<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------
VISUAL EDGE SYSTEMS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C> <C>
Delaware 7999 Applied for
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
7 West 51st Street
New York, New York 10019
(212) 765-1284
(Address and telephone number of registrant's principal executive offices)
------
Earl T. Takefman
Chief Executive Officer
Visual Edge Systems Inc.
7 West 51st Street
New York, New York 10019
(212) 765-1284
(Name, address and telephone number of agent for service)
------
Copies to:
David W. Pollak, Esq. Robert J. Mittman, Esq.
Morgan, Lewis & Bockius LLP Tenzer Greenblatt LLP
101 Park Avenue 405 Lexington Avenue
New York, New York 10178 New York, New York 10174-0208
Tel: (212) 309-6000 Tel: (212) 885-5555
Fax: (212) 309-6273 Fax: (212) 885-5001
------
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
=============================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of each class of securities Amount to be offering price per aggregate offering Amount of
to be registered registered security(1) price(1) registration fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share 1,495,000(2) $5.00 $7,475,000 $2,577.58
- ----------------------------------------------------------------------------------------------------------
Redeemable Warrants, each to
purchase one share of Common
Stock .......................... 1,495,000(3) $ .10 $ 149,500 $ 51.55
- ----------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share(4) ....................... 1,495,000(5) $5.00 $7,475,000 $2,577.58
- ----------------------------------------------------------------------------------------------------------
Underwriter's Warrants, each to
purchase one share of Common
Stock(6) ....................... 130,000 $ .001 $ 130 (7)
- ----------------------------------------------------------------------------------------------------------
Underwriter's Warrants, each to
purchase one Warrant(6) ........ 130,000 $.0001 $ 13 (7)
- ----------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share(8) ....................... 130,000 $6.75 $ 877,500 $ 302.58
- ----------------------------------------------------------------------------------------------------------
Warrants, each to purchase one
share of Common Stock(8) ....... 130,000 $ .135 $ 17,550 $ 6.05
- ----------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share(9) ....................... 130,000 $6.75 $ 877,500 $ 302.58
- ----------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share(10) ...................... 220,000 $5.00 $1,100,000 $ 379.31
- ----------------------------------------------------------------------------------------------------------
Total Registration Fee ................................................................ $6,197.23
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the filing fee.
(2) Includes 195,000 shares of Common Stock which the Underwriter has the
option to purchase from the Registrant to cover over-allotments, if any.
(3) Includes 195,000 redeemable warrants which the Underwriter has the
option to purchase from the Registrant to cover over-allotments, if any.
(4) Issuable upon exercise of the redeemable warrants to be sold to the
public hereunder, together with such indeterminate number of shares of
Common Stock as may be issuable by reason of the anti-dilution
provisions contained therein.
(5) Assumes the Underwriter's option to purchase 195,000 additional
redeemable warrants to cover over- allotments, if any, has been
exercised.
(6) To be issued to the Underwriter at the time of delivery and acceptance
of the securities to be sold to the public hereunder.
(7) No fee due pursuant to Rule 457(g).
(8) Issuable upon exercise of Underwriter's Warrants.
(9) Issuable upon exercise of the warrants underlying the Underwriter's
Warrants, together with such indeterminate number of shares of Common
Stock as may be issuable by reason of the anti-dilution provisions
contained therein.
(10) Represents shares beneficially owned, and to be sold, by certain selling
stockholders and registered for offer on a delayed basis pursuant to
Rule 415.
2
<PAGE>
VISUAL EDGE SYSTEMS INC.
CROSS-REFERENCE SHEET
FURNISHED PURSUANT TO ITEM 501(B) OF REGULATION S-B SHOWING LOCATION IN THE
PROSPECTUS OF THE
INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
<CAPTION>
Form S-1 Item Number and Heading Caption or Location in Prospectus
------------------------------------------------------- -------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus .................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors .............. Prospectus Summary; Risk Factors
4. Use of Proceeds ................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price . . . ............. Outside Front Cover Page of Prospectus; Underwriting
6. Dilution .......................................... Dilution
7. Selling Securityholders ........................... Prospectus Summary; Principal Stockholders; Selling
Stockholders and Plan of Distribution; Underwriting
8. Plan of Distribution .............................. Outside Front Cover Page of Prospectus; Underwriting
9. Legal Proceedings ................................. Business
10. Directors, Executive Officers, Promoters and Control
Persons ........................................... Management
11. Security Ownership of Certain Beneficial Owners and
Management ........................................ Management; Principal Stockholders
12. Description of Securities ......................... Outside Front Cover Page of Prospectus; Prospectus Summary;
Description of Securities
13. Interests of Named Experts and Counsel ............ Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities .................... Not Applicable
15. Organization Within Five Years .................... Certain Transactions
16. Management's Discussion and Analysis or Plan of
Operation........................................... Plan of Operation; Proposed Business
17. Description of Property ........................... Business
18. Certain Relationships and Related Transactions. ... Certain Transactions
19. Market For Common Equity and Related Stockholder
Matters............................................. Description of Securities
20. Executive Compensation ............................ Management
21. Financial Statements .............................. Financial Statements
22. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............... Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PRELIMINARY PROSPECTUS DATED JUNE 4, 1996
SUBJECT TO COMPLETION
LOGO
1,300,000 Shares of Common Stock and
Redeemable Warrants to Purchase
1,300,000 Shares of Common Stock
The Company is offering hereby 1,300,000 shares of Common Stock and
redeemable warrants to purchase 1,300,000 shares of Common Stock (the
"Warrants"). Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at a price of $5.00, subject to adjustment in certain
circumstances, at any time commencing , 1997 through and including , 2000. The
Warrants are redeemable by the Company, upon the consent of the Underwriter, at
any time commencing , 1997, upon notice of not less than 30 days, at a price of
$.10 per Warrant, provided that the closing bid quotation of the Common Stock on
all 30 of the trading days ending on the third day prior to the day on which the
Company gives notice has been at least 150% (currently $7.50, subject to
adjustment) of the then effective exercise price of the Warrants. See
"Description of Securities."
Prior to this offering, there has been no public market for the Common Stock
or the Warrants and there can be no assurance that any such market will develop.
It is anticipated that the Common Stock and the Warrants will be quoted on the
Nasdaq SmallCap Market under the symbols "SHRK" and "SHRKW," respectively. The
offering prices of the Common Stock and the Warrants, and the exercise price of
the Warrants, were determined pursuant to negotiations between the Company and
the Underwriter and do not necessarily relate to the Company's book value or any
other established criteria of value. For a discussion of the factors considered
in determining the offering prices, see "Underwriting."
This Prospectus also relates to the offer and sale by certain persons (the
"Selling Stockholders") of 220,000 shares of Common Stock. The shares offered by
the Selling Stockholders are not part of the underwritten offering and may not
be offered or sold prior to twelve months from the date of this Prospectus
without the prior written consent of the Underwriter. See "Selling Stockholders
and Plan of Distribution."
------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY
INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" ON PAGE 7 AND "DILUTION."
------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=============================================================================
Underwriting
Discounts
Price to and Proceeds to
Public Commissions(1) Company(2)
- -----------------------------------------------------------------------------
Per Share...... $5.00 $.50 $4.50
- -----------------------------------------------------------------------------
Per Warrant .. $.10 $.01 $.09
- -----------------------------------------------------------------------------
Total(3) ..... $6,630,000 $663,000 $5,967,000
=============================================================================
(1) In addition, the Company has agreed to pay to the Underwriter a 3%
non-accountable expense allowance, to grant to the Underwriter warrants
(the "Underwriter's Warrants") to purchase 130,000 shares of Common Stock
and/or 130,000 warrants and to retain the Underwriter as a financial
consultant. The Company has also agreed to indemnify the Underwriter
against certain civil liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses, including the non-accountable expense allowance
in the amount of $198,900 ($228,735 if the Underwriter's over-allotment
option is exercised in full), estimated at $660,000, payable by the
Company. The Selling Stockholders will not bear any expenses of this
offering.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 195,000 additional
shares of Common Stock and/or 195,000 additional Warrants, on the same
terms as set forth above, solely for the purpose of covering
over-allotments, if any. If the Underwriter's over-allotment option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $7,624,500, $762,450 and
$6,862,050, respectively. See "Underwriting."
------
The shares of Common Stock and Warrants are being offered, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify the
offering and to reject any order in whole or in part. It is expected that
delivery of certificates representing the shares of Common Stock and the
Warrants will be made against payment therefor at the offices of the
Underwriter, 650 Fifth Avenue, New York, New York 10019, on or about , 1996.
Whale Securities Co., L.P.
The date of this Prospectus is , 1996.
<PAGE>
1. The inside front cover of the Prospectus has a picture of Greg Norman with
One-on-One logo
2. The gatefold has 12 split-screen images of Greg Norman and a golfer at
various swing positions surrounding a picture of Greg Norman. Next to the
picture of Greg Norman is the following text:
The Company has developed computer
software which digitally combines actual
video footage of a golfer's swing with
a synchronized "split screen" comparison
to Greg Norman's golf swing to produce
a 45-minute One-on-One videotape
golf lesson.
The Company's proposed One-on-One video
golf lesson analyzes a golfer's swing
by comparing it to Greg Norman's swing at
several different club positions from
two camera angles using Greg Norman's
pre-recorded intructional commentary
and analysis and computer graphics
to highlight important golf fundamentals
intended to improve a golfer's performance.
"In the game of golf what you feel and what's
real are not always the same. That's why
I videotape my practice sessions so I'll
have a second set of eyes to spot flaws
that might creep into my swing."
------------
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following regional offices: Northeast Regional Office, 7 World
Trade Center, 13th Floor, and Midwest Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois and copies of
such material can be obtained from the Public Reference Section of the
Commission at prescribed rates. The Company intends to furnish its
stockholders with annual reports containing audited financial statements and
other reports as the Company deems appropriate or as may be required by law.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND WARRANTS AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Prospective investors are
urged to read this Prospectus in its entirety. Unless otherwise indicated,
all share and per share data and information in this Prospectus relating to
the number of shares of Common Stock outstanding (i) has been adjusted to
give retroactive effect to a recapitalization effective May 2, 1996 (the
"Recapitalization") pursuant to which each outstanding share of Class A
Common Stock of the Company was converted into approximately .49 shares of
Common Stock and each outstanding share of Class B Common Stock of the
Company was converted into 4,882.68 shares of Common Stock and (ii) assumes
no exercise of the Underwriter's over-allotment option to purchase up to
195,000 additional Shares and/or 195,000 additional Warrants. See "Certain
Transactions" and "Underwriting."
THE COMPANY
Visual Edge Systems Inc. (the "Company"), a development stage company, was
organized to develop and market personalized videotape golf lessons featuring
One-on-One instruction by leading professional golfer Greg Norman. To date,
the Company has focused its efforts on developing computer software which
digitally combines actual video footage of a golfer's swing with a
synchronized "split-screen" comparison to Greg Norman's golf swing to produce
a 45-minute One-on-One videotape golf lesson. The Company's proposed
One-on-One video golf lesson analyzes a golfer's swing by comparing it to
Greg Norman's swing at several different club positions from two camera
angles using Greg Norman's pre-recorded instructional commentary and analysis
and computer graphics to highlight important golf fundamentals intended to
improve a golfer's performance.
Pursuant to a license agreement with Greg Norman and Great White Shark
Enterprises, Inc. (the "Greg Norman License"), Greg Norman agreed to grant to
the Company a worldwide license to use his name, likeness and endorsement in
connection with the production and promotion of the Company's proposed
products. The agreement provides that the continued use of the license by the
Company is conditioned upon guaranteed payments aggregating $3,300,000 during
the three-year period commencing July 1, 1996 to be applied against a royalty
equal to 8% of the Company's net revenues from product sales. The Company's
proposed business and prospects are dependent upon the Company's continued
association with Greg Norman.
In 1995, the Company developed the software necessary to operate a video
editing and videotape production process and an initial version of a
right-handed, full swing videotape golf lesson. In September 1995, the
Company conducted preliminary market testing of such videotape at a public
driving range in New York where approximately 175 golfers used the One-on-One
concept at no charge. Based on favorable consumer reaction to the videotape,
in November and December 1995 the Company engaged in expanded market testing
activities at various public and private golf courses, driving ranges and
retailers in Florida and California, including the PGA National Golf Course,
during which a limited number of videotapes were sold. The market tests were
intended to provide information on the product's acceptance among golfers and
to test the technical aspects of the Company's video editing and production
process.
The Company intends to design, develop and test production versions of
One-on-One video golf lessons. The production versions are expected to
provide enhanced pre-recorded instructional commentary and analysis of a
golfer's swing at various club positions. The Greg Norman License provides
that the Company has the right to require Greg Norman to be available,
subject to his commitments to the PGA Tour and other golf tours and
contractual commitments, to produce the Company's proposed products and make
promotional appearances to market such products. The Company currently
anticipates that, subject to Greg Norman's availability, it will script,
film, edit and produce production versions of various right and left handed,
full swing, standard, advanced, senior and female One-on-One videotape golf
lessons by late 1996. The Company also plans to develop additional videotape
golf lessons, such as short game, sand play and putting lessons.
3
<PAGE>
In the event of successful completion of production versions of One-on-One
videos, the Company anticipates that it will seek to enter selected target
markets. The Company's primary marketing strategy is to sell One-on-One
videotapes on a prearranged basis to various organizers of amateur corporate,
charity and member golf tournaments (who typically offer gifts to tournament
participants) and golf professionals at private and daily fee golf courses
and driving ranges. The Company may also seek to enter into strategic
relationships with third parties relating to product marketing and
distribution.
