SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
|X| Preliminary Information Statement
|_| Definitive Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
VERTEX INTERACTIVE, INC.
(Name of Registrant As Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials
|_| check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
VERTEX INTERACTIVE, INC.
3619 KENNEDY ROAD, SOUTH PLAINFIELD, NJ 07080
INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO SEND US A PROXY
South Plainfield, New Jersey
*, 2004
This information statement has been mailed on or about *, 2004 to the
stockholders of record on *, 2004 (the "Record Date") of Vertex Interactive,
Inc., a New Jersey corporation (the "Company") in connection with certain
actions to be taken by the written consent by the majority stockholders of the
Company, dated as of *, 2004. The actions to be taken pursuant to the written
consent shall be taken on or about *, 2004, 20 days after the mailing of this
information statement.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED HEREIN.
By Order of the Board of Directors,
/s/ Hugo H. Biermann
Chairman of the Board
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NOTICE OF ACTION TO BE TAKEN PURSUANT TO THE WRITTEN CONSENT OF MAJORITY
STOCKHOLDERS IN LIEU OF A SPECIAL MEETING OF THE STOCKHOLDERS, DATED *, 2004
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the following action will be taken pursuant to
a written consent of a majority of stockholders dated *, 2004, in lieu of a
special meeting of the stockholders. Such action will be taken on or about *,
2004:
1. To Amend the Company's Articles of Incorporation, as amended, to
increase the number of authorized shares of common stock, par value $.005 per
share (the "Common Stock"), of the Company from 75,000,000 shares to 400,000,000
shares;
2. To elect three directors to the Company's Board of Directors, to hold
office until their successors are elected and qualified or until their earlier
resignation or removal;
3. To ratify the selection of J.H. Cohn LLP as independent auditors of the
Company for the year ending September 30, 2004; and
4. To adopt the Company's 2004 Stock Incentive Plan.
OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, the Company's authorized capitalization consisted
of 75,000,000 shares of Common Stock, of which * shares were issued and
outstanding as of the Record Date. Holders of Common Stock of the Company have
no preemptive rights to acquire or subscribe to any of the additional shares of
Common Stock.
Each share of Common Stock entitles its holder to one vote on each matter
submitted to the stockholders. However, because stockholders holding at least a
majority of the voting rights of all outstanding shares of capital stock as of
*, 2004 will have voted in favor of the foregoing proposals by resolution dated
*, 2004; and having sufficient voting power to approve such proposals through
their ownership of capital stock, no other stockholder consents will be
solicited in connection with this Information Statement.
Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as
amended, the proposals will not be adopted until a date at least 20 days after
the date on which this Information Statement has been mailed to the
stockholders. The Company anticipates that the actions contemplated herein will
be effected on or about the close of business on *, 2004.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
This Information Statement will serve as written notice to stockholders
pursuant to the General Corporation Law of the State of New Jersey.
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AMENDMENT TO THE ARTICLES OF INCORPORATION
On *, 2004, the majority stockholders of the Company will have approved an
amendment to the Company's Articles of Incorporation, as amended, to increase
the number of authorized shares of Common Stock from 75,000,000 to 400,000,000.
The Company currently has authorized capital stock of 75,000,000 shares and
approximately * shares of Common Stock are outstanding as of the Record Date.
The Board believes that the increase in authorized common shares would provide
the Company greater flexibility with respect to the Company's capital structure
for such purposes as additional equity financing, and stock based acquisitions.
INCREASE IN AUTHORIZED COMMON STOCK
The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding shares of Common Stock. However, because
holders of Common Stock have no preemptive rights to purchase or subscribe for
any unissued stock of the Company, the issuance of additional shares of Common
Stock will reduce the current stockholders' percentage ownership interest in the
total outstanding shares of Common Stock. This amendment and the creation of
additional shares of authorized common stock will not alter the current number
of issued shares. The relative rights and limitations of the shares of Common
Stock will remain unchanged under this amendment.
As of the Record Date, a total of * shares of the Company's currently
authorized 75,000,000 shares of Common Stock are issued and outstanding. The
increase in the number of authorized but unissued shares of Common Stock would
enable the Company, without further stockholder approval, to issue shares from
time to time as may be required for proper business purposes, such as raising
additional capital for ongoing operations, business and asset acquisitions,
stock splits and dividends, present and future employee benefit programs and
other corporate purposes.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal. The Board of Directors is not aware of any attempt, or contemplated
attempt, to acquire control of the Company, and this proposal is not being
presented with the intent that it be utilized as a type of anti- takeover
device.
Except for the following, there are currently no plans, arrangements,
commitments or understandings for the issuance of the additional shares of
Common Stock which are proposed to be authorized:
o SECURED CONVERTIBLE NOTE
To obtain funding for its ongoing operations, the Company entered into a
Securities Purchase Agreement with four accredited investors on April 28,
2004 for the sale of (i) $3,000,000 in convertible notes and (ii) warrants
to buy 3,000,000 shares of our common stock. The investors are obligated
to provide us with an aggregate of $3,000,000 as follows:
o $1,500,000 was disbursed on April 28, 2004;
o $750,000 will be disbursed within five business days of the filing
of a registration statement covering the common stock underlying the
secured convertible notes and warrants, assuming that we are in
compliance with all the terms and conditions of the Securities
Purchase Agreement; and
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o $750,000 will be disbursed within five business days of the
effectiveness of the registration statement.
Accordingly, we have received a total of $1,500,000 pursuant to the
Securities Purchase Agreement. The Company used the proceeds generated
from the sale of the first round of secured convertible notes for general
working capital purposes including payment of professional fees, payroll
and rent and the payment of vendors.
