock with
respect to which ISOs are exercisable for the first time by any
Employee during any calendar year under all plans of the Corporation
and any Parent or Subsidiary corporation shall not exceed $100,000. To
the extent the limitation set forth in the preceding sentence is
exceeded, the Options with respect to such excess shall be treated as
NQSOs.
(f) The Committee shall determine whether any Option granted to a Grantee
shall become exercisable in one or more installments and specify the
installment dates in the Stock Option Agreement. The Committee may also
specify in the Stock Option Agreement such other provisions, not
inconsistent with the terms of this Plan, as it may deem desirable,
including such provisions as it may deem necessary to qualify any ISO
under the provisions of Section 422 of the Code. Unless otherwise
determined by the Committee and specified in the Stock Option
Agreement, all Options shall immediately become exercisable upon a
Change in Control.
(g) The Committee may, at any time, grant new or additional options to any
eligible Grantee who has previously received Options under this Plan,
or options under other plans, whether such prior Options or other
options are still outstanding, have been exercised previously in whole
or in part, or have been cancelled. The exercise price of such new or
additional options may be established by the Committee, subject to
Sections 6(b) and 7(b) hereof, without regard to such previously
granted Options or other options.
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Section 7. Grants of Options to Non-Employee Directors
(a) Non-Employee Directors of the Corporation shall be eligible to receive
NQSOs under the stock option plan only pursuant to the provisions of
this Section 7. The Committee shall determine and designate from time
to time Non-Employee Directors who are to be granted Options, and shall
specify in the Stock Option Agreement the number of shares of Stock
subject to each such option. The Committee may in its discretion
specify that an award of a NQSO for a specific number of shares shall
be made annually to all Non-Employee Directors on the day of the annual
meeting of stockholders.
(b) The exercise price of each share of Stock subject to an Option granted
to a Non-Employee Director shall equal the Fair market value of a share
of Stock on the date such option is granted. Payment of the exercise
price for the shares being purchased shall be made in cash or by
delivery of shares of Stock.
(c) The Committee shall determine whether any Option granted to a
Non-Employee Director shall become exercisable in one or more
installments and specify the installment dates in the Stock Option
Agreement. The term of each Option granted to a Non-Employee Director
shall be determined by the Committee and specified in a Stock Option
Agreement, provided that no option shall be exercisable more than ten
years from the date such option is granted. All such Options shall
immediately become exercisable upon a Change in Control.
Section 8. Exercise of Options
(a) A Grantee shall exercise an option by delivery of written notice to the
Corporation setting forth the number of shares with respect to which
the option is to be exercised, together with cash, certified check,
bank draft, wire transfer, or postal or express money order payable to
the order of the Corporation for an amount equal to the Option price of
such shares and any income tax required to be withheld. The Committee
may, in its sole discretion, permit a Grantee to pay all or a portion
of the exercise price by delivery of Stock or other property (including
notes or other contractual obligations of Grantees to make payment on a
deferred basis, such as through "cashless exercise"arrangements, to the
extent permitted by applicable law), and the methods by which Stock
will be delivered or deemed to be delivered to Grantees.
(b) Except as provided pursuant to Section 9(a), no option granted to an
Employee or Consultant shall be exercised unless at the time of such
exercise the Grantee is then an Employee (determined with reference to
Section 2(j)(i) only) or Consultant (determined with reference to
Section 2(e)(i) only) of the Corporation or a Subsidiary (determined
with reference to Section 2(x)(i) only).
(c) Except as provided in Section 9(a), no Option granted to a Non-Employee
Director shall be exercised unless at the time of such exercise the
Grantee is then a Non-Employee Director.
Section 9. Exercise of Options Upon Termination
(a) Unless otherwise determined by the Committee: (i) upon termination of a
Grantee's employment with the Corporation and its Subsidiaries (except
by reason of death or Disability), such Grantee may exercise any
options that are then exercisable during the three-month period
following such termination of employment (but not beyond the remaining
term of the Option); and (ii) upon termination of a Grantee's
employment with the Corporation and its Subsidiaries by reason of death
or Disability, such Grantee or his personal representatives may
exercise any Options that are then exercisable during the one-year
period following such termination of employment (but not beyond the
remaining term of the Option). Notwithstanding the foregoing, if the
Committee determines that such termination is for cause, all Options
held by the Grantee shall immediately terminate. In addition, all
Options granted on the basis of Sections 2(e)(ii), Section 2(j)(ii) or
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2(x)(ii) shall immediately terminate if the Committee determines, in
its sole discretion, that the Consultant, Employee or Subsidiary, as
the case may be, will not become a Consultant, Employee or Subsidiary
within the meaning of clause (i) of such Sections.