The Company's objective is to develop mobile One-on-One vans equipped with
video and personal computer equipment to market, promote and produce the
Company's proposed products. The Company will seek to position such vans in
selected geographic areas that will service golf courses and driving ranges
throughout the United States, initially in Florida, the Carolinas and
California. The Company anticipates that a Company employee will operate
videotaping equipment at the first tee, driving range or other suitable
location to videotape a golfer's swing which would be edited inside a
One-on-One van to create a personalized videotape golf lesson in
approximately 25 minutes.
Golf has become an increasingly popular form of sport and entertainment in
recent years. According to the National Golf Foundation, consumer spending on
golf-related activities, including green fees, golf equipment and related
merchandise, has increased from approximately $12.7 billion in 1989 to
approximately $15.1 billion in 1994. The number of golfers and golf courses
and driving ranges has also increased and golf industry participants have
sought to increase public awareness and provide greater access to golfers of
all ages and income levels. It is estimated that golfers spend approximately
$440 million annually on golf lessons. The Company believes that the
capabilities of its software, including its ability to produce instructional
commentary by Greg Norman and synchronized, "split-screen" comparisons with
Greg Norman's swing, coupled with the consumer recognition and appeal of Greg
Norman, differentiate the Company's proposed products from competing products
and position the Company to capitalize on the growing popularity of golf.
Since its inception, the Company has engaged in only limited operations
and has not yet generated any operating revenues, other than limited revenues
from market testing activities, and requires the proceeds of this offering to
implement its proposed plan of operation. The Company expects to incur
substantial up-front expenses in connection with product development and
commercialization (including the payment of license fees and the purchase
and/or lease of One-on-One vans and video and computer equipment), which will
result in significant losses for the foreseeable future. There can be no
assurance that the Company will be able to successfully implement its
business plan. See "Risk Factors."
The Company was incorporated under the laws of the State of Delaware in
July 1994 under the name Golf Vision, Inc. The Company changed its name to
Visual Edge Systems Inc. in March 1995. The Company's executive offices are
currently located at 7 West 51st Street, New York, New York 10019, and its
telephone number is (212) 765-1284.
BRIDGE FINANCING
In May 1996, the Company consummated a bridge financing (the "Bridge
Financing"), pursuant to which it issued an aggregate of (i) $1,100,000
principal amount of promissory notes (the "Bridge Notes") which bear interest
at the rate of 8% per annum and are due on the earlier of the consummation of
this offering or May 31, 1997 and (ii) 220,000 shares of Common Stock. The
Company intends to use a portion of the proceeds of this offering to repay
the entire principal amount of and accrued interest on the Bridge Notes. See
"Use of Proceeds" and "Selling Stockholders and Plan of Distribution."
4
<PAGE>
THE OFFERING
Securities offered by the
Company...................... 1,300,000 shares of Common Stock and
Warrants to purchase 1,300,000 shares of
Common Stock.
Securities offered by the
Selling Stockholders ........ 220,000 shares of Common Stock. Such shares
are not part of the underwritten offering
and may not be offered or sold prior to
twelve months from the date of this
Prospectus without the prior written consent
of the Underwriter. See "Selling
Stockholders and Plan of Distribution."
Common Stock to be outstanding
after the offering(1)........ 4,520,000 shares.
Warrants:
Number to be outstanding
after the offering...... 1,300,000 Warrants.
Exercise terms.......... Exercisable commencing , 1997, each to
purchase one share of Common Stock at a
price of $5.00, subject to adjustment in
certain circumstances. See "Description of
Securities -- Redeemable Warrants."
Expiration date......... , 2001.
Redemption.............. Redeemable by the Company, upon the consent
of the Underwriter, at any time commencing
, 1997, upon notice of not less than 30
days, at a price of $.10 per Warrant,
provided that the closing bid quotation of
the Common Stock on all 30 trading days
ending on the third day prior to the day on
which the Company gives notice has been at
least 150% (currently $7.50, subject to
adjustment) of the then effective exercise
price of the Warrants. The Warrants will be
exercisable until the close of business on
the date fixed for redemption. See
"Description of Securities -- Redeemable
Warrants."
Use of Proceeds................ The Company intends to use the net proceeds
from this offering for van development;
repayment of the Bridge Notes; repayment of
bank indebtedness; marketing and promotion;
and the balance for working capital and
general corporate purposes. See "Use of
Proceeds."
Risk Factors................... The securities offered hereby are
speculative and involve a high degree of
risk and immediate substantial dilution and
should not be purchased by investors who
cannot afford the loss of their entire
investment. See "Risk Factors" and
"Dilution."
Proposed Nasdaq Symbols ....... Common Stock -- SHRK
Warrants -- SHRKW
- ------
(1) Does not include (i) 1,300,000 shares of Common Stock reserved for
issuance upon the exercise of the Warrants; (ii) an aggregate of 260,000
shares of Common Stock reserved for issuance upon the exercise of the
Underwriter's Warrants and the warrants included therein; (iii) 767,871
shares of Common Stock which may be issued upon the exercise of
outstanding options under the Company's 1996 Stock Option Plan (the
"Plan"), including up to 500,000 shares of Common Stock which may be
issued upon the exercise of options granted to Earl T. Takefman and Alan
L. Lubell, Chief Executive Officer and Chairman of the Board of the
5
<PAGE>
Company, respectively, subject to certain stock performance levels; and (iv)
32,129 shares of Common Stock reserved for issuance upon the exercise of
options available for future grant under the Plan. See "Management --
Employment and Consulting Agreements," "-- Stock Option Plan," "Certain
Transactions," "Description of Securities" and "Underwriting."
SUMMARY FINANCIAL DATA
The summary financial information set forth below is derived from and
should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1995 March 31, 1996
----------------- ------------------
<S> <C> <C>
Net revenues ................................ $ 132,267 $ 3,848
Net loss .................................... (464,963) (131,299)
Net loss per share .......................... (.14) (.04)
Weighted average number of shares outstanding . 3,220,000 3,220,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
March 31, 1996
December 31, -------------------------------------------------
1995 Actual Pro Forma(1) As Adjusted(1)(2)
-------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Working capital (deficit) .... $ (682,422) $ (789,556) $ (640,210) $ 4,312,444
Total assets ................. 633,477 609,587 1,709,587 5,204,587
Total liabilities ............ 682,980 790,389 1,556,043 283,389
Deficit accumulated during the
development stage ........... (464,963) (596,262) (596,262) (1,135,608)(3)
Stockholders' equity (deficit) . (49,503) (180,802) 153,544 4,921,198
</TABLE>
- ------
(1) Gives effect to the Bridge Financing in May 1996.
(2) Gives effect to the sale of the Common Stock and Warrants offered hereby
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
(3) Gives effect to a non-recurring charge of $539,346 relating to the Bridge
Financing. Does not give effect to a non-recurring charge of $600,000
relating to the transfer of Common Stock to Greg Norman pursuant to the
terms of the Greg Norman License, which will be recorded in the
three-month period ending June 30, 1996. See Notes 2 and 9 to Notes to
Financial Statements.
6
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Prospective investors should carefully consider the following risk
factors before making an investment decision.
1. Recent Organization; Development Stage Company. The Company was
organized in July 1994 and is in the development stage. Since its inception,
the Company has been engaged principally in organizational activities,
including developing a business plan, entering into the Greg Norman License,
engaging in product development and market testing and undertaking
preliminary activities for the commencement of operations. Accordingly, the
Company has no relevant operating history upon which an evaluation of its
performance and prospects can be made. The Company will be subject to all of
the risks, expenses, delays, problems and difficulties frequently encountered
in the establishment of a new business and the development and
commercialization of new products. See "Proposed Business."
2. Uncertainty of Proposed Plan of Operation. The Company's proposed plan
of operation and prospects will be largely dependent upon the Company's
ability to successfully complete development of production versions of its
proposed One-on-One videotapes; hire and retain skilled technical, marketing
and other personnel; establish and maintain satisfactory relationships with
golf professionals at golf courses and driving ranges; successfully develop,
equip and operate One-on-One vans on a timely and cost effective basis; and
achieve significant market acceptance for its proposed products. The Company
has limited experience in developing and commercializing new products based
on innovative technology and there is limited information available
concerning the potential performance of the Company's video editing and
production process or market acceptance of the Company's proposed products.
There can be no assurance that the Company will be able to successfully
implement its business plan or that unanticipated expenses, problems or
technical difficulties will not occur which would result in material delays
in its implementation. See "Plan of Operation."
3. No Operating Revenues; Significant and Continuing Losses; Going
Concern. The Company has not yet generated any operating revenues, other than
limited revenues from market testing activities, and will not generate any
meaningful revenues until after the Company successfully completes
development of its proposed One-on-One videotapes and develops and operates a
number of One-on-One vans, which the Company does not anticipate will occur
until several months following the consummation of this offering. For the
period from July 15, 1994 (inception) to March 31, 1996, the Company incurred
a cumulative net loss of $596,262. Since March 31, 1996, the Company has
continued to incur losses and anticipates that it will continue to incur
significant losses until, at the earliest, the Company generates sufficient
revenues to offset the substantial up-front capital expenditures and
operating costs (including salaries of executives officers) associated with
developing and commercializing its proposed products. There can be no
assurance that the Company will ever generate meaningful revenues or achieve
profitable operations or that the Company's proposed products will be
commercially viable. The Company will incur non-recurring charges aggregating
approximately $1,139,000 relating to the Bridge Financing and the transfer of
Common Stock to Greg Norman pursuant to the terms of the Greg Norman License
in future periods. The Company's independent auditors have included an
explanatory paragraph in their report on the Company's financial statements
stating that the Company's losses and working capital and net capital
deficiencies raise substantial doubt about its ability to continue as a going
concern. See Financial Statements.
4. Dependence on Proceeds to Implement Plan of Operation; Need for
Additional Financing. The capital requirements relating to implementation of
the Company's business plan will be significant. The Company is dependent on
the proceeds of this offering to implement its proposed plan of operation.
The Company anticipates, based on currently proposed plans and assumptions
relating to the implementation of its business plan (including the timetable
of, and costs associated with, product and van development and
commercialization), that the proceeds of this offering will be sufficient to
satisfy its contemplated cash requirements for at least twelve months
following the consummation of this offering. In the event that the Company's
plans change, its assumptions change or prove to be inaccurate or if the
proceeds of this offering prove to be insufficient to implement its business
plan (due to unanticipated expenses, technical difficulties, problems or
otherwise), the Company would be required to seek additional financing sooner
than currently anticipated. There can be no assurance that the proceeds of
this offering will be sufficient to permit the Company to meet its objective
of developing a significant number of One-on-One vans to market, promote and
produce the Company's proposed products or that any assumptions relating to
the implementation of the Company's business plan will prove to be accurate.
To the extent that the proceeds of this offering are not sufficient to enable
7
<PAGE>
the Company to generate meaningful revenues or achieve profitable operations,
the inability to obtain additional financing will have a material adverse
effect on the Company, including possibly requiring the Company to
significantly curtail or cease its operations. In addition, any
implementation of the Company's business plan subsequent to the twelve month
period following this offering or the development of additional products will
require capital resources greater than the proceeds of this offering or
otherwise currently available to the Company. There can be no assurance that
any additional financing, particularly the significant amounts of financing
that would be required if the Company is unable to secure satisfactory
equipment leasing or financing arrangements, will be available to the Company
on commercially reasonable terms, or at all. See "Use of Proceeds" and "Plan
of Operation."
5. Dependence on Greg Norman License. Pursuant to the Greg Norman License,
Greg Norman agreed to grant to the Company a worldwide license to use his
name, likeness and endorsement in connection with the production and
promotion of the Company's proposed products. The license agreement provides
that the continued use of the license by the Company is conditioned upon
guaranteed payments aggregating $3,300,000 during the three-year period
commencing July 1, 1996 to be applied against a royalty equal to 8% of the
Company's net revenues from product sales. The Company is required to make
payments aggregating $600,000, $1,000,000 and $1,700,000, respectively,
during each of the years commencing July 1, 1996, 1997 and 1998, whether or
not the Company derives any revenues from product sales. Failure to make any
required payment under the Greg Norman License would result in termination of
the agreement, which would have a material adverse effect on the Company. The
Company is also dependent upon the continued services of Greg Norman,
principally his availability to schedule videotaping sessions to complete
development of the Company's proposed products on a timely basis. The Greg
Norman License provides that the Company has the right to require Greg Norman
to be available for a limited number of days per year, subject to his
commitments to the PGA Tour and other golf tours and contractual commitments,
to produce the Company's proposed products. Failure or any significant delay
by Greg Norman in scheduling videotaping sessions, his death, disability or
retirement from tournament play or any significant decline in the level of
Greg Norman's tournament play would, under certain circumstances, have a
material adverse effect on the Company. In addition, the commission by Greg
Norman of any serious crime or any act which adversely affects his reputation
could also have an adverse affect on the Company. The Company intends to
obtain "key-man" insurance on the life of Greg Norman in the amount of
$10,000,000. See "Proposed Business -- Relationship with Greg Norman."
6. Uncertainty of Product Development; Technological Factors. Although the
Company has developed an initial version of a One-on-One videotape golf
lesson, the Company has not yet completed development, production or testing
of its proposed products. The Company will be required to commit considerable
time, effort and resources to finalize development of production versions of
its proposed One-on-One videotapes and adapt the video editing and videotape
production functions of its software to its proposed products. The Company's
development efforts are subject to all of the risks inherent in the
development of new products and technologies, including unanticipated delays,
expenses, technical problems or difficulties, as well as the possible
insufficiency of funds to satisfactorily complete development, which could
result in abandonment or substantial change in product commercialization.