The secured convertible notes bear interest at 10%, mature two years from
the date of issuance, and are convertible into our common stock, at the
selling stockholders' option, at the lower of (i) $0.30 or (ii) 60% of the
average of the three lowest intra-day trading prices for the common stock
on a principal market for the 20 trading days before but not including the
conversion date. Accordingly, there is in fact no limit on the number of
shares into which the notes may be converted. As of May 19, 2004, the
average of the three lowest intra-day trading prices for our common stock
during the preceding 20 trading days as reported on the Over-The-Counter
Bulletin Board was $.10 and, therefore, the conversion price for the
secured convertible notes was $.06. Based on this conversion price, the
$3,000,000 secured convertible notes, excluding interest, were convertible
into 50,000,000 shares of our common stock. If the Company's stock price
should decrease, the Company will be required to issue substantially more
shares, which will cause dilution to the Company's existing stockholders.
There is no upper limit on the number of shares that may be issued, which
will have the effect of further diluting the proportionate equity interest
and voting power of holders of the Company's common stock.
The full principal amount of the convertible notes are due upon default
under certain terms of convertible notes. The Company is obligated to
register the resale of the conversion shares issuable upon conversion of
the notes under the Securities Act of 1933, as amended, no later than
thirty (30) days from April 28, 2004. In addition, management is also
obligated, pursuant to the Securities Purchase Agreement, to vote in favor
of an increase in the Company's common stock as well as to recommend such
increase to the Company's stockholders. In the event that the increase in
the Company's authorized common stock is not approved, an event of default
will exist upon the Company's failure to rectify such default within ten
days of receipt of a notice of default from the investor and the investor
may demand that all interest owed on the secured convertible note be paid
in either cash or common stock. Furthermore, upon the event of default,
the investors have a first priority security interest in substantially all
of our assets and can take possession of them upon an event of default.
o CONVERTIBLE PREFERRED STOCK
On *, 2004, we entered into an Investment Restructuring Agreement
with six accredited investors. In connection with this transaction, we
agreed to amend the terms of our series C convertible preferred stock and
we will issue 7,391 shares of series D convertible preferred stock to
MidMark Capital II, L.P. in exchange for approximately $305,000 of debt
owed by us and our subsididiaries to MidMark Capital, L.P., and
approximately $7,300,000 owed by us and our subsidiaries to MidMark
Capital II, L.P. In Addition, we also issued 5,569,980 shares of our
common stock to MidMark Capital II, L.P. and 240,000 shares of our common
stock to MidMark Capital II L.P. Each share of the series C and D
convertible preferred stock is convertible into 1,000 shares of our common
stock, at the selling stockholders' option, at the lower of (i) $0.30 or
(ii) 60% of the average of the three lowest intra-day trading prices for
the common stock on a principal market for the 20 trading days before but
not including the conversion date. Accordingly, there is in fact no limit
on the number of shares into which the preferred stock may be converted.
As of May 26, 2004, the average of the three lowest intra-day trading
prices for our common stock during the preceding 20 trading days as
reported on the Over-The-Counter Bulletin Board was $.12 and, therefore,
the conversion price for the secured convertible notes was $.072. Based on
this conversion price, the 7,391 shares of series D convertible preferred
stock were convertible into 102,652,778 shares of our common stock and the
955 shares of series C convertible preferred stock were convertible into
13,263,889 shares of our common stock.
The following are the risks associated with entering into the
Securities Purchase Agreement and the Investment Restructuring Agreement:
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THERE ARE A LARGE NUMBER OF SHARES UNDERLYING OUR SECURED CONVERTIBLE NOTES,
SERIES C AND SERIES D CONVERTIBLE PREFERRED STOCK AND WARRANTS THAT MAY BE
AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS THE MARKET
PRICE OF OUR COMMON STOCK.
As of *, 2004, we had 55,865,727 shares of common stock issued and
outstanding and secured convertible notes outstanding that may be converted into
an estimated 25,000,000 shares of common stock at current market prices, series
D convertible preferred stock outstanding that may be converted into an
estimated 102,652,778 shares of common stock at current market prices, series C
convertible preferred stock outstanding that may be converted into an estimated
13,263,889 shares of common stock at current market prices and outstanding
warrants to purchase 1,500,000 shares of common stock and an obligation to issue
warrants to purchase 1,500,000 shares of common stock in the near future. In
addition, the number of shares of common stock issuable upon conversion of the
outstanding secured convertible notes and series C and D convertible preferred
stock may increase if the market price of our stock declines. All of the shares,
including all of the shares issuable upon conversion of the notes and series C
and D convertible preferred stock and upon exercise of our warrants, may be sold
without restriction. The sale of these shares may adversely affect the market
price of our common stock.
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR SECURED CONVERTIBLE
NOTES AND SERIES C AND SERIES D CONVERTIBLE PREFERRED STOCK COULD REQUIRE US TO
ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES, WHICH WILL CAUSE DILUTION TO OUR
EXISTING STOCKHOLDERS.
Our obligation to issue shares upon conversion of our secured convertible
notes and Series C and Series D convertible preferred stock is essentially
limitless. The following is an example of the amount of shares of our common
stock that are issuable, upon conversion of our secured convertible notes and
series C and D convertible preferred stock (excluding accrued interest), based
on market prices 25%, 50% and 75% below the market price, as of May 20, 2004 of
$0.18.