(b) Unless otherwise determined by the Committee and specified in the Stock
Option Agreement, in no event shall any Option be exercisable for more
than the maximum number of shares that the Grantee was entitled to
purchase at the date of termination of the relationship with the
Corporation and its Subsidiaries.
(c) The sale of any Subsidiary shall be treated as a termination of
employment with respect to any Grantee employed by such Subsidiary.
(d) Subject to the foregoing, in the event of death, Options may be
exercised by a Grantee's legal representative.
Section 10. Adjustment Upon Changes in Capitalization
In the event that any dividend or other distribution (whether in the form
of cash, Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Grantees under the stock option plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Stock deemed to be available thereafter for
grants of Options under Section 3, (ii) the number and kind of shares of Stock
that may be delivered or deliverable in respect of outstanding Options, (iii)
the number of shares with respect to which Options may be granted to a given
Grantee in the specified period as set forth in Section 6(d), and (iv) the
exercise price (or, if deemed appropriate, the Committee may make provision for
a cash payment with respect to any outstanding Option). In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Options (including, without limitation, cash payments
in exchange for an Option or substitution of Options using stock of a successor
or other entity) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Corporation or any Subsidiary or the financial statements of the Corporation or
any Subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.
Section 11. Restrictions on Issuing Shares
The Corporation shall not be obligated to deliver Stock upon the exercise
or settlement of any Option or take other actions under the stock option plan
until the Corporation shall have determined that applicable federal and state
laws, rules, and regulations have been complied with and such approvals of any
regulatory or governmental agency have been obtained and contractual obligations
to which the Option may be subject have been satisfied. The Corporation, in its
discretion, may postpone the issuance or delivery of Stock under any Option
until completion of such stock exchange listing or registration or qualification
of such Stock or other required action under any federal or state law, rule, or
regulation as the Corporation may consider appropriate, and may require any
Grantee to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock under
the stock option plan.
Section 12. Tax Withholding
The Corporation shall have the right to require that the Grantee make such
provision, or furnish the Corporation such authorization, necessary or desirable
so that the Corporation may satisfy its obligation, under applicable laws, to
withhold or otherwise pay for income or other taxes of the Grantee attributable
to the grant or exercise of Options granted under the stock option plan or the
sale of Stock issued with respect
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to Options. This authority shall include authority to withhold or receive Stock
or other property and to make cash payments in respect thereof in satisfaction
of a Grantee's tax obligations.
Section 13. Transferability
No Option shall be subject to anticipation, sale, assignment, pledge,
encumbrance, charge or transfer except by will or the laws of descent and
distribution, and an Option shall be exercisable during the Grantee's lifetime
only by the Grantee, provided, however, that the Committee may permit a Grantee
to transfer a NQSO to a family member or a trust created for the benefit of
family members. In the case of such a transfer, the transferee's rights and
obligations with respect to the Option shall be determined by reference to the
Grantee and the Grantee's rights and obligations with respect to the Option had
no transfer been made. Notwithstanding such transfer, the Grantee shall remain
obligated pursuant to Section 12 if required by applicable law.
Section 14. General Provisions
(a) Each Option shall be evidenced by a Stock Option Agreement. The terms
and provisions of such Stock Option Agreements may vary among Grantees
and among different Options granted to the same Grantee.
(b) The grant of an Option in any year shall not give the Grantee any right
to similar grants in future years, any right to continue such Grantee's
employment relationship with the Corporation or its Subsidiaries, or,
until such Option is exercised and share certificates are issued, any
rights as a Stockholder of the Corporation. All Grantees shall remain
subject to discharge to the same extent as if the stock option plan
were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason
of any Option to any particular assets of the Corporation or its
Subsidiaries, or any shares of Stock allocated or reserved for the
purposes of the stock option plan or subject to any Option except as
set forth herein. The Corporation shall not be required to establish
any fund or make any other segregation of assets to assure the payment
of any Option.