There can be no assurance that product development efforts will be
successfully completed on a timely basis, or at all, or that unanticipated
events will not occur which would result in increased costs or material
delays in product development or commercialization. In addition, although the
Company believes that its software performs the principal functions for which
it has been designed, the Company has only conducted limited tests of its
software. Consequently, there can be no assurance that such software will
perform all of the functions for which it has been designed or prove to be
sufficiently reliable for the widespread commercial production of the
Company's proposed One-on-One videos. Technologies such as those incorporated
into the Company's software may contain errors which become apparent
subsequent to commercial use. Remedying such errors could delay the Company's
plans and cause it to incur additional costs. See "Proposed Business --
Product Development."
7. New Concept; Uncertainty of Market Acceptance and Commercialization
Strategy. The Company's One-on-One personalized videotape golf lesson is a
new business concept and, accordingly, demand and market acceptance for the
Company's proposed products is subject to a high level of uncertainty. The
Company has not conducted and does not intend to conduct any independent
market or concept feasibility studies nor does it currently expect to conduct
any additional market testing activities. In the event of successful
completion of production versions of its proposed One-on-One videotapes, the
8
<PAGE>
Company currently anticipates that it will seek to enter selected target
markets. Achieving market acceptance for the Company's proposed products will
require significant efforts and expenditures by the Company to create awareness
and demand by golf professionals at golf courses and driving ranges and
consumers. The Company's prospects will be significantly affected by its ability
to successfully build an effective sales organization and develop a significant
number of One-on-One vans. The Company has not yet commenced any marketing
activities and has limited marketing and technical experience and limited
financial, personnel and other resources to independently undertake extensive
marketing activities. The Company's strategy and preliminary and future
marketing plans may be subject to change as a result of a number of factors,
including progress or delays in the Company's marketing efforts, changes in
market conditions (including the emergence of potentially significant related
market segments), the nature of possible license and distribution arrangements
which may become available to it in the future and competitive factors. To the
extent that the Company enters into third-party marketing and distribution
arrangements in the future, it will be dependent on the marketing efforts of
such third parties and in certain instances on the popularity and sales of their
products. Additionally, to the extent that the Company seeks to market its
proposed products in foreign markets, the Company may be subject to various
risks associated with foreign trade, including customs duties, quotas and other
trade restrictions, shipping delays, currency fluctuations and international
political and economic developments. There can be no assurance that the
Company's strategy will result in successful product commercialization or that
the Company's efforts will result in initial or continued market acceptance for
the Company's proposed products. See "Proposed Business -- Marketing and
Distribution."
8. Competition. The Company will face intense competition for a finite
amount of consumer discretionary spending from numerous other businesses in
the golf industry and related market segments. The Company will compete with
numerous other products and services which provide golf instruction,
including instructional golf videotapes, golf software used to analyze golf
swings and golf courses, schools and professionals who offer video golf
lessons, certain of which may be less expensive or provide other advantages
to consumers. Various instructional golf videotapes currently being marketed
by leading golf professionals and instructors such as Jack Nicklaus, Tom
Kite, Nick Faldo, David Leadbetter, Jim McLean and Greg Norman have achieved
significant national, regional and local consumer recognition. These products
are marketed by companies with substantially greater financial, marketing,
distribution, personnel and other resources than the Company, permitting such
companies to implement extensive advertising and promotional campaigns, both
generally and in response to efforts by additional competitors to enter into
new markets. In addition, certain companies offer both hardware and software
to golf professionals for use in connection with golf lessons. Moreover, the
instructional golf video segment of the industry has no substantial barriers
to entry and, consequently, the Company expects that other companies which
have developed software technologies may seek to enter into the Company's
target markets and compete directly against the Company. There can be no
assurance that other companies are not developing or will not seek to develop
similar products.
The Greg Norman License prohibits Greg Norman from granting similar rights
to any person with respect to any concept which is the same as or confusingly
similar to the Company's concept or proposed products. For purposes of the
Greg Norman License, however, the self-instructional golf video product known
as Better Golf featuring Greg Norman or any other form of golf instructional
video or multi-media presentation for teaching golf techniques is not deemed
the same as or confusingly similar to the Company's proposed products. There
can be no assurance that the Company will be able to compete successfully.
See "Proposed Business -- Competition."
9. Potential Product Obsolescence. The markets for the Company's proposed
products may be characterized by rapidly changing technology which could
result in product obsolescence or short product life cycles. Accordingly, the
ability of the Company to compete may be dependent upon the Company's ability
to complete development and commercialization of the Company's proposed
products in a timely manner and to continually enhance and improve its
software. There can be no assurance that competitors will not develop
technologies or products that render the Company's proposed products obsolete
or less marketable. See "Proposed Business -- Product Development."
10. Industry Factors. Sales of the Company's instructional golf videotapes
will be dependent on discretionary spending by consumers, which may be
adversely affected by unfavorable general economic conditions,
9
<PAGE>
as well as a decline in the popularity of golf. Any decrease in the level of
consumer spending on golf instruction could adversely affect the Company's
proposed business and prospects. The Company's future operating results will
depend on numerous factors beyond its control, including the popularity,
price and timing of other instructional golf videos and related products
being introduced and distributed, national, regional and local economic
conditions (particularly recessionary conditions adversely affecting consumer
spending), changes in consumer demographics, the availability and relative
popularity of other forms of sports and entertainment, and public tastes and
preferences, which may change rapidly and cannot be predicted. The Company's
ability to plan for product development and promotional activities may be
affected by the Company's ability to anticipate and respond to relatively
rapid changes in consumer tastes and preferences. To the extent that the
Company targets consumers with limited disposable income, the Company may
find it more difficult to price its products at levels which result in
profitable operations. In addition, seasonal weather conditions limiting the
playing seasons in certain geographic areas may result in fluctuations in the
Company's future operating results. See "Proposed Business."
11. Uncertainty of Patent Protection; Proprietary Information. The
Company has filed a patent application with the United States Patent and
Trademark Office covering certain aspects of its digital video editing and
videotape production process. There can be no assurance, however, as to the
breadth or degree of protection which patents may afford the Company, that
any patent applications will result in issued patents or that patents will
not be circumvented or invalidated. Rapid technological developments in the
computer software industry result in extensive patent filings and a rapid
rate of issuance of new patents. Although the Company believes that its
proposed products do not and will not infringe patents or violate proprietary
rights of others, the Company has not conducted any investigation to
determine whether its proposed products infringe patents or violate
proprietary rights of others, and it is possible that infringement of
existing or future patents or proprietary rights of others have occurred or
may occur. In the event the Company's proposed products infringe patents or
proprietary rights of others, the Company may be required to modify the
design of its proposed products or obtain a license. There can be no
assurance that the Company will be able to do so in a timely manner, upon
acceptable terms and conditions or at all. The failure to do any of the
foregoing could have a material adverse effect upon the Company. In addition,
there can be no assurance that the Company will have the financial or other
resources necessary to enforce or defend a patent infringement action and the
Company could, under certain circumstances, become liable for damages, which
also could have a material adverse effect on the Company.
The Company intends to rely on proprietary processes and to employ various
methods to protect the concepts, ideas and documentation of its proposed
products. However, such methods may not afford complete protection and there
can be no assurance that others will not independently develop such processes
or obtain access to the Company's proprietary processes, ideas and
documentation. Furthermore, although the Company intends to enter into
confidentiality agreements with its employees, there can be no assurance that
such arrangements will adequately protect the Company. See "Business --
Patents, Trademarks and Proprietary Information."
12. Broad Discretion in Application of Proceeds; Allocation of Proceeds to
Repay Indebtedness; Substantial Benefits to Related Parties. Approximately
$1,380,000 (26.0%) of the estimated net proceeds of this offering has been
allocated to working capital and general corporate purposes. Accordingly, the
Company will have broad discretion as to the application of such proceeds. In
addition, approximately $1,627,000 (30.7%) of the estimated net proceeds of
this offering has been allocated to the repayment of the Bridge Notes and
indebtedness owed to Republic National Bank of New York (the "Bank") and will
not be available for use in connection with other corporate purposes.
Repayment of the Company's indebtedness to the Bank will release the personal
guarantees of Messrs. Earl T. Takefman, Alan L. Lubell and Barry Minsky,
principal stockholders of the Company, and pledges of personal assets in the
form of letters of credit and certificates of deposit to secure such loan.
The Company also intends to use approximately $1,152,500 (21.7%) of the
proceeds of this offering allocated to working capital to pay $112,500 of
accrued salaries since January 1, 1996 to Messrs. Takefman and Lubell and to
pay salaries of executive officers and license fees pursuant to the Greg
Norman License (which are anticipated to be approximately $590,000 and
$450,000, respectively, during the twelve months following this offering).
See "Use of Proceeds" and "Certain Transactions."
13. Dependence on Third-Party Production Companies and Equipment
Manufacturers. The Company will rely on third-party production companies to
film and edit the Company's proposed One-on-One videotapes and will be
10
<PAGE>
dependent on such third parties to satisfactorily complete such filming and
editing on behalf of the Company on a timely and cost-effective basis. The
Company will also rely on third-party manufacturers for all of its supply of
video and computer equipment and vans used in its operations. The Company has
not entered into agreements with any equipment manufacturer and intends to
purchase or lease equipment components pursuant to purchase orders placed from
time to time in the ordinary course of business. Failure or delay by any
manufacturer in supplying components to the Company on favorable terms could
result in interruptions in its operations and adversely effect the Company's
ability to implement its business plan. See "Proposed Business."
14. Dependence on Key Personnel; Need for Qualified Personnel. The
success of the Company will be dependent on the personal efforts of Earl T.
Takefman, its Chief Executive Officer, and other key personnel. The loss of
the services of Mr. Takefman could have a material adverse effect on the
Company's proposed business and prospects. The Company intends to obtain
"key-man" insurance on the life of Mr. Takefman in the amount of $5,000,000
prior to the consummation of this offering. The success of the Company is
also dependent upon its ability to hire and retain additional qualified
marketing, technical, financial and other personnel. Competition for
qualified personnel is intense and there can be no assurance that the Company
will be able to hire or retain additional qualified personnel. Any inability
to attract and retain qualified management and other personnel would have a
material adverse effect on the Company. See "Management."
15. Control by Management. Upon consummation of this offering, Earl T.
Takefman, the Company's Chief Executive Officer, and Alan L. Lubell, Chairman
of the Board of Directors of the Company, will beneficially own, in the
aggregate, approximately 50.3% of the outstanding shares of Common Stock
(assuming no exercise of the Warrants). Accordingly, such persons, acting
together, will be in a position to control the Company, elect all of the
Company's directors, cause an increase in the authorized capital or the
dissolution, merger or sale of the assets of the Company, and generally to
direct the affairs of the Company. See "Management" and "Principal
Stockholders."
16. Outstanding Options. Upon consummation of this offering, there will be
outstanding options to purchase an aggregate of 767,871 shares of Common
Stock at an exercise price equal to the initial public offering price per
share, of which options to purchase up to an aggregate of 500,000 shares (the
"Executive Options") will be granted to Messrs. Takefman and Lubell. Of such
Executive Options, 300,000 options shall vest and become exercisable if the
market price of the Common Stock equals or exceeds $10.00 per share for at
least five consecutive trading days during the 18-month period following the
consummation of this offering and 200,000 options shall vest and become
exercisable if the market price of the Common Stock equals or exceeds $15.00
per share for five consecutive trading days during the 30-month period
following the consummation of this offering. Exercise of any of the foregoing
options will have a dilutive effect on the Company's stockholders.
Furthermore, the terms upon which the Company may be able to obtain
additional equity financing may be adversely affected, since the holders of
the options can be expected to exercise them, if at all, at a time when the
Company would, in all likelihood, be able to obtain any needed capital on
terms more favorable to the Company than those provided in the options. See
"Management -- Stock Option Plan."
17. No Dividends. To date, the Company has not paid any cash dividends on
its Common Stock and does not expect to declare or pay dividends on the
Common Stock in the foreseeable future. In addition, the payment of cash
dividends may be limited or prohibited by the terms of future loan agreements
or the future issuance of Preferred Stock. See "Description of Securities --
Dividend Policy."
18. Substantial Dilution. Investors purchasing Common Stock in this
offering will incur immediate and substantial dilution of $3.92 (78.4%) per
share between the adjusted net tangible book value per share after this
offering and the initial public offering price of $5.00 per share. See
"Dilution."
19. Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the Company's Board of
Directors to issue up to 5,000,000 shares of preferred stock, from time to
time, in one or more series. The Board of Directors will be authorized,
without further approval of the stockholders, to fix the dividend rights and
terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each new series of preferred stock. The issuance
of such stock could adversely affect the voting power of the holders of Com-
11
<PAGE>
mon Stock and, under certain circumstances, make it more difficult for a
third party to gain control of the Company, discourage bids for the Common
Stock at a premium, or otherwise adversely affect the market price of the
Common Stock. See "Description of Securities--Preferred Stock."