Convertible Notes
- -----------------
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 40% Issuable Stock
- ------ ----- ------ -------- -----
25% $.135 $.081 37,037,038 42.53%
50% $.09 $.054 55,555,556 52.60%
75% $.045 $.027 111,111,112 68.94%
Series C Convertible Preferred Stock
- ------------------------------------
Convertible Notes
- -----------------
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 40% Issuable Stock
- ------ ----- ------ -------- -----
25% $.135 $.081 11,790,124 19.06%
50% $.09 $.054 17,685,186 26.11%
75% $.045 $.027 35,370,371 41.40%
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Series D Convertible Preferred Stock
- ------------------------------------
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 40% Issuable Stock
- ------ ----- ------ -------- -----
25% $.135 $.081 91,246,914 64.58%
50% $.09 $.054 136,870,371 73.22%
75% $.045 $.027 273,740,741 84.54%
As illustrated, the number of shares of common stock issuable upon
conversion of our secured convertible notes and series C and D convertible
preferred stock will increase if the market price of our stock declines, which
will cause dilution to our existing stockholders.
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR SECURED CONVERTIBLE
NOTES AND SERIES C AND D CONVERTIBLE PREFERRED STOCK MAY ENCOURAGE INVESTORS TO
MAKE SHORT SALES IN OUR COMMON STOCK, WHICH COULD HAVE A DEPRESSIVE EFFECT ON
THE PRICE OF OUR COMMON STOCK.
The secured convertible notes and series C and D convertible preferred
stock are convertible into shares of our common stock at a 40% discount to the
trading price of the common stock prior to the conversion. The significant
downward pressure on the price of the common stock as the stockholders convert
and sell material amounts of common stock could encourage short sales by
investors. This could place further downward pressure on the price of the common
stock. The stockholders could sell common stock into the market in anticipation
of covering the short sale by converting their securities, which could cause the
further downward pressure on the stock price. In addition, not only the sale of
shares issued upon conversion or exercise of notes, series C and D convertible
preferred stock, warrants and options, but also the mere perception that these
sales could occur, may adversely affect the market price of the common stock.
THE ISSUANCE OF SHARES UPON CONVERSION OF THE SECURED CONVERTIBLE NOTES AND
SERIES C AND D CONVERTIBLE PREFERRED STOCK AND EXERCISE OF OUTSTANDING WARRANTS
MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS.
The issuance of shares upon conversion of the secured convertible notes
and series C and D convertible preferred stock and exercise of warrants may
result in substantial dilution to the interests of other stockholders since the
stockholders may ultimately convert and sell the full amount issuable on
conversion. Although the stockholders may not convert their secured convertible
notes and series C and D convertible preferred stock and/or exercise their
warrants if such conversion or exercise would cause them to own more than 4.99%
of our outstanding common stock, this restriction does not prevent the
stockholders from converting and/or exercising some of their holdings and then
converting the rest of their holdings. In this way, the stockholders could sell
more than this limit while never holding more than this limit. There is no upper
limit on the number of shares that may be issued which will have the effect of
further diluting the proportionate equity interest and voting power of holders
of our common stock, including investors in this offering.
IN THE EVENT THAT OUR STOCK PRICE DECLINES, THE SHARES OF COMMON STOCK ALLOCATED
FOR CONVERSION OF THE SECURED CONVERTIBLE NOTES AND SERIES C AND D CONVERTIBLE
PREFERRED STOCK AND REGISTERED PURSUANT TO A REGISTRATION STATEMENT MAY NOT BE
ADEQUATE AND WE MAY BE REQUIRED TO FILE A SUBSEQUENT REGISTRATION STATEMENT
COVERING ADDITIONAL SHARES. IF THE SHARES WE HAVE ALLOCATED AND ARE REGISTERING
ARE NOT ADEQUATE AND WE ARE REQUIRED TO FILE AN ADDITIONAL REGISTRATION
STATEMENT, WE MAY INCUR SUBSTANTIAL COSTS IN CONNECTION THEREWITH.
Based on our current market price and the potential decrease in our market
price as a result of the issuance of shares upon conversion of the secured
convertible notes and series C and D convertible preferred stock, we have made a
good faith estimate as to the amount of shares of common stock that we are
required to register and allocate for conversion of the secured convertible
notes. Accordingly, we have allocated and will register 10,000,000 shares to
cover the conversion of the secured convertible notes and 4,000,000 to cover the
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conversion of the series C and D convertible preferred stock. In the event that
our stock price decreases, the shares of common stock we have allocated for
conversion of the secured convertible notes and series C and D convertible
preferred stock may not be adequate. If the shares we have allocated to the
registration statement are not adequate and we are required to file an
additional registration statement, we may incur substantial costs in connection
with the preparation and filing of such registration statement.
IF WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING SECURED CONVERTIBLE
NOTES, WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE, OR
RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE SECURED CONVERTIBLE NOTES, IF
REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE
OF SUBSTANTIAL ASSETS.