(d) The issuance of shares of Stock to Grantees or to their legal
representatives shall be subject to any applicable taxes and other laws
or regulations of the United States or of any state having jurisdiction
thereof.
Section 15. Amendment or Termination
The Board may, at any time, alter, amend, suspend, discontinue or terminate
this Plan; provided, however, that no such action shall adversely affect the
rights of Grantees to Options previously granted hereunder and, provided
further, however, that any shareholder approval necessary or desirable in order
to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code
(or other applicable law or regulation) shall be obtained in the manner required
therein. The Committee may waive any conditions or rights under, or amend,
alter, suspend, discontinue, or terminate, any Option theretofore granted and
any Stock Option Agreement relating thereto; provided, however, that, without
the consent of an affected Grantee, no such action may materially impair the
rights of such Grantee under such Option.
Section 16. Effective Date of Amended and Restated Plan
This Plan, as amended and restated, is effective upon its adoption by the
Board and shall continue in effect until terminated by the Board. No ISO may be
granted more than ten years after such date.
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EXHIBIT B
RESOLUTION REGARDING
VISUAL EDGE SYSTEMS INC.
PLAN OF INTERNAL RESTRUCTURING
WHEREAS, the Board of Directors of Directors (the "Board") of Visual Edge
Systems Inc. ("Visual Edge") has determined that it would be in the best
interests of Visual Edge and its stockholders for the Board to have the
authority, in its discretion, to incorporate Visual Edge's operations and to
transfer some or substantially all of Visual Edge's assets to one or more
directly or indirectly wholly-owned subsidiaries ("Subsidiaries"), with the
result that Visual Edge would become a holding company; and
WHEREAS, the Board believes that the formation of such Subsidiaries and the
adoption, in whole or in part, of a holding company structure would (i)
facilitate the entry into new businesses, the disposition of existing businesses
and the formation of joint ventures or other business combinations with third
parties; (ii) permit greater flexibility in the management and financing of new
and existing business operations; and (iii) possibly enable Visual Edge to
achieve certain benefits through the reallocation of assets and business
functions in separate Subsidiary corporations; and
WHEREAS, the Board has adopted this Plan of Internal Restructuring (the "Plan"),
providing for Visual Edge to transfer its golf video lesson assets and such
other operations as the Board deems appropriate, to Subsidiaries; and
WHEREAS, pursuant to the terms of the Plan, the Board would have the discretion
to determine when and whether to make such transfers.
RESOLVED, that, in furtherance of the foregoing, this Plan is hereby adopted:
1. SUBSIDIARIES. The Board is hereby authorized to cause the formation of one or
more Subsidiaries and to effect the transfer of all, substantially all, or any
portion of the assets and related liabilities, if any, of Visual Edge's golf
video lesson operations or other operations as the Board deems appropriate, to
such new or existing Subsidiaries, either as contributions to the capital of
such Subsidiaries or in exchange for stock of the Subsidiary.
2. AUTHORITY TO DETERMINE STRUCTURE OF SUBSIDIARIES. The Board is hereby
authorized to determine the jurisdiction of incorporation of each such new
Subsidiary, its capitalization, officers and directors, and is authorized to
effect such transfers of assets, liabilities and employees to such new or
existing Subsidiaries as the Board shall deem appropriate in its sole discretion
consistent with Section 1 above.
3. EMPLOYEES. Upon the approval of any transfer of employees to any such
Subsidiary, the appropriate officers of Visual Edge shall take or cause to be
taken such actions as they shall deem necessary or desirable to implement
appropriate compensation levels and to obtain appropriate workers' compensation,
unemployment compensation and benefit plans coverages in effect for such
employees.
4. AUTHORITY OF OFFICERS. Except as otherwise provided in Visual Edge's and
applicable Subsidiaries' Bylaws and resolutions, the appropriate officers of
Visual Edge are hereby authorized to cause the incorporation of the Subsidiaries
as hereinafter directed by the Board, to obtain such consents of lenders,
lessors and other persons, as may be necessary for the assignment and assumption
of agreements, commitments and obligations and the transfers of assets
contemplated hereby, to qualify each of the new Subsidiaries to do business in
such jurisdictions as may be appropriate, and to secure office space, equipment
and staff necessary for their operations, and to make such filings, execute and
deliver on behalf of Visual Edge such agreements, instruments and documents and
do all other acts and things necessary or appropriate to carry out the intent
and purpose of this Plan, all subject to the further instruction, if necessary,
by the Board.