20. No Assurance of Public Market; Possible Volatility of Market Price of
Common Stock and Warrants; Underwriter's Potential Influence on the
Market. Prior to this offering, there has been no public trading market for
the Common Stock or Warrants. There can be no assurance that a regular
trading market for the Common Stock or Warrants will develop after this
offering or that, if developed, it will be sustained. The market prices of
the Company's securities following this offering may be highly volatile as
has been the case with the securities of other emerging companies. Factors
such as the Company's operating results and announcements by the Company or
its competitors may have a significant impact on the market price of the
Company's securities. In addition, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the stock of many companies have experienced wide price fluctuations which
have not necessarily been related to the operating performance of such
companies. Although it has no obligation to do so, the Underwriter intends to
make a market in the Common Stock and Warrants and may otherwise effect
transactions in the Common Stock and Warrants. If the Underwriter makes a
market in the Common Stock or Warrants, such activities may exert a
dominating influence on the market and such activity may be discontinued at
any time. The prices and liquidity of the Common Stock and Warrants may be
significantly affected to the extent, if any, that the Underwriter
participates in such market. See "Underwriting."
21. Possible Delisting of Securities from Nasdaq; Risks Relating to
Low-Priced Stocks. It is currently anticipated that the Company's Common
Stock and Warrants will be eligible for listing on the Nasdaq Small Cap
Market upon the completion of this offering. In order to continue to be
listed on Nasdaq, however, the Company must maintain $2,000,000 in total
assets, a $200,000 market value of the public float and $1,000,000 in total
capital and surplus. In addition, continued inclusion requires two
market-makers and a minimum bid price of $1.00 per share; provided, however,
that if the Company falls below such minimum bid price, it will remain
eligible for continued inclusion on Nasdaq if the market value of the public
float is at least $1,000,000 and the Company has $2,000,000 in capital and
surplus. The failure to meet these maintenance criteria in the future may
result in the delisting of the Common Stock and Warrants from Nasdaq, and
trading, if any, in the Company's securities would thereafter be conducted in
the non-Nasdaq over-the-counter market. As a result of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.
In addition, if the Common Stock were to become delisted from trading on
Nasdaq and the trading price of the Common Stock were to fall below $5.00 per
share, trading in the Common Stock would also be subject to the requirements
of certain rules promulgated under the Exchange Act, which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non- Nasdaq equity security that has
a market price of less than $5.00 per share, subject to certain exceptions).
Such rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks
associated therewith, and impose various sales practice requirements on
broker- dealers who sell penny stocks to persons other than established
customers and accredited investors (generally institutions). For these types
of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Common Stock, which could severely limit the
market price and liquidity of the Common Stock and the ability of purchasers
in this offering to sell the Common Stock in the secondary market.
22. Potential Adverse Effect of Warrant Redemption. The Warrants are
subject to redemption by the Company, upon the consent of the Underwriter, at
any time commencing on , 1997, upon notice of not less than 30 days, at
a price of $.10 per Warrant, provided that the closing bid quotation of the
Common Stock on all 30 trading days ending on the third day prior to the day
on which the Company gives notice has been at least 150% (currently $7.50,
subject to adjustment) of the then effective exercise price of the Warrants.
Redemption of the Warrants could force the holders to exercise the Warrants
and pay the exercise price at a time when it may be disadvantageous for the
holders to do so, to sell the Warrants at the then current market price
12
<PAGE>
when they might otherwise wish to hold the Warrants, or to accept the
redemption price, which is likely to be substantially less than the market
value of the Warrants at the time of redemption. See "Description of
Securities -- Redeemable Warrants."
23. Possible Inability to Exercise Warrants. The Company intends to
qualify the sale of the Common Stock and the Warrants in a limited number of
states. Although certain exemptions in the securities laws of certain states
might permit the Warrants to be transferred to purchasers in states other
than those in which the Warrants were initially qualified, the Company will
be prevented from issuing Common Stock in such states upon the exercise of
the Warrants unless an exemption from qualification is available or unless
the issuance of Common Stock upon exercise of the Warrants is qualified. The
Company may decide not to seek or may not be able to obtain qualification of
the issuance of such Common Stock in all of the states in which the ultimate
purchasers of the Warrants reside. In such a case, the Warrants held by
purchasers will expire and have no value if such Warrants cannot be sold.
Accordingly, the market for the Warrants may be limited because of these
restrictions. Further, a current prospectus covering the Common Stock
issuable upon exercise of the Warrants must be in effect before the Company
may accept Warrant exercises. There can be no assurance the Company will be
able to have a prospectus in effect when this Prospectus is no longer
current, notwithstanding the Company's commitment to use its best efforts to
do so. See "Description of Securities -- Redeemable Warrants."
24. Shares Eligible for Future Sale. Upon the consummation of this
offering, the Company will have 4,520,000 shares of Common Stock outstanding
(assuming no exercise of the Warrants), of which 1,520,000 shares, consisting
of the 1,300,000 shares offered hereby and, subject to certain contractual
restrictions described below, the 220,000 shares being offered by the Selling
Stockholders, will be freely tradeable without restriction or further
registration under the Securities Act. All of the remaining 3,000,000 shares
of Common Stock outstanding are "restricted securities", as that term is
defined in Rule 144 promulgated under the Securities Act, and in the future
may be sold only pursuant to an effective registration statement under the
Securities Act, in compliance with the exemption provisions of Rule 144 or
pursuant to another exemption under the Securities Act. Of the 3,000,000
restricted shares, an aggregate of 2,520,406 shares will be eligible for
sale, without registration, under Rule 144 (subject to certain volume
limitations prescribed by such rule and to the contractual restrictions
described below), commencing March 1997. All of the Company's officers,
directors and security holders (except for the holders of 9,776 shares of
Common Stock) have agreed not to sell or dispose of any of their securities
of the Company for a period of twelve months from the date of this Prospectus
without the Underwriter's prior written consent. No prediction can be made as
to the effect, if any, that sales of such securities or the availability of
such securities for sale will have on the market prices prevailing from time
to time. However, even the possibility that a substantial number of the
Company's securities may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and Warrants and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Description of Securities." "Shares Eligible for Future
Sale," "Underwriting" and "Selling Stockholders and Plan of Distribution."
25. Limitations of Liability of Directors and Officers. The Company's
Certificate of Incorporation includes provisions to limit, to the full extent
permitted by Delaware law, the personal liability of directors of the Company
for monetary damages arising from a breach of their fiduciary duties as
directors. The Certificate of Incorporation also includes provisions to the
effect that (subject to certain exceptions) the Company shall, to the maximum
extent permitted from time to time under the law of the State of Delaware,
indemnify, and upon request shall advance expenses to, any director or
officer to the extent permitted under such law as it may from time to time be
in effect. In addition, the Company's By-Laws require the Company to
indemnify, to the full extent permitted by law, any director, officer,
employee or agent of the Company for acts which such person reasonably
believes are not in violation of the Company's corporate purposes as set
forth in the Certificate of Incorporation. As a result of such provisions in
the Certificate of Incorporation and the By-Laws of the Company, stockholders
may be unable to recover damages against the directors and officers of the
Company for actions taken by them which constitute negligence, gross
negligence or a violation of their fiduciary duties, which may reduce the
likelihood of stockholders instituting derivative litigation against
directors and officers and may discourage or deter stockholders from suing
directors, officers, employees and agents of the Company for breaches of
their duty of care, even though such an action, if successful, might
otherwise benefit the Company and its stockholders. See "Management --
Limitations of Liability and Indemnification."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the securities offered
hereby are estimated to be $5,307,000 ($6,172,215 if the Underwriter's
over-allotment option is exercised in full). The Company expects to use the
net proceeds over the twelve months following this offering approximately as
follows:
<TABLE>
<CAPTION>
Approximate Approximate
Application of Proceeds Dollar Amount Percentage
---------------------- --------------- -------------
<S> <C> <C>
Van development(1) ............................... $2,000,000 37.7%
Repayment of Bridge Notes(2) ..................... 1,120,000 21.1
Repayment of bank indebtedness(3) ................ 507,000 9.6
Marketing and promotion(4) ....................... 300,000 5.6
Working capital and general corporate purposes(5) . 1,380,000 26.0
--------------- -------------
$5,307,000 100.0%
=============== =============
</TABLE>
- ------
(1) Represents anticipated costs associated with developing up to twenty
One-on-One vans equipped with video and computer equipment, consisting
primarily of personal computers, video cassette recorders, video cameras
and equipment and television monitors, during the twelve months following
the consummation of this offering. The Company anticipates that the
average cost to acquire a van and related equipment will be approximately
$110,000. The Company may seek to lease or finance rather than purchase
One-on-One vans and related equipment. See "Plan of Operation" and
"Proposed Business -- Marketing and Distribution."
(2) Represents amounts to be used for the repayment of the entire $1,100,000
principal amount of the Bridge Notes and accrued interest thereon. The
Bridge Notes bear interest at the rate of 8% per annum and are repayable
on the earlier of the consummation of this offering or May 31, 1997. The
Company used the proceeds of the Bridge Financing principally in
connection with product and van design and development, payment of a
license fee and working capital. See "Plan of Operation."
(3) Represents amounts to be used to repay outstanding principal and accrued
interest owed to the Bank. Such indebtedness currently bears interest at
the rate of 8.25% per annum and is repayable on or before December 31,
1996. The Company used the proceeds of such borrowings in connection with
product development and market testing activities. See "Plan of
Operation."
(4) Represents anticipated costs associated with marketing and promotion,
including costs associated with public relations and advertising in trade
publications, attendance at trade shows and preparation of product
brochures. See "Proposed Business -- Marketing and Distribution."
(5) Working capital will be used, among other things, to pay accrued salaries
since January 1, 1996 of approximately $112,500 to Messrs. Lubell and
Takefman, to pay salaries of its executive officers and license fees
pursuant to the Greg Norman License (which are anticipated to be $590,000
and $450,000, respectively, during the twelve months following the
consummation of this offering), to purchase furniture, fixtures and
equipment and to pay salaries of additional personnel, rent, trade
payables, professional fees and other operating expenses. See
"Management."
If the Underwriter exercises its over-allotment option in full, the
Company will realize additional net proceeds of $865,000 which will be added
to working capital.
Based on the Company's currently proposed plans and assumptions relating
to the implementation of its business plan (including the timetable of, and
costs associated with, product and van design and development and
commercialization), the Company anticipates that the net proceeds of this
offering will be sufficient to satisfy its contemplated cash requirements for
at least twelve months following the consummation of this offering. In the
event that the Company's plans change (due to changes in market conditions,
competitive factors or new or different business opportunities that may
become available in the future), its assumptions change or prove to be
inaccurate or if the proceeds of this offering prove to be insufficient to
implement its business plan (due to unanticipated expenses, technical
difficulties, problems or otherwise), the Company may find it necessary or
14
<PAGE>
desirable to reallocate a portion of the proceeds within the above described
categories, use of proceeds for other purposes, seek additional financing or
curtail its operations. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest
bearing investments.
15
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
and the net tangible book value per share after this offering constitutes the
dilution to investors in this offering. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of outstanding shares
of Common Stock.
At March 31, 1996, the net tangible book value of the Company was
($230,816), or ($.08) per share. After giving retroactive effect to the
Bridge Financing, the pro forma net tangible book value of the Company at
March 31, 1996 would be ($56,470), or ($.02) per share. After also giving
effect to the sale of the 1,300,000 shares of Common Stock and 1,300,000
Warrants being offered hereby and the receipt of the estimated net proceeds
therefrom (less underwriting discounts and commissions and estimated expenses
of this offering), the as adjusted pro forma net tangible book value of the
Company at March 31, 1996 would be approximately $4,896,184, or $1.08 per
share, representing an immediate increase in net tangible book value of $1.10
per share to existing stockholders and an immediate dilution of $3.92 (78.4%)
per share to new investors. The following table illustrates the foregoing
information with respect to dilution to new investors on a per share basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price .............................. $5.00
Net tangible book value before Bridge Financing ........ $(.08)
Increase attributable to Bridge Financing .............. .06
--------
Pro forma net tangible book value before offering ...... $(.02)
Increase attributable to investors in this offering ..... 1.10
Adjusted pro forma net tangible book value after offering 1.08
-------
Dilution to investors in this offering ..................... $3.92
=======
</TABLE>
The following table sets forth, with respect to existing stockholders
(including investors in the Bridge Financing) and new investors in this
offering, a comparison of the number of shares of Common Stock acquired from
the Company, the percentage of ownership of such shares, the total cash
consideration paid, the percentage of total cash consideration paid and the
average price per share.
<TABLE>
<CAPTION>
Total Cash
Shares Purchased Consideration Paid Average
------------------------ ------------------------- Price Per
Number Percent Amount Percent Share
----------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders . 3,220,000 71.2% $ 738,046 10.2% $ .23
New investors ....... 1,300,000 28.8% $6,500,000 89.8% $5.00
----------- --------- ------------ --------- -----------
Total ............. 4,520,000 100.0% $7,238,046 100.0%
=========== ========= ============ =========
</TABLE>
The above table assumes no exercise of the Underwriter's over-allotment
option. If such option is exercised in full, such investors will have paid
$975,000 for 195,000 shares of Common Stock, representing approximately 11.9%
of the total consideration for 4.1% of the total Common Stock outstanding. In
addition, the above table also assumes no exercise of outstanding stock
options or the Warrants. Upon consummation of this offering, there will be
outstanding stock options to purchase an aggregate of 767,871 shares of
Common Stock. See "Certain Transactions," "Description of Securities" and
"Underwriting."