In April 2004, we entered into a Securities Purchase Agreement for the
sale of an aggregate of $3,000,000 principal amount of secured convertible
notes. The secured convertible notes are due and payable, with 10% interest, two
years from the date of issuance, unless sooner converted into shares of our
common stock. Although we currently have $1,500,000 secured convertible notes
outstanding, the investor is obligated to purchase additional secured
convertible notes in the aggregate of $1,500,000. In addition, any event of
default such as our failure to repay the principal or interest when due, our
failure to issue shares of common stock upon conversion by the holder, our
failure to timely file a registration statement or have such registration
statement declared effective, breach of any covenant, representation or warranty
in the Securities Purchase Agreement or related convertible note, the assignment
or appointment of a receiver to control a substantial part of our property or
business, the filing of a money judgment, writ or similar process against our
company in excess of $50,000, the commencement of a bankruptcy, insolvency,
reorganization or liquidation proceeding against our company and the delisting
of our common stock could require the early repayment of the secured convertible
notes, including a default interest rate of 15% on the outstanding principal
balance of the notes if the default is not cured with the specified grace
period. We anticipate that the full amount of the secured convertible notes will
be converted into shares of our common stock, in accordance with the terms of
the secured convertible notes. If we are required to repay the secured
convertible notes, we would be required to use our limited working capital and
raise additional funds. If we were unable to repay the notes when required, the
note holders could commence legal action against us and foreclose on all of our
assets to recover the amounts due. Any such action would require us to curtail
or cease operations.
ELECTION OF DIRECTORS
On *, 2004, the majority stockholders of the Company elected Hugo H.
Biermann, Nicholas R. Toms and Otto Leistner to the Company's Board of Directors
for a term of one year. Following is information about each director, including
biographical data for at least the last five years.
The Board is responsible for supervision of the overall affairs of the
Company. In fiscal 2003, the Board's business was conducted at 39 meetings of
the board of directors. The Board now consists of three directors. The term of
each director continues until the next annual meeting or until successors are
elected. The directors are:
o Hugo H. Biermann, Chairman of the Board and Director
o Nicholas R. Toms, Chief Executive Officer, Chief Financial Officer and
Director
o Otto Leistner, Director
APPOINTMENT OF J.H. COHN LLP
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of J.H. Cohn LLP as independent auditors of the Company for
the year ending September 30, 2004. On *, 2004, the majority stockholders
ratified the selection of J.H. Cohn LLP as the independent auditors of the
Company for the year ending September 30, 2004.
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MEMBERSHIP AND ROLE OF THE AUDIT COMMITTEE
The Audit Committee of the board of directors reviews the internal
accounting procedures of the Company and consults with and reviews the services
provided by our independent accountants. During 2003, the audit committee
consisted of Messr. Otto Leistner. The Audit Committee held four meetings in
2003.
As at May 26, 2004 the Audit Committee (Messr. Leistner) was "independent"
for purposes of the National Association of Securities Dealers' listing
standards. The Audit Committee operates under a written charter adopted by the
Board of Directors.
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted accounting principles and to issue a report
thereon. The Committee monitors these processes.
Review of the Company's audited financial statements for the fiscal year ended
December 31, 2003
In this context, the Committee met and held discussions with management
and the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Committee also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Codification of Statements on Auditing Standards, AU 380), as amended.
In addition, the Committee discussed with the independent auditors the
auditors' independence from the Company and its management, and the independent
auditors provided to the Committee the written disclosures and letter required
by the Independence Standards Board Standard No. 1 (Independence Discussions
With Audit Committees).
The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
met with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluation of the
Company's internal controls, and the overall quality of the Company's financial
reporting.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended September 30, 2003, for filing with the Securities and
Exchange Commission.
AUDIT FEES
J.H. Cohn LLP did not bill the Company for any audit related services during
fiscal 2003.
TAX FEES
J.H. Cohn LLP did not bill the Company for tax related work during fiscal 2003.
ALL OTHER FEES
J.H. Cohn LLP did not bill the Company for any other services during fiscal
2003.
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The Board of Directors has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended September 30, 2003, J.H. Cohn LLP no information
technology services to the Company relating to financial systems design and
implementation, and no fees were billed by J.H. Cohn LLP to the Company for any
such services.
2004 STOCK INCENTIVE PLAN
On *, 2004, the majority stockholders approved the 2004 Stock Incentive
Plan (the "2004 Incentive Plan") and authorized 10,000,000 shares of Common
Stock for issuance of stock awards and stock options thereunder. The following
is a summary of principal features of the 2004 Incentive Plan. The summary,
however, does not purport to be a complete description of all the provisions of
the 2004 Incentive Plan. Any stockholder of the Company who wishes to obtain a
copy of the actual plan document may do so upon written request to the Company's
Secretary at the Company's principal offices, Vertex Interactive, Inc., 3619
Kennedy Road, South Plainfield, NJ 07080.
GENERAL
The 2004 Incentive Plan was adopted by the Board of Directors. The Board
of Directors has initially reserved 10,000,000 shares of Common Stock for
issuance under the 2004 Incentive Plan. Under the Plan, options may be granted
which are intended to qualify as Incentive Stock Options ("ISOs") under Section
422 of the Internal Revenue Code of 1986 (the "Code") or which are not
("Non-ISOs") intended to qualify as Incentive Stock Options thereunder.
The 2004 Incentive Plan and the right of participants to make purchases
thereunder are intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
2004 Incentive Plan is not a qualified deferred compensation plan under Section
401(a) of the Internal Revenue Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
PURPOSE
The primary purpose of the 2004 Incentive Plan is to attract and retain
the best available personnel for the Company by granting stock awards and stock
options in order to promote the success of the Company's business and to
facilitate the ownership of the Company's stock by employees. In the event that
the 2004 Incentive Plan is not adopted the Company may have considerable
difficulty in attracting and retaining qualified personnel, officers, directors
and consultants.
ADMINISTRATION
The 2004 Incentive Plan will be administered by the Company's Board of
Directors, as the Board of Directors may be composed from time to time. All
questions of interpretation of the 2004 Incentive Plan are determined by the
Board, and its decisions are final and binding upon all participants. Any
determination by a majority of the members of the Board of Directors at any
meeting, or by written consent in lieu of a meeting, shall be deemed to have
been made by the whole Board of Directors.