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5. STOCKHOLDER APPROVAL. This Plan shall be presented to the stockholders of
Visual Edge for their approval at a meeting (or consent in lieu of a meeting) of
stockholders. The affirmative vote of the holders of a majority of the issued
and outstanding stock of Visual Edge is necessary for such approval.
6. CONDITIONS TO CONSUMMATION OF PLAN. The consummation of this Plan is
conditioned upon (a) receipt, prior to the effective time of any transfers of
assets and related liabilities (if any) by Visual Edge hereunder, of all
consents of lenders, lessors and other persons deemed necessary by the officers
of Visual Edge to permit the assignment and assumption of agreements,
commitments and obligations and the transfers of assets and related liabilities
contemplated hereby; and (b) approval of this Plan by the requisite affirmative
vote (or consent) of the stockholders of Visual Edge, as provided in Section 5
hereof. If any consent referred to in clause (a) of the preceding sentence is
not deemed by such officers to be materially necessary to the consummation of
this Plan, such officers may waive such consent. The Board reserves the right to
amend or terminate this Plan at any time prior to any effective time and further
reserves the right to implement only a portion of such Plan; provided that no
amendment shall be made after approval of the Plan by the stockholders of Visual
Edge which would have a material adverse effect on the rights of the
stockholders of Visual Edge. Partial implementation of the Plan as provided in
the preceding sentence shall not be deemed an amendment of the Plan.
7. STOCKHOLDER APPROVAL OF TRANSFERS OF ASSETS BY SUBSIDIARIES. In the event
that the Board determines to form or utilize one or more new or existing
Subsidiaries and transfer assets of Visual Edge thereto in accordance with this
Plan, any subsequent transfer of assets by such Subsidiary to an unrelated third
party or affiliate other than a Subsidiary under Section 271 of Delaware General
Corporation Law, as in effect at the time of transfer to an unrelated third
party by such Subsidiary, will be submitted to the stockholders of Visual Edge
for approval if the assets so transferred to such unrelated third party or
affiliate other than a Subsidiary, would then constitute substantially all of
the assets of Visual Edge and its Subsidiaries on a consolidated basis.
8. NO LIMITATIONS. This Plan is intended to define, describe and provide for the
structure and functions of Visual Edge, its existing subsidiaries and any new
Subsidiaries created pursuant hereto. Nothing contained herein shall be
construed to limit the power of Visual Edge, its existing subsidiaries or the
new Subsidiaries in the future, and upon proper authorization by their
respective Boards of Directors and stockholders, to do anything which they may
lawfully have the power to do under the corporation laws of their respective
states of incorporation. Notwithstanding the foregoing, the Board shall use
reasonable efforts to consummate that portion of this Plan with respect to the
golf video lesson operations or other operations of Visual Edge within five (5)
years after stockholder approval as provided in Section 5 hereto, if at all.
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VISUAL EDGE SYSTEMS INC.
Consent in lieu of Annual Meeting of Stockholders
The undersigned hereby consents as follows:
WHEN PROPERLY EXECUTED, THIS WRITTEN CONSENT WILL CONSITUTE A
CONSENT FOR THE CORPORATE ACTIONS AS INDICATED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS WRITTEN CONSENT WILL CONSITUTE A
CONSENT:
(i) FOR EACH OF THE NOMINEES AS A DIRECTOR OF VISUAL EDGE;
(ii) FOR APPROVAL OF AN AMENDMENT TO THE VISUAL EDGE'S CERTIFICATE
OF INCORPORATION TO CHANGE OUR NAME FROM VISUAL EDGE SYSTEMS INC.