16
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996, the capitalization
of the Company (i) on an actual basis, as adjusted to give effect to the
Recapitalization, (ii) on a pro forma basis giving effect to the consummation
of the Bridge Financing in May 1996 and (iii) as further adjusted to give
retroactive effect to the issuance and the sale of the Common Stock and
Warrants offered hereby and anticipated application of the estimated net
proceeds therefrom:
<TABLE>
<CAPTION>
March 31, 1996
---------------------------------------------
Pro Forma As
Actual Pro Forma Adjusted
------------ ------------ --------------
--
<S> <C> <C>
Short term debt ................................. $ 507,000 $1,272,654 $
============ ============ ==============
Stockholders' equity (deficit):
Common Stock, $0.01 par value:
20,000,000 shares authorized; 3,000,000
shares issued and outstanding (actual);
3,220,000 shares issued and outstanding
pro forma; 4,520,000 shares issued and
outstanding (pro forma as adjusted)(1) 30,000 32,200 45,200
Preferred Stock, 5,000,000 shares authorized;
none issued; none issued as adjusted. .... -- -- --
Additional paid-in capital ................. 385,460 717,606 6,011,606
Deficit accumulated during the development stage (596,262) (596,262) (1,135,608)(2)
------------ ------------ --------------
Total stockholders' equity (deficit) ....... (180,802) 153,544 4,921,198
------------ ------------ --------------
Total capitalization ............................ $(180,802) $ 153,544 $ 4,921,198
============ ============ ==============
</TABLE>
- ------
(1) Does not include (i) 1,300,000 shares of Common Stock reserved for
issuance upon the exercise of the Warrants, (ii) an aggregate of 260,000
shares of Common Stock reserved for issuance upon the exercise of the
Underwriter's Warrants and the warrants included therein, (iii) 767,871
shares of Common Stock which may be issued upon the exercise of
outstanding options under the Company's 1996 Stock Option Plan (the
"Plan"), including up to 500,000 shares of Common Stock which may be
issued upon the exercise of options granted to Earl T. Takefman and Alan
L. Lubell, Chief Executive Officer and Chairman of the Board of the
Company, respectively, subject to certain stock performance levels, and
(iv) 32,129 shares of Common Stock reserved for issuance upon the
exercise of options available for future grant under the Plan. See
"Management -- Employment and Consulting Agreements," "-- Stock Option
Plan," "Certain Transactions," "Description of Securities" and
"Underwriting."
(2) Gives effect to a non-recurring charge of $539,346 relating to the Bridge
Financing. Does not give effect to a non-recurring charge of $600,000
relating to the transfer of Common Stock to Greg Norman pursuant to the
terms of the Greg Norman License which will be recorded in the
three-month period ending June 30, 1996. See Notes 2 and 9 to Financial
Statements.
17
<PAGE>
PLAN OF OPERATION
The Company was organized in July 1994 and is in the development stage.
Since its inception, the Company has been engaged principally in
organizational activities, including developing a business plan, entering
into the Greg Norman License, engaging in product development and market
testing and undertaking preliminary activities for the commencement of
operations.
The Company has not yet generated any operating revenues, other than
limited revenues from market testing activities, and will not generate any
meaningful revenues until after the Company successfully completes
development of its proposed One-on-One videotapes and develops a number of
One-on-One vans, which the Company does not anticipate will occur until
several months following the consummation of this offering. For the period
from July 15, 1994 (inception) to March 31, 1996, the Company incurred a
cumulative net loss of $596,262. Since March 31, 1996, the Company has
continued to incur losses and anticipates that it will continue to incur
significant losses until, at the earliest, the Company generates sufficient
revenues to offset the substantial up-front capital expenditures and
operating costs (including salaries of executive officers) associated with
developing and commercializing its proposed products. There can be no
assurance that the Company will ever generate meaningful revenues or achieve
profitable operations or that the Company's proposed products will be
commercially viable.
Through March 31, 1996, the Company generated revenues of $11,115 from
product sales during market testing activities and $125,000 from a
non-refundable royalty payment pursuant to the terms of a distribution
agreement with an unaffiliated third party relating to the territories of
Australia, New Zealand and Indonesia. To date, a significant portion of the
Company's expenses have consisted of general and administrative expenses,
including costs associated with market testing, professional fees and travel.
Since inception, the Company had capital expenditures of $671,177, consisting
primarily of computer hardware and software as well as video production and
equipment. See Financial Statements.
The Company will incur a non-recurring charge of approximately $539,000
relating to the Bridge Financing upon the consummation of this offering. The
Company will also incur a non-recurring charge of $600,000 relating to the
transfer of Common Stock to Greg Norman pursuant to the terms of the Greg
Norman License for the three-month period ending June 30, 1996. The Company's
independent auditors have included an explanatory paragraph in their report
on the Company's financial statements stating that the Company's losses and
working capital and net capital deficiencies raise substantial doubt about
its ability to continue as a going concern. This offering is an integral part
of the Company's plan to continue as a going concern. See Financial
Statements.
BUSINESS DEVELOPMENT
The Company's proposed plan of operation and prospects will be largely
dependent upon the Company's ability to successfully complete development of
production versions of its proposed One-on-One videotapes; hire and retain
skilled technical, marketing and other personnel; establish and maintain
satisfactory relationships with golf professionals at golf courses and
driving ranges; successfully develop, equip and operate One-on-One vans on a
timely and cost effective basis; and achieve significant market acceptance
for its proposed products.
In 1995, the Company developed the software necessary to operate a video
editing and videotape production process and an initial version of a
right-handed, full swing videotape golf lesson. The Company intends to
design, develop and test production versions of its proposed full swing
One-on-One videotapes. The production versions are expected to provide
enhanced pre-recorded instructional commentary and analysis of a golfer's
swing at various club positions. The Company currently anticipates that,
subject to Greg Norman's availability, it will script, film, edit and produce
production videotapes of its proposed One-on-One lessons by late 1996. The
Company will be required to commit considerable time, effort and resources to
finalize development of production versions of One-on-One videotapes and
adapt the editing and production functions of its software to its proposed
products.
The Company currently does not have any personnel, other than its
executive officers. The Company has engaged a Director of Software
Development, who is expected to continue to enhance and adapt the Company's
18
<PAGE>
software to the Company's proposed products. Additionally, the Company has
engaged independent production companies to produce the Company's proposed
One-on-One videos. The Company currently anticipates that Greg Norman will be
available to film additional segments of the Company's videos in July 1996.
See "Proposed Business -- Product Development."
In the event of successful completion of production versions of One-on-One
videotapes, the Company anticipates that it will seek to enter selected
target markets. The Company's objective is to develop mobile One-on-One vans
equipped with video and personal computer equipment to market, promote and
produce the Company's proposed products. Pursuant to its currently proposed
plan of operation, the Company will seek to develop up to 20 One-on-One vans
during the twelve months following the consummation of this offering. The
Company is in the process of designing and developing the first of such vans
and purchasing necessary equipment to produce personalized One-on-One
videotape golf lessons. The Company anticipates that the average cost to
acquire a van and purchase and install equipment in each van will be
approximately $110,000. The Company will seek to engage the services of the
logistic consulting division of KPMG Peat Marwick LLP to advise and assist
the Company in connection with van development. In order to reduce the
Company's up-front capital requirements associated with van development, the
Company may seek to lease or finance rather than purchase a portion of its
equipment. There can be no assurance that the Company will be able to obtain
satisfactory equipment leasing arrangements. See "Proposed Business --
Marketing and Distribution."
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements will be to fund the development
of its proposed products, the purchase of the One-on-One vans and equipment
and the Company's working capital requirements. The Company has historically
financed its capital requirements through the issuance of equity and debt
securities and bank borrowings.
In March 1995, an aggregate of 1,281,704, 1,159,636 and 488,268 shares of
Common Stock, respectively, were acquired by Alan Lubell, Chairman of the
Board of Directors and Vice President -- Product Development of the Company,
Status-One Investments Inc. ("Status-One"), a company controlled by Earl T.
Takefman, Chief Executive Officer of the Company, and Greenwich Properties,
Inc. ("Greenwich"), a company controlled by Barry Minsky, a principal
stockholder of the Company, for an aggregate consideration of $1,000. See
"Certain Transactions."
Since its inception, the Company borrowed $191,750, $162,500 and $48,450,
respectively, from Mr. Lubell, Status-One and Greenwich. In December 1995,
these loans were contributed to the capital of the Company. See "Certain
Transactions" and Financial Statements.
The Company borrowed an aggregate of $507,000 from the Bank, which is due
and payable on December 31, 1996. Interest on the unpaid principal amount of
the loan accrues at the reference rate established by the Bank from time to
time (currently 8.25%). All of the Company's assets are pledged as collateral
to secure such indebtedness and Earl T. Takefman, Alan Lubell and Barry
Minsky, principal stockholders of the Company, have guaranteed and pledged
personal assets in the form of letters of credit and certificates of deposit
in the amounts of $354,400, $106,325 and $39,275, respectively, to secure
such loan. The Company intends to use a portion of the proceeds of this
offering to repay such indebtedness, which will release the personal
guarantees of Messrs. Takefman, Lubell and Minsky. See "Use of Proceeds" and
"Certain Transactions."
On May 31, 1996, the Company consummated the Bridge Financing, pursuant to
which it issued an aggregate of (i) $1,100,000 principal amount of Bridge
Notes which bear interest at the rate of 8% per annum and are due on the
earlier of the consummation of this offering or May 31, 1997 and (ii) 220,000
shares of Common Stock. After the payment of $135,000 in placement fees and
expenses to the Underwriter, which acted as placement agent for the Company
in connection with the Bridge Financing and other offering expenses of
approximately $50,000, the Company received net proceeds of approximately
$915,000. The proceeds from the Bridge Financing were used for product
development, the payment of a license fee of $150,000 under the Greg Norman
License, the design and development of a One-on-One van and for working
capital and general corporate purposes. See Note 2 to Notes to Financial
Statements.
The capital requirements relating to the implementation of the Company's
business plan will be significant. The Company is dependent on the proceeds
of this offering to implement its proposed plan of operation. The Company
19
<PAGE>
anticipates, based on currently proposed plans and assumptions relating to the
implementation of its business plan (including the timetable of, and costs
associated with, product van development and commercialization), that the
proceeds of this offering will be sufficient to satisfy its contemplated cash
requirements for at least twelve months following the consummation of this
offering. In the event that the Company's plans change, the assumptions change
or prove to be inaccurate or if the proceeds of this offering prove to be
insufficient to implement its business plan (due to unanticipated expenses,
technical difficulties, problems or otherwise), the Company would be required to
seek additional financing sooner than currently anticipated. There can be no
assurance that the proceeds of this offering will be sufficient to permit the
Company to meet its objective of developing a significant number of One-on-One
vans to market, promote and produce the Company's proposed products or that any
assumptions relating to the implementation of the Company's business plan will
prove to be accurate. To the extent that the proceeds of this offering are not
sufficient to enable the Company to generate meaningful revenues or achieve
profitable operations, the inability to obtain additional financing will have a
material adverse effect on the Company, including possibly requiring the Company
to significantly curtail or cease its operations.
In addition, any implementation of the Company's business plan subsequent
to the twelve month period following this offering or the development of
additional products will require capital resources greater than the proceeds
of this offering or otherwise currently available to the Company. The Company
also may determine, depending upon the opportunities available to it, to seek
additional debt or equity financing to fund the cost of continuing expansion.
The extent that the Company finances expansion through the issuance of
additional equity securities, any such issuance would result in dilution to
the interests of the Company's stockholders. Additionally, to the extent that
the Company incurs indebtedness or issues debt securities in connection with
financing expansion activities, the Company will be subject to all of the
risks associated with incurring substantial indebtedness, including the risks
that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. There can be no assurance
that any additional financing, particularly the significant amounts of
financing that would be required if the Company is unable to secure
satisfactory leasing arrangements, will be available to the Company on
commercially reasonable terms, or at all.
SEASONALITY
The Company's proposed business may be subject to seasonal factors, with a
larger portion of sales generally expected to occur in certain geographic
regions during the spring and summer months of each year.
20
<PAGE>
PROPOSED BUSINESS
The Company, a development stage company, was organized to develop and
market videotape golf lessons featuring personalized One-on-One instruction
by leading professional golfer Greg Norman. The Company intends to sell its
proposed products under the name One-on-One with Greg Norman.(TR)
INDUSTRY OVERVIEW
Golf has become an increasingly popular form of sport in recent years.
According to the National Golf Foundation, consumer spending on golf-related
activities, including green fees, golf equipment and related merchandise,
increased from approximately $12.7 billion in 1989 to approximately $15.1
billion in 1994. The Company believes that this trend is due largely to the
aging of the general population as well as baby boomers, whose income and
leisure time spent on recreational activities have been increasing. According
to the National Golf Foundation, golfers are generally well-educated, high
income, young to middle-aged adult males, a target market with attractive
demographics and significant spending power. Also, it is estimated that there
are more female golfers enjoying the sport than ever before.
The number of golfers and golf courses and driving ranges has also
increased and golf industry participants have sought to increase public
awareness and provide greater access to golfers of all ages and income
levels. According to the National Golf Foundation, there are approximately
15,000 public and private courses and, according to the Golf Range and
Recreational Association, 1,900 to 2,300 stand-alone driving ranges in the
United States today. In addition, the National Golf Foundation has estimated
that there are currently 1,850 golf courses under construction in the United
States. It is also estimated that golfers spend approximately $440 million
annually on golf lessons. The Company believes that golfers are motivated to
continually improve their play and that video is an effective method of
delivering instruction. The Company believes that the capabilities of its
software, including its ability to produce instructional commentary by Greg
Norman and synchronized, "split- screen" comparisons with Greg Norman's
swing, coupled with consumer recognition and appeal of Greg Norman,
differentiate the Company's proposed products from competing products and
position the Company to capitalize on the growing popularity of golf.