Notwithstanding the foregoing, the Board of Directors may at any time, or
from time to time, appoint a committee (the "Committee") of at least two members
of the Board of Directors, and delegate to the Committee the authority of the
Board of Directors to administer the Plan. Upon such appointment and delegation,
the Committee shall have all the powers, privileges and duties of the Board of
Directors, and shall be substituted for the Board of Directors, in the
administration of the Plan, subject to certain limitations.
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Members of the Board of Directors who are eligible employees are permitted
to participate in the 2004 Incentive Plan, provided that any such eligible
member may not vote on any matter affecting the administration of the 2004
Incentive Plan or the grant of any stock award or option pursuant to it, or
serve on a committee appointed to administer the 2004 Incentive Plan. In the
event that any member of the Board of Directors is at any time not a
"disinterested person", as defined in Rule 16b-3(c)(3)(i) promulgated pursuant
to the Securities Exchange Act of 1934, the Plan shall not be administered by
the Board of Directors, and may only by administered by a Committee, all the
members of which are disinterested persons, as so defined.
ELIGIBILITY
Under the 2004 Incentive Plan, stock awards and options may be granted to
key employees, officers, directors or consultants of the Company, as provided in
the 2004 Incentive Plan.
TERMS OF OPTIONS
The term of each Option granted under the Plan shall be contained in a
stock option agreement between the Optionee and the Company and such terms shall
be determined by the Board of Directors consistent with the provisions of the
Plan, including the following:
(a) PURCHASE PRICE. The purchase price of the Common Shares subject to
each ISO shall not be less than the fair market value (as set forth in the 2004
Incentive Plan), or in the case of the grant of an ISO to a Principal
Stockholder, not less that 110% of fair market value of such Common Shares at
the time such Option is granted. The purchase price of the Common Shares subject
to each Non-ISO shall be determined at the time such Option is granted, but in
no case less than 85% of the fair market value of such Common Shares at the time
such Option is granted.
(b) VESTING. The dates on which each Option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Board of Directors, in its discretion, at the time such Option is
granted.
(c) EXPIRATION. The expiration of each Option shall be fixed by the Board
of Directors, in its discretion, at the time such Option is granted; however,
unless otherwise determined by the Board of Directors at the time such Option is
granted, an Option shall be exercisable for ten (10) years after the date on
which it was granted (the "Grant Date"). Each Option shall be subject to earlier
termination as expressly provided in the 2004 Incentive Plan or as determined by
the Board of Directors, in its discretion, at the time such Option is granted.
(d) TRANSFERABILITY. No Option shall be transferable, except by will or
the laws of descent and distribution, and any Option may be exercised during the
lifetime of the Optionee only by him. No Option granted under the Plan shall be
subject to execution, attachment or other process.
(e) OPTION ADJUSTMENTS. The aggregate number and class of shares as to
which Options may be granted under the Plan, the number and class shares covered
by each outstanding Option and the exercise price per share thereof (but not the
total price), and all such Options, shall each be proportionately adjusted for
any increase decrease in the number of issued Common Shares resulting from
split-up spin-off or consolidation of shares or any like Capital adjustment or
the payment of any stock dividend.
Except as otherwise provided in the 2004 Incentive Plan, any Option
granted hereunder shall terminate in the event of a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
the Company. However, the Optionee shall have the right immediately prior to any
such transaction to exercise his Option in whole or in part notwithstanding any
otherwise applicable vesting requirements.
11
(f) TERMINATION, MODIFICATION AND AMENDMENT. The 2004 Incentive Plan (but
not Options previously granted under the Plan) shall terminate ten (10) years
from the earlier of the date of its adoption by the Board of Directors or the
date on which the Plan is approved by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, and no Option shall be granted after termination of the Plan.
Subject to certain restrictions, the Plan may at any time be terminated and from
time to time be modified or amended by the affirmative vote of the holders of a
majority of the outstanding shares of the capital stock of the Company present,
or represented, and entitled to vote at a meeting duly held in accordance with
the applicable laws of the State of Delaware.
FEDERAL INCOME TAX ASPECTS OF THE 2004 INCENTIVE PLAN
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES
UNDER THE 2004 INCENTIVE PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND
DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL
TAX STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX
CONSEQUENCES OTHER THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH
PARTICIPANT TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES
OF PARTICIPATION IN THE 2004 INCENTIVE PLAN AND FOR REFERENCE TO APPLICABLE
PROVISIONS OF THE CODE.
The 2004 Incentive Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421, 422 and
423 of the Code. Under these provisions, no income will be recognized by a
participant prior to disposition of shares acquired under the 2004 Incentive
Plan.
If the shares are sold or otherwise disposed of (including by way of gift)
more than two years after the first day of the offering period during which
shares were purchased (the "Offering Date"), a participant will recognize as
ordinary income at the time of such disposition the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price of the shares or (b) 15% of the fair market value of the shares
on the first day of the offering period. Any further gain or loss upon such
disposition will be treated as long-term capital gain or loss. If the shares are
sold for a sale price less than the purchase price, there is no ordinary income
and the participant has a capital loss for the difference.
If the shares are sold or otherwise disposed of (including by way of gift)
before the expiration of the two-year holding period described above, the excess
of the fair market value of the shares on the purchase date over the purchase
price will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gift of the shares is made. The balance of any
gain or loss will be treated as capital gain or loss and will be treated as
long-term capital gain or loss if the shares have been held more than one year.