TO EDGE TECHNOLOGY GROUP, INC.;
(iii) FOR APPROVAL OF AN AMENDMENT TO THE VISUAL EDGE'S CERTIFICATE
OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK OF VISUAL EDGE FROM 20,000,000 TO 90,000,000;
(iv) FOR APPROVAL OF AN AMENDMENT TO VISUAL EDGE'S CERTIFICATE OF
DESIGNATION OF SERIES A-2 CONVERTIBLE PREFERRED STOCK, WHICH WOULD
ENTITLE VISUAL EDGE, AT ITS OPTION, TO AMEND THE CONVERSION PRICE
OF THE SERIES A-2 CONVERTIBLE PREFERRED STOCK;
(v) FOR APPROVAL OF AMENDMENTS TO THE VISUAL EDGE SYSTEMS INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN TO (A) INCREASE THE
TOTAL NUMBER SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE
PLAN TO 4,000,000, (B) INCREASE THE MAXIMUM NUMBER OF OPTIONS THAT
CAN BE GRANTED TO AN EMPLOYEE UNDER THE PLAN IN A SINGLE YEAR FROM
250,000 TO 2,000,000, AND (C) AUTHORIZE THE BOARD OF DIRECTORS OR
THE COMMITTEE ADMINISTERING THE PLAN TO DETERMINE AND DESIGNATE
OPTION AWARDS TO NONEMPLOYEE DIRECTORS;
(vi) FOR APPROVAL OF THE PLAN OF INTERNAL RESTRUCTURING TO
INCORPORATE VISUAL EDGE'S OPERATIONS AND TO TRANSFER SOME OR
SUBSTANTIALLY ALL OF VISUAL EDGE'S ASSETS INITIALLY TO DIRECTLY OR
INDIRECTLY WHOLLY-OWNED SUBSIDIARIES, WITH THE RESULT THAT VISUAL
EDGE WOULD BECOME A HOLDING COMPANY; AND
(vii) FOR APPROVAL OF A FOUR (4) FOR ONE (1) REVERSE STOCK SPLIT OF
VISUAL EDGE'S COMMON STOCK;
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
1. ELECTION OF DIRECTORS: Consent for the election of the following
persons as directors is:
/ / GRANTED / / WITHHELD
(Except as indicated otherwise)
IF THERE IS ANY INDIVIDUAL DIRECTOR WITH RESPECT TO WHOM YOU DESIRE TO
WITHHOLD YOUR CONSENT, YOU MAY DO SO BY LINING THROUGH OR OTHERWISE
STRIKING OUT HIS NAME.
Thomas Peters John Wagner J. Keith Benedict
2. Consent to the amendment to Visual Edge's certificate of incorporation
to change our name from Visual Edge Systems Inc. to Edge Technology
Group, Inc.
/ / GRANTED / / WITHHELD / / ABSTAIN
3. Consent to the amendment to Visual Edge's certificate of incorporation
to increase the authorized number of shares of common stock of Visual
Edge from 20,000,000 to 90,000,000.
/ / GRANTED / / WITHHELD / / ABSTAIN
4. Consent to the amendment to Visual Edge's Certificate of Designation of
Series A-2 Convertible Preferred Stock, which would entitle Visual
Edge, at its option, to amend the conversion price of the Series A-2
Convertible Preferred Stock.
/ / GRANTED / / WITHHELD / / ABSTAIN
5. Consent to amendments to Visual Edge's Amended and Restated 1996 Stock
Option Plan to (A) increase the total number of shares of common stock
reserved for issuance under the Plan to 4,000,000 (B) increase the
maximum number of options that can be granted to an employee under the
Plan in a single year from 250,000 to 2,000,000, and (C) authorize the
Board of Directors or the committee administering the plan to determine
and designate option awards to non-employee directors.
/ / GRANTED / / WITHHELD / / ABSTAIN
6. Consent to plan of internal restructuring to incorporate Visual Edge's
operations and to transfer some or substantially all of Visual Edge's
assets initially to directly or indirectly wholly-owned subsidiaries,
with the result that Visual Edge would become a holding company.
/ / GRANTED / / WITHHELD / / ABSTAIN
7. Consent to a four (4) for one (1) reverse stock split of Visual Edge's
common stock.
/ / GRANTED / / WITHHELD / / ABSTAIN
PLEASE SIGN, DATE AND RETURN THE WRITTEN CONSENT CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
Signature:
------------------------------
Signature:
------------------------------
Dated: , 2000
---------
NOTE: Please sign exactly as your name appears above. When signing as an
attorney, executor, administrator, trustee or guardian, please give your full
title as such. If shares are held jointly, each holder should sign. If a
corporation, please sign full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.