PROPOSED PRODUCTS
The Company's proposed One-on-One personalized videotape golf lesson
analyzes a golfer's swing by comparing it to Greg Norman's swing at several
different club positions from two camera angles using Greg Norman's
pre-recorded instructional commentary and analysis and computer graphics to
highlight important golf fundamentals intended to improve a golfer's
performance. The Company's proposed products, through the use of synchronized
"split-screen" comparisons to Greg Norman's swing, are being designed to
enable golfers to make meaningful self-observations to improve their play. In
each of the Company's proposed video golf lessons, Greg Norman will emphasize
the importance of the relevant golf fundamental, comment on the golfer's
execution of the fundamental and summarize the key fundamentals to remember.
The Company's principal proposed products under development include the
following right and left-handed, full swing personalized One-on-One golf
lessons with Greg Norman:
o Standard Lesson. The Company's standard golf lesson is being
designed for golfers of all skill levels. The Company plans to
develop three versions of such lesson, each focusing on a different
body type.
o Advanced Lesson. The Company's advanced golf lesson is being
designed primarily for golfers who have taken the standard lesson
and lower handicap golfers.
o Senior Lesson. The Company's senior lesson is intended for male and
female senior golfers who typically have more limited range of
motion. The Company expects that this lesson may also include a
professional senior golfer.
o Female Lesson. The Company's female lesson is being designed for a
female golfer and may include a professional female golfer to
provide additional comparisons.
21
<PAGE>
o Self-Comparison Video. The Company's self-comparison video lesson is
being designed to permit golfers to compare two swings taken at
different times to Greg Norman's swing to measure improvement or
deterioration through the use of triple "split-screen" video. The
Company anticipates that golfers will be able to store several
swings on a computer diskette which may be incorporated into a
self-comparison One-on-One video at any time.
The Company's proposed products are expected to sell for $39.95 to $59.95,
except for the self-comparison video which is expected to sell for $19.95 to
$29.95, and will be available on VHS videotape format. The Company also
expects to make personalized video golf lessons available on CD-ROM. In
addition, the Company plans to develop additional One-on-One video golf
lessons, including short game lessons designed to focus on short iron play,
chipping and pitching, sand play lessons and putting lessons. In the event
the Company is able to meet its business objective, the Company believes that
potential opportunities exist for the application of its One-on-One concept
to the sports of bowling, tennis and baseball. There can be no assurance that
the Company will be able to successfully develop any of its proposed
products.
RELATIONSHIP WITH GREG NORMAN
Greg Norman, currently the number one player in the world according to the
SONY golfer ranking system, is a two-time British Open winner, was awarded
the Varden Trophy for the lowest average score on the PGA Tour in 1989, 1990
and 1994 and was named the 1995 PGA Player of the Year. The Company's
proposed business and prospects are dependent upon the Company's continued
association with Greg Norman.
Pursuant to a license agreement dated March 1, 1995, by and among the
Company, Greg Norman and Great White Shark Enterprises, Inc. (the "Greg
Norman License"), Greg Norman agreed to grant to the Company a worldwide
license to use his name, likeness and endorsement in connection with the
production and promotion of the Company's proposed products. Greg Norman also
agreed to grant to the Company the right to use any trademarks owned by him
(except for the "Shark" logo). The agreement provides that the continued use
of the license by the Company is conditioned upon guaranteed payments
aggregating $3.3 million during the three-year period commencing July 1, 1996
(the "initial term") to be applied against a royalty equal to 8% of the
Company's net revenues from product sales. "Net revenues" is defined as
revenues less costs associated with discounts, allowances, payments to golf
clubs, driving ranges or golf professionals, sales tax and returns, not to
exceed 20% of product sales.
Under the agreement, the Company is required to make payments aggregating
$600,000, $1,000,000 and $1,700,000, respectively, during each of the years
commencing July 1, 1996, 1997 and 1998, whether or not the Company derives
any revenues from product sales. Such annual payments are payable on a
quarterly basis. The Company has the option to renew the agreement for two
additional five-year periods. In the event of renewal, the Company is
obligated to make guaranteed payments of $1,300,000 during the first year of
any renewal term, increasing by $100,000 for each successive year. The
Company used a portion of the proceeds of the Bridge Financing to make the
first payment of $150,000 under the Greg Norman License which was due on or
prior to June 30, 1996. In connection with the agreement, in April 1996,
Status-One, Greenwich and Mr. Lubell transferred an aggregate of 300,000
shares of Common Stock owned by them to Mr. Norman pursuant to an option held
by Mr. Norman.
The Company has the right to require Greg Norman to be available, subject
to his commitments to the PGA Tour and other golf tours and contractual
commitments, to produce the Company's proposed products and make promotional
appearances to market such products. Greg Norman is required to be available
to the Company on three days, one day and two days during the first, second
and third year, respectively, of the initial term, and two days during each
year of any renewal term. In order to assist the Company in developing its
proposed products, Greg Norman has agreed to make himself available, at a
cost of $50,000 per day and subject to his schedule and convenience, for
additional days in 1996 and 1997 for the purpose of filming personalized
One-on-One golf video lessons. Greg Norman has the right to approve
prototypes and finished products and related advertising and promotional
materials and may withhold his consent under certain circumstances. The
agreement also requires Greg Norman to make himself available for medical
exams for the purpose of assisting the Company in obtaining up to $10 million
in "key-man" insurance on his life. The Company has agreed to indemnify Greg
Norman against any liability arising out of the Greg Norman License.
22
<PAGE>
The Greg Norman License prohibits Greg Norman from granting similar rights
to any person with respect to any concept which is the same as or confusingly
similar to the Company's concept or proposed products. "Products" means a
videotape or CD-ROM or other similar medium that is given or sold to a
consumer upon use of the concept in which Greg Norman's golf swing or any
other golf professional's golf swing is compared to the user's golf swing
using audio and video analysis of both swings. For purposes of the agreement,
however, the self-instructional golf video product Better Golf featuring Greg
Norman or any other form of golf instructional video or multi-media
presentation for teaching golf techniques are not deemed to be the same as or
confusingly similar to the Company's concept or proposed products.
Greg Norman may terminate the agreement in the event the Company fails to
make any payment, breaches the agreement, is declared bankrupt or becomes
insolvent, assigns its assets for the benefit of creditors, consents to the
appointment of a receiver or trustee or winds up or ceases to carry on its
business. The Company may terminate the agreement in the event Greg Norman
dies, voluntarily enters a substance abuse program, commits an act that
results in a criminal conviction damaging to his reputation or good will or
breaches any material term of the agreement.
The Company may assign the agreement to an affiliated entity and enter
into distribution agreements with third parties with respect to product
sales. The Company has no right to sublicense its rights under the agreement
to a third party without the prior consent of Greg Norman.
PRODUCT DEVELOPMENT
In 1995, the Company developed the software necessary to operate a video
editing and videotape production process and an initial version of a
right-handed, full swing videotape golf lesson. The Company intends to
design, develop and test production versions of its proposed full swing
One-on-One videotapes. The production versions are expected to provide
enhanced pre-recorded commentary and analysis of a golfer's swing at various
club positions. The Company currently anticipates that, subject to Greg
Norman's availability, it will script, film, edit and produce its proposed
One-on-One videos by late 1996. The Company intends to engage independent
production companies to produce the Company's proposed videotapes. The
Company currently anticipates that Greg Norman will be available to film
additional segments of the Company's videos in July 1996. The Company
allocated approximately $350,000 of the proceeds of the Bridge Financing for
video production.
To date, the Company has focused its efforts on developing computer
software which digitally combines actual video footage of a golfer's swing
with a synchronized "split-screen" comparison to Greg Norman's golf swing to
produce a 45-minute One-on-One videotape golf lesson. The Company's software
was developed on behalf of the Company by Thomas Peters, Director of Software
Development of the Company. Mr. Peters has entered into a confidentiality
agreement with the Company, has agreed, pursuant to his employment agreement,
to devote all of his business time to the Company's affairs and has assigned
to the Company all of his right, title and interest in and to any invention
relating to or used in connection with the Company's One-on-One products
which he developed while engaged by the Company. Mr. Peters has independently
developed additional software features for Smart View ("Smart View"), a
company he controls which the Company is evaluating and may elect to license
for use in connection with its One-on-One products. Such features would
provide the ability to size and superimpose a golfer's image onto that of
Greg Norman. The Company anticipates that following the consummation of this
offering, Mr. Peters will continue to devote his efforts to enhance and adapt
the editing and videotape production functions of the Company's software to
its proposed products. The Company allocated $75,000 of the proceeds of the
Bridge Financing for product development.
The Company will be required to commit considerable time, effort and
resources to finalize development of production versions of its proposed
One-on-One videotapes and adapt the editing and videotape production
functions of its software to its proposed products. There can be no assurance
that any of the Company's product development efforts will be successful.
MARKET TESTING
In September 1995, the Company conducted preliminary market testing of its
initial version of the right- handed, full swing videotape golf lesson at a
public driving range in New York where approximately 175 golf ers used the
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One-on-One concept at no charge. Each of the 175 market test participants was
asked to complete a two-page questionnaire after reviewing their videotape to
solicit evaluations, recommendations, criticisms and comments. Of the
approximate 120 responses received by the Company, approximately 55% rated the
video golf lesson excellent and approximately 34% rated it above average.
Based on favorable consumer reaction to the initial version of the
Company's video golf lesson, in November and December 1995 the Company
engaged in expanded market testing activities at various public and private
golf courses, driving ranges and retailers in Florida and California,
including the PGA National Golf Course, during which a limited number of
videotapes were sold. The market tests were intended to provide information
on the product's acceptance among golfers and to test the technical aspects
of the Company's video editing and production process. The Company circulated
a limited number of questionnaires and conducted on-site interviews to
solicit consumer feedback used to develop a preliminary marketing strategy.
The Company believes that the results from market testing indicate that the
Company's video editing and videotape production process is effective in
commercial applications and that its proposed products will have strong
appeal to golfers. The Company does not currently expect to conduct any
additional market testing activities.
MARKETING AND DISTRIBUTION
Marketing Strategy
In the event of successful completion of production versions of One-on-One
videotapes, the Company anticipates that it will seek to enter selected
target markets. The Company's primary marketing strategy is to sell
One-on-One videotapes on a prearranged basis to various organizers of amateur
corporate, charity and member golf tournaments (who typically offer gifts to
tournament participants) and golf professionals at private and daily fee golf
courses and driving ranges.
Target Markets
The Company expects that its primary target markets will include:
Amateur Golf Tournaments. The Company believes that private and public
golf courses present a significant opportunity to sell personalized
One-on-One videotape golf lessons. The Company intends to target private and
public golf courses which host corporate, charity and member tournaments and
typically offer gifts such as golf umbrellas, golf bag towels, golf balls or
golf shirts to tournament participants. The Company believes there is a
significant opportunity for product and promotional "tie-ins" with potential
corporate sponsors.
Golf Courses and Golf Professionals. The Company intends to focus its
marketing efforts on golf professionals at private and public golf courses.
The Company believes that golf professionals will be willing to use the
Company's proposed products as instructional tools to enhance the marketing
and quality of golf lessons given to their students.
Driving Ranges. The Company has identified driving ranges as a potentially
significant market for the Company's proposed One-on-One videotapes. Driving
ranges generally conduct a substantial portion of their business during the
evenings and on weekends. The Company intends to market its proposed products
at driving ranges during evening hours to complement its marketing efforts to
private and public golf courses during the daytime.
Other Potential Markets. The Company also believes that travel agents who
plan golf trips, golf specialty shops and sporting goods retailers and
professional golf tournaments are also potential markets for the Company's
proposed products.
Distribution Strategy
The Company's objective is to develop mobile One-on-One vans equipped with
video and personal computer equipment to market, promote and produce the
Company's proposed products. The Company will seek to position such vans in
selected geographic areas that will serve golf courses and driving ranges
throughout the United States, initially Florida, the Carolinas and
California. The Company anticipates that initially such geographic areas will
include Palm Beach, Boca Raton, Miami, Fort Lauderdale, Jacksonville,
Orlando, Tampa, Naples, Fort Myers, Sarasota, Tallahassee, Pensacola, as well
as Hilton Head and Myrtle Beach and, thereafter, selected areas in Southern
California.
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One-on-One Van Development
The Company has allocated approximately $125,000 of the proceeds of the
Bridge Financing to develop and customize its first One-on-One van and to
purchase certain equipment necessary to produce personalized One-on-One video
golf lessons, and intends to use $2,000,000 of the proceeds of this offering
to develop up to 20 additional fully-equipped vans during the twelve months
following the consummation of this offering. The Company expects that the
costs associated with developing a customized One-on-One van will be
approximately $35,000. The Company will seek to engage the logistics
consulting division of KPMG Peat Marwick LLP to advise and assist the Company
in identifying and evaluating van specifications, procurement and lease
arrangements, maintenance contracts, security and warranty arrangements.
The Company currently estimates that the average cost to acquire and
install equipment in each van will be approximately $75,000, including video
equipment (cameras, tripods, lens, filters, splitters, small television
monitor, lighting and accessories); input equipment (computer and video
cassette recorder); and output equipment (computers, output video cassette
recorders, scan converters, a television monitor and accessories).
In order to reduce the Company's up-front capital requirements associated
with van development, the Company may seek to lease or finance rather than
purchase a portion of its equipment. There can be no assurance that the
Company will be able to obtain satisfactory leasing arrangements.
Strategic Relationships
The Company may also seek to enter into strategic relationships with third
parties relating to product marketing and distribution. Potential marketing
partners may include golf industry participants, such as organizers of golf
tournaments and companies that offer hole-in-one insurance.