In the case of a participant who is subject to Section 16(b) of the
Exchange Act, the purchase date for purposes of calculating such participant's
compensation income and beginning of the capital gain holding period may be
deferred for up to six months under certain circumstances. Such individuals
should consult with their personal tax advisors prior to buying or selling
shares under the 2004 Incentive Plan.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
12
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that ordinary income must be reported
upon disposition of shares by the participant before the expiration of the
two-year holding period described above.
RESTRICTIONS ON RESALE
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act.
The Common Stock acquired under the 2004 Incentive Plan by an affiliate may be
reoffered or resold only pursuant to an effective registration statement or
pursuant to Rule 144 under the Securities Act or another exemption from the
registration requirements of the Securities Act.
EXECUTIVE COMPENSATION
Directors are elected at each meeting of stockholders and hold office until the
next annual meeting of stockholders and the election and qualifications of their
successors. Executive officers are elected by and serve at the discretion of the
board of directors.
Our executive officers and directors are as follows:
Name Age Position
- ------- ----- ----------
Hugo H. Bierman 55 Executive Chairman
Nicholas R. H. Toms 55 Chief Executive Officer, Chief Financial Officer and
Director
Otto Leistner 59 Director
Barbara H. Martorano 47 Secretary
HUGO H. BIERMANN has served as Executive Chairman of the Board of
Directors since July 2001 and served as Joint Chairman and Joint Chief Executive
Officer and a Director of ours from September 1999 through June 2001. Mr.
Biermann has been a principal in Edwardstone & Company, Incorporated
("Edwardstone"), an investment management company, since 1986 as well as serving
as President of Edwardstone since 1989. From 1988 to 1995 Mr. Biermann served as
Director and Vice Chairman of Peak Technologies Group, Incorporated ("Peak
Technologies"), a company involved in automated data capture technologies.
NICHOLAS R. H. TOMS has served as Chief Executive Officer and a director
since July, 2001 and served as Joint Chairman of the Board of Directors, Joint
Chief Executive Officer and a Director of ours from September 1999 through June
2001. Mr. Toms has been a principal of Edwardstone, an investment management
company, since 1986 and Chairman and Chief Executive Officer of Edwardstone
since 1989. From 1988 to 1997, Mr. Toms served as Chairman, President and Chief
Executive Officer of Peak Technologies.
OTTO LEISTNER has been a Director since April 2000. He has been a Partner
since 1995 in Leistner Pokoj Schnedler, a midsize accounting and consulting firm
in Frankfurt, Germany with a staff of approximately 100.
BARBARA H. MARTORANO joined us in June 1990 and has served in a variety of
positions, including Sales Order Processing Coordinator, Office Administrator,
Executive Assistant to the President, CEO and Chairman of the Board, as well as
Corporate Secretary as of January 17, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
During the fiscal year ended December 31, 2003, based upon an examination of the
public filings, all of our company's officers and directors timely filed reports
on Forms 3, 4 and 5.
13
The following table sets forth for the fiscal year indicated the compensation
paid by our company to our Chief Executive Officer and other executive officers
with annual compensation exceeding $100,000:
SUMMARY COMPENSATION TABLE:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Other
Annual Restricted Options LTIP
Name & Principal Salary Bonus Compen- Stock SARs Payouts All Other
Position Year ($) ($) sation ($) Awards($) (#) ($) Compensation
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Hugo H. Bierman 2003 0 0 0 - - - -
Executive Chairman of 2002 300,000 0 0 - - - -
the Board of Directors 2001 300,000 0 0 - - - -
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Nicholas R. H. Toms 2003 91,667 0 0 - - - -
Chief Executive Officer 2002 300,000 0 0 - - - -
2001 300,000 0 0 - - - -
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Mark A. Flint 2003 218,589 (1) 0 0 - - - -
Chief Financial Officer 2002 275,000 100,000 (2) 0 - - - -
2001 40,104 0 0 - 400,000 - -
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Donald W. Rowley 2003 101,667 (3) 0 0 - - - -
Executive VP - 2002 225,000 0 0 - - - -
Strategic Development 2001 206,731 0 0 - 200,000 - -
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Robert Schilt 2003 214,475 0 0 - - - -
Chief Operating Officer 2002 235,828 105,000 0 - - - -
Exqute Solutions, Inc. 2001 210,000 85,000 0 - - - -
- ------------------------ ------- ------------ ------------ ------------ ------------- ----------- ------------ -------------
Timothy Callahan 2003 198,750 0 0 - - - -
Vice President 2002 170,625 0 0 - - - -
Sales and Marketing 2001 175,125 155,000 0 - - - -
(1) Mr. Flint was laid off in August, 2003.
(2) Such amount is accrued however unpaid as of May 17, 2004.
(3) Mr. Rowley resigned as an officer in February, 2003, and was laid off in
June, 2003.
EMPLOYMENT AGREEMENTS
None.
DIRECTORS' COMPENSATION
All directors are reimbursed for their reasonable expenses incurred in attending
meetings of the board of directors and its committees. Directors serve without
cash compensation and without other fixed remuneration.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted to executive
officers named in the Summary Compensation Table during the fiscal year ended
December 31, 2003:
14
Individual Grants
Number of % of Total Options
Securities Granted to
Name Underlying Employees in Fiscal
Options Granted Year Exercise Expiration Date
(#) Price ($/sh)
- --------- ----------------------------------------------------------------------------
NONE
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table contains information concerning the number and value, at
December 31, 2003, of unexercised options held by executive officers named in
the Summary Compensation Table:
Number of Securities Underlying Unexercised Options at Value of Unexercised
In-the-Money
Number of Securities Underlying Unexercised Options at Value of Unexercised In-the-Money
Name FY-End (#) (Exercisable/Unexercisable) Options at FY-End ($)
(Exercisable/Unexercisable)
- ------- ------------------------------------------------------------------------------------------------------
NONE
STOCK OPTION PLANS
On October 10, 1985, the board of directors adopted our 1985 Incentive
Stock Option Plan which was amended on February 14, 2000. We reserved 8,000,000
shares of common stock for issuance upon exercise of options granted from time
to time under the 1985 plan. The 1985 stock option plan is intended to assist us
in securing and retaining key employees, directors and consultants by allowing
them to participate in our ownership and growth through the grant of stock
options.
Under the stock compensation plan, we may grant stock options only to
employees and consultants. The 1985 stock option plan is administered directly
by our board of directors.
Subject to the provisions of the stock option plan, the board will
determine who shall receive stock options, the number of shares of common stock
that may be purchased under the options, the time and manner of exercise of
options and exercise prices.
As of May 19, 2004, we have granted 4,042,468 stock options under the 1985
plan.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tables sets forth, as of May 19, 2004, the number of and percent
of the Company's common stock beneficially owned by
o all directors and nominees, naming them,
o our executive officers,
o our directors and executive officers as a group, without naming them, and
o persons or groups known by us to own beneficially 5% or more of our
common stock:
The Company believes that all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.
A person is deemed to be the beneficial owner of securities that can be acquired
by him within 60 days from May 19, 2004 upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person, and which are exercisable
within 60 days of May 19, 2004 have been exercised and converted.
16
NAME AND ADDRESS NUMBER OF PERCENTAGE OF
OF OWNER TITLE OF CLASS SHARES OWNED(1) CLASS (2)
- --------------------------------------------------------------------------------
Hugo H. Biermann Common Stock 863,010 (3) 1.79%
3619 Kennedy Road
South Plainfield, NJ 07080
Nicholas R. H. Toms Common Stock 1,500,014 (4) 3.00%
3619 Kennedy Road
South Plainfield, NJ 07080
Otto Leistner Common Stock 672,875 (5) 1.34%
3619 Kennedy Road
South Plainfield, NJ 07080
Barbara Martorano Common Stock 19,000 (6) *
3619 Kennedy Road
South Plainfield, NJ 07080
All Officers and Directors Common Stock 2,954,899 (7) 5.90%
As a Group (4 persons)
- ----------------------------
American Marketing Complex Common Stock 10,000,000 20.75%
330 East 33rd Street, Suite 15M
New York, NY 10016
MidMark Capital L.P. Common Stock 6,201,930 (8) 11.50%
177 Madison Avenue
Morristown, NJ 07960
Pitney Bowes, Inc. Preferred A 1,356,852 100%
One Elmcroft Road
Stamford, CT 06926
Pitney Bowes, Inc. Preferred B 1,000 100%
One Elmcroft Road
Stamford, CT 06926
MidMark Capital L.P. Preferred C 805 80.74%
177 Madison Avenue
Morristown, NJ 07960
Paine Webber Custodian Preferred C 50 5.02%
F/B/O Wayne Clevenger
177 Madison Avenue
Morristown, NJ 07960
Joseph Robinson Preferred C 50 5.02%
177 Madison Avenue
Morristown, NJ 07960
O'Brien Ltd Partnership Preferred C 50 5.02%
177 Madison Avenue
Morristown, NJ 07960
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of May 19, 2004 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.
(2) For purposes of calculating the percentage beneficially owned, the number of
shares of each class of stock deemed outstanding include (i) 50,055,747 common
shares, 1,356,852 Preferred "A" Shares; 1,000 Preferred "B" Shares and 997
Preferred "C" shares outstanding as of May 19, 2004.
17
(3) Includes 475,000 shares issuable pursuant to presently exercisable options
and 388,010 shares held in the name of Bunter BVI Limited of which Mr. Biermann
may be deemed to be a beneficiary. Mr. Biermann, however, disclaims such
beneficial ownership.
(4) Includes 475,000 shares issuable pursuant to presently exercisable options
and 82,000 shares indirectly owned by Mr. Toms through which he may be deemed to
be a beneficiary.
(5) Includes 50,000 shares issuable pursuant to presently exercisable options
and 100,000 shares held in the name of Partas AG of which Mr. Leistner may be
deemed to be a beneficiary.
(6) Includes 19,000 shares issuable pursuant to presently exercisable options.
(7) Includes 1,019,000 shares issuable pursuant to presently exercisable options
and 388,010 shares held by a company for which by Mr. Biermann disclaims
beneficial ownership.