In November 1995, the Company entered into a distribution agreement with
Visual Edge Systems Australia Pty. Ltd. ("Vesa"), an unaffiliated third
party, pursuant to which the Company granted to Vesa the exclusive right to
distribute One-on-One products in Australia, New Zealand and Indonesia. In
connection with the agreement and upon delivery of the Company's initial
version of its product, the Company received a non-refundable payment of
$125,000 to be applied against future royalties, and is entitled to receive a
royalty of $5.00 for each videotape sold. During the second and third years
of the agreement, the Company is entitled to receive aggregate guaranteed
royalties of $700,000. In addition, the agreement provides for certain profit
sharing arrangements.
The Company has not yet commenced any significant marketing activities and
has limited marketing and technical experience and limited financial,
personnel and other resources to independently undertake extensive marketing
activities. The Company's strategy and preliminary and future marketing plans
may be subject to change as a result of a number of factors, including
progress or delays in the Company's marketing efforts, changes in market
conditions (including the emergence of potentially significant related market
segments), the nature of possible license and distribution arrangements which
may become available to it in the future and competitive factors. There can
be no assurance that the Company's strategy will result in successful product
commercialization or that the Company's efforts will result in initial or
continued market acceptance for the Company's proposed products.
PRODUCTION
The Company's proposed One-on-One products are made possible by relatively
recent advancements in the capabilities of affordable desktop personal
computers to process, manipulate and edit digital video information. Creation
of a One-on-One videotape involves videotaping a golfers' swing, editing and
production of a videotape. Videotaping involves the operation of video
equipment, including three cameras, a small television monitor, a splitter
(to provide a "split-screen" image), a video cassette recorder and power
supply. Editing involves the use of a computer and monitor, a scan converter
and video cassette recorder and consists of digitizing the videotape and
synchronizing and sizing the golfer's swing to Greg Norman's swing and
identifying key clubhead and body positions. In the final videotape
production stage, the Company's software scans the videotape to the first
blank segment where it records a "split-screen" image of Greg Norman and the
golfer at similar club positions. Using pre-recorded film and audio footage
stored in the computer's memory, the software creates computer graphics
designed to illustrate comparisons to Greg Norman's swing and chooses
appropriate verbal instructions and analytical comments from Greg Norman.
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The Company anticipates that a Company employee will operate videotaping
equipment at the first tee, driving range or other suitable location to
videotape a golfer's swing which would be edited inside the One-on-One van to
create a personalized video golf lesson in approximately 25 minutes.
COMPETITION
The Company will face intense competition for a finite amount of consumer
discretionary spending from numerous other businesses in the golf industry
and related market segments. The Company will compete with numerous other
products and services which provide golf instruction, including instructional
golf videotapes, golf software used to analyze golf swings and golf courses,
golf schools and professionals who offer video golf lessons, which may be
less expensive or provide other advantages to consumers.
Various instructional golf videotapes currently being marketed by leading
golf professionals and instructors such as Jack Nicklaus, Tom Kite, Nick
Faldo, David Leadbetter, Jim McLean and Greg Norman, including Better Golf
and Shark Attack, among others, featuring Greg Norman, have achieved
significant national, regional and local consumer recognition. These products
are marketed by companies with substantially greater financial, marketing,
distribution, personnel and other resources than the Company, permitting such
companies to implement extensive advertising and promotional campaigns, both
generally and in response to efforts by additional competitors to enter into
new markets.
In addition, certain companies offer both hardware and software to golf
professionals for use in connection with golf lessons. Such companies include
Astar, Inc., Vivid Visions, Inc. and Golf Training Systems, Inc. The Company
believes that such companies offer hardware and software at prices ranging
from $4,500 to $20,000. Certain companies also offer computer software to
permit a golfer to analyze a golf swing, such as David Leadbetter's
ComputerCoach, which sells at a price of $59.95.
The instructional golf video segment of the industry has no substantial
barriers to entry and, consequently, the Company expects that other companies
which have developed software technologies may seek to enter into the
Company's target markets and compete directly against the Company. There can
be no assurance that other companies are not developing or will not seek to
develop similar products.
The Greg Norman License prohibits Greg Norman from granting similar rights
to any person with respect to any concept which is the same as or confusingly
similar to the Company's concept or proposed products. Notwithstanding this
prohibition, the self-instructional golf video product known as Better Golf
featuring Greg Norman or any other form of golf instructional video or
multi-media presentation for teaching golf techniques are not deemed the same
as or confusingly similar to the Company's concept or proposed products.
There can be no assurance that the Company will be able to compete
successfully.
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company has filed a patent application with the United States Patent
and Trademark Office covering certain aspects of its digital video editing
and production process. There can be no assurance, however, as to the breadth
or degree of protection which patents may afford the Company, that any patent
applications will result in issued patents or that patents will not be
circumvented or invalidated. Rapid technological developments in the computer
software industry results in extensive patent filings and a rapid rate of
issuance of new patents. Although the Company believes that its proposed
products do not and will not infringe patents or violate proprietary rights
of others, the Company has not conducted any investigation, to determine
whether its proposed products infringe patents or violate proprietary rights
of others, and it is possible that infringement of existing or future patents
or proprietary rights of others have occurred or may occur. In the event the
Company's proposed products infringe patents or proprietary rights of others,
the Company may be required to modify the design of its proposed products or
obtain a license. There can be no assurance that the Company will be able to
do so in a timely manner, upon acceptable terms and conditions or at all. The
failure to do any of the foregoing could have a material adverse effect upon
the Company. In addition, there can be no assurance that the Company will
have the financial or other resources necessary to enforce or defend a patent
infringement action and the Company could, under certain circumstances,
become liable for damages, which also could have a material adverse effect on
the Company.
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The Company intends to rely on proprietary processes and to employ various
methods to protect the concepts, ideas and documentation of its proposed
products. However, such methods may not afford complete protection and there
can be no assurance that others will not independently develop such processes
or obtain access to the Company's proprietary processes, ideas and
documentation. Furthermore, although the Company intends to enter into
confidentiality agreements with its employees, there can be no assurance that
such arrangements will adequately protect the Company.
The Company has filed a trademark application with the United States
Patent and Trademark Office, on behalf of Greg Norman, for the mark
One-on-One with Greg Norman(TR) and may use this mark, as well as all other
trademarks owned by Greg Norman (except the "Shark" logo) in connection with
the marketing of its products. The Company's rights in these marks may be a
significant part of the Company's proposed business. The Company is not aware
of any claims or infringement or other challenges to the Company's rights to
use these marks.
LEGAL PROCEEDINGS
The Company has no pending legal proceedings.
EMPLOYEES
Other than the Company's executive officers, the Company has no employees.
The Company anticipates that it will hire additional personnel, including
administrative personnel, as well as van operators, during the 12 months
following this offering. See "Management."
PROPERTY
The Company's executive offices are located in approximately 300 square
feet of office space in New York, New York. Such space is being provided to
the Company by Alan Lubell, its Chairman of the Board and Vice
President-Product Development, at no cost. The Company intends to lease
office space in South Florida following the completion of this offering. See
"Certain Transactions."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following are the directors and executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
----------------- ----- -----------------------------------------------
<S> <C> <C>
Earl T. Takefman . 46 Chief Executive Officer and Director
Chairman of the Board, Vice President -- Product
Alan L. Lubell .. 57 Development and Director
Richard Parker* . 35 Chief Operating Officer
Ami Trauber* .... 56 Chief Financial Officer
Thomas Peters ... 51 Director of Software Development
Frank Williams* . 55 Director
Eddie Einhorn* .. 60 Director
Mark Hershhorn* . 48 Director
</TABLE>
- ------
* Nominee whose appointment is to become effective upon consummation of this
offering.
Earl T. Takefman, a co-founder of the Company, has been Chief Executive
Officer of the Company since March 1995. Prior to founding the Company, Mr.
Takefman was Co-Chief Executive Officer of SLM International, Inc. ("SLM"), a
publicly traded toy and sporting goods company, from December 1989 to August
1994. SLM filed for protection under Chapter 11 of the U.S. Bankruptcy Code
in October 1995. From 1980 to 1989, prior to joining SLM, Mr. Takefman was
Chief Operating Officer of Charan Industries ("Charan"), a publicly traded
Canadian toy and sporting goods company. Mr. Takefman also currently serves
as a consultant to National Media Corporation of Philadelphia ("National
Media"), a publicly traded company which is a producer of infomercials, in
the area of new product development. Mr. Takefman received a Bachelor of
Architecture degree in 1971 and a Masters of Business Administration degree
from McGill University in Montreal, Canada in 1973.
Alan L. Lubell, a co-founder of the Company, has been Chairman of the
Board of the Company since July 1994 and Vice President -- Product
Development since May 1996. Prior to founding the Company, Mr. Lubell had
been an entrepreneur in the area of sports television. From 1977 to July
1994, Mr. Lubell served as President of Marathon Entertainment, a sports
television company which he founded that created many events and programs
that were sold to television stations and networks and national advertisers.
Among the events developed, packaged and produced by Marathon Entertainment
was the New York City Marathon. Mr. Lubell received a Bachelor of Science
degree in marketing from New York University in 1960.
Richard Parker has been appointed as Chief Operating Officer, effective
upon the completion of this offering. Since February 1990, Mr. Parker has
been the founder, owner and president of Diomo Marketing Inc. and Devrew
Merchandising Inc., companies engaged in marketing and selling consumer
products in Canada. From August 1984 to February 1990, Mr. Parker held
various positions, including Vice President, at Charan. Mr. Parker graduated
from Vanier College in Montreal in 1980.
Ami Trauber has been appointed as Chief Financial Officer, effective upon
completion of this offering. Since 1991, Mr. Trauber has been President and
Chief Operating Officer of Ed's West, Inc., a designer and importer of
headwear and other licensed apparel. From 1978 until 1990, Mr. Trauber was
Corporate Vice President -- Finance and Controller of Harcourt General, Inc.,
a conglomerate. From 1976 to 1978, Mr. Trauber was Corporate Vice President
and Controller of Hertz Corporation. Mr. Trauber received a Bachelor of
Science degree from the University of Connecticut in 1965 and graduated from
the Harvard Business School Advanced Management Program in 1982.
Thomas Peters has been Director of Software Development of the Company
since May 1996. Since July 1992, Mr. Peters has been the owner of Smart View
("Smart View"), a company he founded to design and develop computer golf
software to be used by golf professionals when giving video golf lessons.
Since March 1995, Smart View has been engaged as an independent consultant to
the Company and is principally responsible for the development of the
software used in the Company's proposed products. Smart View also has
developed operating systems used by the Golf Academy at PGA National and at
the Doral Golf Learning Center, each in Florida. Prior to founding Smart
View, Mr. Peters, for 26 years, held various positions at International
Business Machines Corporation, including Manager of Application Development
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from July 1989 to July 1992 and Personal Computer Product Planning Manager from
1984 to 1989. Mr. Peters graduated from Harper College at University of New York
in 1967, with a B.A. in mathematics.
Frank Williams will become a director of the Company upon completion of
this offering. Mr. Williams has been the Managing Director of Great White
Shark Enterprises, Inc. ("Great White Shark") since January 1993. From 1988
to January 1993, Mr. Williams served as a General Manager of the Australian
division of International Management Group, a company engaged in representing
athletes and producing sports programming. From 1978 to 1988, Mr. Williams
was Managing Director and a co-founder of the Australian Masters Golf
Tournament.
Eddie Einhorn will become a director of the Company upon completion of
this offering. Mr. Einhorn currently serves, and has served for the past five
years, as Vice-Chairman of the Chicago White Sox baseball team franchise.
Prior to being appointed Vice-Chairman, he served the franchise as its
President and Chief Operating Officer from 1981 to 1991. Mr. Einhorn is a
member of the Major League Baseball Schedule Format Committee, the
Professional Baseball Association Committee, and was a member of the
Television Committee from 1992 to 1995. In 1989, Mr. Einhorn was appointed
television consultant to the United States Olympic Committee. He is currently
a television consultant for the United States Figure Skating Association and
the International Skating Union, the governing bodies for figure skating
throughout the world. Mr. Einhorn also serves on the Board of Directors of
the Chicago Bulls basketball team of the National Basketball Association.
Prior to 1981, Mr. Einhorn was executive producer of CBS Sports Spectacular,
where he was awarded an Emmy Award in 1980. Mr. Einhorn holds a Bachelor's
degree from the University of Pennsylvania and is a graduate of Northwestern
University School of Law.
Mark Hershhorn will become a director of the Company upon completion of
this offering. Mr. Hershhorn currently serves and has served since November
1994 as President and Chief Executive Officer and as a director of National
Media Corporation of Philadelphia, a publicly-traded worldwide infomercial
company, and as Chairman of the Board of its international subsidiary,
Quantum International, Inc. From August 1994 to November 1994, Mr. Hershhorn
acted as President and Chief Operating Officer of National Media. Mr.
Hershhorn was President and Chief Operating Officer of Buckeye
Communications, a publicly traded corporation, from June 1993 to August 1994
and of National Media from December 1991 to April 1993. From 1990 to December
1991, Mr. Hershhorn was a Senior Vice President of Food Marketing for
Nutri-Systems Inc., a diet food company. Prior to joining Nutri-Systems, he
held various positions at the Franklin Mint, including Chief Financial
Officer, Treasurer, Vice President and director, from 1985 to 1990. Mr.
Hershhorn received a Bachelor of Arts degree in economics Rutgers University
and a Masters of Business Administration degree from the Wharton School of
Business at the University of Pennsylvania. He currently serves as a member
of the Wharton School Graduate Executive Board and as a member of the
Executive Committee of the National Infomercial Marketing Associations.