(8) Includes 300,000 shares issuable pursuant to presently exercisable options
and warrants to purchase 5,411,580 shares.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Wayne L. Clevenger and Joseph R. Robinson, directors of ours until August
1, 2002, are partners in Midmark Associates, which firm provided consulting
services to us. During fiscal 2001 and 2002, we paid $250,000 and $218,000
respectively, to Midmark Associates for consulting services pursuant to a
five-year management agreement entered into in September 1999 that was
terminated in August 2002 when Mr. Clevenger and Mr. Robinson resigned as
directors. In addition, during the year ended September 30, 2001, we issued in
the aggregate $5,500,000 of convertible notes payable to Midmark. During the
year ended September 30, 2002, Midmark elected to convert approximately $782,000
of principal and $218,000 of accrued interest into 997 shares of Series "C"
Preferred Stock. The remaining convertible notes payable of $4,718,717 with
accrued interest at prime were convertible into Series "C" Preferred Shares at a
conversion price of $1,000 per share, and the Series "C" Preferred Shares in
turn were convertible into Common Shares at $0.84 per share. In addition, during
the year ended September 30, 2002, we issued $3,000,000 of notes payable
convertible into 3,000 shares of Series "C" Preferred Stock and in turn
convertible into 3,570,026 shares of Common Stock at $0.84 per share, and
borrowed $2,588,900 under a demand note payable and additional $1,113,000
(including $425,000 restricted for usage on XeQute obligations) during 2003. We
had an additional $250,000 payable to Midmark at June 30, 2003 under the Bridge
Loan. In December 2002, XeQute received an additional $480,000 from Midmark
under a Convertible Loan Note with terms similar to the 10% convertible note
payable described above. The Convertible Loan Note would have automatically
converted into Non-Voting shares of XeQute at $0.672 per share when a minimum
subscription of $480,000 of a proposed but now aborted Private Placement had
been reached. (See Note 9 to the Consolidated Financial Statements). On August
9, 2002, the remaining balance of the $4,718,717 convertible notes and
$1,185,176 of the $3.0 million convertible notes were fully settled with the
sale of the French based advanced planning software business to MidMark (See
Note 2 to the Consolidated Financial Statements). The remaining $1,814,324 or
10% convertible notes payable at September 30, 2002 are collateralized by all
tangible and intangible property of ours, except that the holders have executed
in favor of certain senior lenders a subordination of their right of payment
under the Notes and the priority of any liens on certain assets, primarily
accounts receivable.
On January 2, 2001, we awarded Otto Leistner, one of its Directors,
options exercisable at a price of $5.72 per share for 20,000 unregistered shares
of our common stock for the accounting services he performed from September 22,
1999 thru April 17, 2000 prior to his becoming a Director. In August 2001, we
issued a $359,375 convertible note payable to PARTAS AG, which is owned by Mr.
Leistner. This note was to automatically convert into 250,000 shares of our
common stock on the day that we obtained the requisite shareholder approval for
the issuance of shares to PARTAS AG. Since shareholder approval was not obtained
by February 22, 2002, the principal amount plus any accrued interest (at prime
rate) became immediately due and payable. On July 31, 2002 this convertible note
payable was fully settled with the sale of the German point solutions business
to PARTAS AG.
L. G. Schafran, a director of ours, provided consulting services to us
prior to his election as a Director on August 9, 2001. For these services Mr.
Schafran received 30,000 non-qualified, in-plan options at an exercise price of
$1.51, all of which vested on the date of grant, August 14, 2001. Mr. Schafran
resigned as a Director of ours on July 8, 2002.
19
ADDITIONAL INFORMATION
The Company's annual report on Form 10-K for the fiscal year ended
September 30, 2003 and quarterly reports on Form 10-Q for the quarters ended
December 31, 2003 and March 31, 2004 are being delivered to you with this
Information Statement. The Company will furnish a copy of any exhibit thereto or
other information upon written request by a stockholder to Barbara H. Martorano,
Secretary, Vertex Interactive, Inc., 3619 Kennedy Road, South Plainfield, NJ
07080.
By Order of the Board of Directors,
/s/ Hugo H. Biermann
Hugo H. Biermann
Chairman of the Board
South Plainfield, New Jersey
May 27, 2004
20
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
VERTEX INTERACTIVE, INC.
The undersigned, being the Chief Executive Officer and Secretary of VERTEX
INTERACTIVE, INC., a corporation existing under the laws of the State of New
Jersey, do hereby certify under the seal of the said corporation as follows:
1. The certificate of incorporation of the Corporation is hereby amended by
replacing Article Third, in its entirety, with the following:
"THIRD: The Corporation is authorized to issue two
classes of stock. One class of stock shall be Common Stock,
par value $0.005. The second class of stock shall be
Preferred Stock, par value $0.01. The Preferred Stock, or
any series thereof, shall have such designations,
preferences and relative, participating, optional or other
special rights and qualifications, limitations or
restrictions thereof as shall be expressed in the
resolution or resolutions providing for the issue of such
stock adopted by the board of directors and may be made
dependent upon facts ascertainable outside such resolution
or resolutions of the board of directors, provided that the
matter in which such facts shall operate upon such
designations, preferences, rights and qualifications;
limitations or restrictions of such class or series of
stock is clearly and expressly set forth in the resolution
or resolutions providing for the issuance of such stock by
the board of directors.
The total number of shares of stock of each class
which the Corporation shall have authority to issue and the
par value of each share of each class of stock are as
follows:
Class Par Value Authorized Shares
----- --------- -----------------
Common $0.005 400,000,000
Preferred $0.01 2,000,000
Totals: 402,000,000"
2. The amendment of the articles of incorporation herein certified has
been duly adopted by the unanimous written consent of the Corporation's Board of
Directors and a majority of the Corporation's stockholders in accordance with
the provisions of Section 14A:5-6 of the General Corporation Law of the State of
New Jersey.
21
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Corporation's Articles
of Incorporation, as amended, to be signed by Nicholas R. Toms, its Chief
Executive Officer, and Barbara H. Martorano, its Secretary, this __th day of
May, 2004.
VERTEX INTERACTIVE, INC.
By:
-----------------------------------------
Nicholas R. Toms, Chief Executive Officer
By:
-----------------------------------------
Barbara H. Martorano, Secretary
22