BOARD OF DIRECTORS
All directors currently hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified. The
Company reimburses directors for reasonable travel expenses incurred in
connection with their activities on behalf of the Company but does not
currently pay its directors any fees for attending Board meetings. The
Company has granted to its non-employee directors options to purchase 5,000
shares of Common Stock and such directors will receive annual option grants
to purchase 2,500 shares of Common Stock. See "Stock Option Plan."
Audit Committee. Upon the consummation of this offering, the Company will
establish an Audit Committee of the Board of Directors consisting of at least
two directors who are not employees of the Company. It is currently
anticipated that Messrs. Einhorn and Hershhorn will comprise the Audit
Committee. Audit Committee members will meet regularly with the Company's
financial management and independent auditors to review the results of their
examination, the scope of audits and their opinions on the adequacy of
internal controls and quality of financial reporting.
Compensation Committee. Upon the consummation of this offering, the
Company will establish a Compensation Committee of the Board of Directors
consisting of at least two directors who are not employees of the Company. It
is currently anticipated that Messrs. Hershhorn and Williams will comprise
the Compensation Committee. The Committee will make recommendations to the
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<PAGE>
Board of Directors concerning the salaries of all elected officers. In addition,
the Compensation Committee will administer the Company's 1996 Stock Option Plan
and determine the amounts of, and the individuals to whom, awards shall be made
thereunder. See "Stock Option Plan."
The Company has agreed, for a period of three years from the date of the
Prospectus, if so requested by the Underwriter, to nominate and use its best
efforts to elect a designee of the Underwriter as a director of the Company
or, at the Underwriter's option, as a non-voting advisor to the Company's
Board of Directors. The Underwriter has not yet exercised its right to
designate such a person. See "Underwriting."
EXECUTIVE COMPENSATION
Since its inception, the Company has not paid any salaries, bonuses,
long-term compensation (through plans or otherwise) or any other form of
compensation to any of its executive officers. Salaries owing since January
1, 1996 under the Company's employment agreements with Messrs. Takefman and
Lubell will be paid with a portion of the proceeds of this offering. See
"Employment Agreements."
EMPLOYMENT AGREEMENTS
Effective January 1, 1996, the Company entered into a three-year
employment agreement with Earl T. Takefman, the Chief Executive Officer of
the Company. Pursuant to the agreement, Mr. Takefman is entitled to receive a
base salary of $150,000 per annum, subject to increase to $200,000 in July
1997 and $250,000 in July 1998 if the Company achieves pre-tax earnings of $2
million and $4 million in the prior 12-month periods, respectively. The
agreement also provides for additional compensation in the amount of 5% of
pre-tax earnings of the Company in each year if the Company achieves pre-tax
earnings of at least $3 million and $5 million in fiscal 1997 and 1998,
respectively. In addition, pursuant to the agreement, Mr. Takefman shall
receive the Executive Options upon the consummation of this offering. Of the
Executive Options, 150,000 options will vest and become exercisable if the
market price of the Common Stock equals or exceeds $10.00 per share for at
least five consecutive trading days during the 18-month period following the
completion of this offering and 100,000 of the Executive Options will vest
and become exercisable if the trading price of the Common Stock equals or
exceeds $15.00 per share for at least five consecutive trading days during
the 30-month period following completion of this offering. The agreement is
automatically renewed for additional one-year periods unless Mr. Takefman or
the Company provides notice to the other of its termination. In the event
that Mr. Takefman is terminated without cause, he will be entitled to receive
as severance the amount of his base salary for the lesser of one year or the
remaining term of the agreement.
Effective January 1, 1996, the Company entered into a three-year
employment agreement with Alan L. Lubell, the Chairman of the Board and Vice
President -- Product Development of the Company. Pursuant to the agreement,
Mr. Lubell is entitled to receive a base salary of $75,000 per annum, subject
to increase to $100,000 in July 1997 and $125,000 in July 1998 if the Company
achieves pre-tax earnings of $2 million and $4 million in the prior 12-month
periods, respectively. In addition, Mr. Lubell shall have the right to
receive a bonus based on the Company's performance, as determined by the
Board of Directors, and the Executive Options on the same terms and subject
to the same conditions as Mr. Takefman. The agreement is automatically
renewed for additional one-year periods unless Mr. Lubell or the Company
provides notice to the other of its termination. In the event Mr. Lubell is
terminated without cause, he will be entitled to receive as severance the
amount of his base salary for six months.
Effective upon the completion of this offering, the Company will enter
into an employment agreement with Richard Parker, pursuant to which Mr.
Parker will serve as the Chief Operating Officer of the Company. Mr. Parker
will receive a base salary of $150,000 per annum, subject to increase to
$175,000 in 1998 if the Company achieves pre-tax earnings during 1997. Mr.
Parker will be eligible to receive a bonus based on the Company's
performance, as determined by the Board of Directors. The agreement will
expire on December 31, 1998 but will automatically be renewed annually unless
terminated by one or both of the parties. If Mr. Parker is terminated without
cause, he will be entitled to receive as severance the amount of his base
salary for the lesser of six months or the remaining term of the agreement.
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<PAGE>
Effective upon completion of this offering, the Company will enter into an
employment agreement with Ami Trauber, pursuant to which Mr. Trauber will
serve as the Chief Financial Officer of the Company. Mr. Trauber will receive
a base salary of $150,000 per annum, subject to increase to $175,000 in 1998
if the Company achieves pre-tax earnings during 1997. Mr. Trauber will be
eligible to receive a bonus based on the Company's performance, as determined
by the Board of Directors. The agreement will expire on December 31, 1998,
but will automatically be renewed for one additional year unless terminated
by one or both of the parties, provided that either party may terminate the
agreement, without cause, on or before December 31, 1996. If Mr. Trauber is
terminated without cause, he will be entitled to receive as severance the
amount of his then base salary for the lesser of six months or the remaining
term of the agreement.
Since March 1995, Thomas Peters and Smart View have been engaged to act as
independent consultants to the Company in the area of software development,
and are principally responsible for the development of the software used in
the Company's proposed products. Mr. Peters has been paid an hourly rate in
connection with services so rendered. Mr. Peters has entered into a
confidentiality agreement with the Company, has agreed, pursuant to his
employment agreement, to devote all of his business time to the Company's
affairs and has assigned to the Company all of his right, title and interest
in and to any invention relating to or used in connection with the Company's
One-on-One products which he developed while engaged by the Company. As of
May 1, 1996, the Company entered into a two-year employment agreement with
Thomas Peters, pursuant to which Mr. Peters serves the Company, as Director
- -- Software Development. Mr. Peters is entitled to receive a base salary of
$65,000 in the first year of the agreement and $75,000 in the second year.
Pursuant to the agreement, Mr. Peters will also be eligible to receive a
bonus based on the Company's performance, as determined by the Board of
Directors. The agreement is automatically renewed for additional one-year
periods unless Mr. Peters or the Company 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.
STOCK OPTION PLAN
In April 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Stock Option Plan (the "Plan"). The purpose of
the Plan is to provide directors, officers and key employees of, and
consultants to, the Company with additional incentives by increasing their
ownership interests in the Company. Directors, officers and other key
employees of the Company are eligible to participate in the Plan. Awards may
also be granted to consultants providing valuable services to the Company. In
addition, individuals who have agreed to become a key employee of or a
consultant to the Company are eligible for option grants, conditional in each
case on actual employment or consultant status. Awards of options to purchase
Common Stock may include incentive stock options ("ISOs") and/or
non-qualified stock options ("NQSOs").
The maximum number of shares of Common Stock that may be subject to
outstanding options, determined immediately after the grant of any option, is
equal to the greater of 800,000 shares (reduced by the number of Executive
Options not granted or, if granted, forfeited in accordance with their terms)
or 12% of the aggregate number of shares of the Company's Common Stock
outstanding, provided, however, that options to purchase no more than 300,000
shares of Common Stock may be granted as ISOs.
The Board of Directors intends, upon consummation of this offering, to
establish a Compensation Committee, consisting of two or more directors who
qualify as disinterested persons within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
administer the Plan. The Compensation Committee will generally have
discretion to determine the terms of an option grant, including the number of
option shares, option price, term, vesting schedule, the post-termination
exercise period, and whether the grant will be an ISO or NQSO.
Notwithstanding this discretion: (i) the number of shares subject to options
granted to any individual in any calendar year may not exceed 250,000; (ii)
the option price per share of Common Stock may not be less than 100% of the
market value of such share at the time of grant (or 110% if granted as an ISO
to a 10% or more stockholder); (iii) the term of any option may not exceed 10
years (unless granted as an ISO to a 10% or more stockholder, which term may
not exceed five years); and (iv) an option may terminate upon a grantee's
termination of employment for cause. In addition, unless otherwise specified
by the Compensation Committee, all outstanding options vest upon a "change in
control" of the Company (as defined in the Plan), and all options will
terminate three months following any termination of employment.
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<PAGE>
The Plan also provides for automatic option grants to directors who are
not otherwise employed by the Company. Upon commencement of service (or upon
agreeing to serve in the case of the initial non-employee directors), a
non-employee director will receive a nonqualified option to purchase 5,000
shares of Common Stock, and continuing non-employee directors will receive
annual options to purchase 2,500 shares of Common Stock. Options granted to
non-employee directors become exercisable one-third on the date of grant and
one- third on each of the next two anniversaries of the date of grant.
Non-employee directors' options have a term of five years from the date of
grant. Upon consummation of this offering, Messrs. Williams, Einhorn and
Herschhorn will each receive options to purchase 5,000 shares of Common
Stock.
The Plan will remain in effect until terminated by the Board of Directors.
The Plan may be amended by the Board of Directors without the consent of the
stockholders of the Company, except that any amendment, although effective
when made, will be subject to stockholder approval if required by any Federal
or state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
Upon consummation of this offering, the Company will have outstanding
nonqualified options to purchase an aggregate of 767,871 shares of Common
Stock. Of such options, options to purchase 87,478, 58,318, 50,000, 25,000,
20,411, 5,832 and 5,832 shares were granted to Earl Takefman, Frank Williams,
Richard Parker, Ami Trauber, Thomas Peters, Mona-Lee Takefman and Mark Lubell
(excluding options granted to Mr. Williams as a non-employee director of the
Company), respectively. All of such options are exercisable at the public
offering price per share and vest in equal installments over a three- or
five-year period following the completion of this offering. In addition,
Messrs. Takefman and Lubell are each eligible to receive the Executive
Options upon the completion of this offering pursuant to their employment
arrangements, which may be exercised at various times over the course of two
and a half years following completion of this offering if the market price of
the Company's Common Stock reaches certain levels. See
"Management--Employment Agreements."
LIMITATIONS OF LIABILITY AND INDEMNIFICATION
Section 145 of the Delaware General Corporation Law ("DGCL") contains
provisions entitling the Company's directors and officers to indemnification
from judgments, fines, amounts paid in settlement, and reasonable expenses
(including attorneys' fees) as the result of an action or proceeding in which
they may be involved by reason of having been a director or officer of the
Company. In its Certificate of Incorporation, the Company has included a
provision that limits, to the fullest extent now or hereafter permitted by
the DGCL, the personal liability of its directors to the Company or its
stockholders for monetary damages arising from a breach of their fiduciary
duties as directors. Under the DGCL as currently in effect, this provision
limits a director's liability except where such director (i) breaches his
duty of loyalty to the Company or its stockholders, (ii) fails to act in good
faith or engages in intentional misconduct or a knowing violation of law,
(iii) authorizes payment of an unlawful dividend or stock purchase or
redemption as provided in Section 174 of the DGCL, or (iv) obtains an
improper personal benefit. This provision does not prevent the Company or its
stockholders from seeking equitable remedies, such as injunctive relief or
rescission. If equitable remedies are found not to be available to
stockholders in any particular case, stockholders may not have any effective
remedy against actions taken by directors that constitute negligence or gross
negligence.
The Certificate of Incorporation also includes provisions to the effect
that (subject to certain exceptions) the Company shall, to the maximum extent
permitted from time to time under the law of the State of Delaware,
indemnify, and upon request shall advance expenses to, any director or
officer to the extent that such indemnification and advancement of expenses
is permitted under such law, as it may from time to time be in effect. In
addition, the Company's By-Laws require the Company to indemnify, to the full
extent permitted by law, any director, officer, employee or agent of the
Company for acts which such person reasonably believes are not in violation
of the Company's corporate purposes as set forth in the Certificate of
Incorporation. At present, the DGCL provides that, in order to be entitled to
indemnification, an individual must have acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the Company's best
interests.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of the date of this
Prospectus and as adjusted to reflect the sale by the Company of the
1,300,000 shares of Common Stock offered hereby (based on information
obtained from the persons named below), relating to the beneficial ownership
of shares of Common Stock by: (i) each person or entity who is known by the
Company to own beneficially five percent or more of the outstanding Common
Stock; (ii) each of the Company's directors; and (iii) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Beneficially Owned(2)
Shares ------------------------
Name and address of Beneficially Before After
Beneficial Owners(1) Owned(2) Offering Offering
-------------------- -------------- ---------- ----------
<S> <C> <C> <C>
Earl T. Takefman(3) ........................... 1,154,350 35.8% 25.5%
Alan L. Lubell(4) ............................. 1,117,553 34.7 24.7
Greg Norman ................................... 300,000 9.3 6.6
Barry Minsky(5) ............................... 248,503 7.7 5.5
Eddie Einhorn ................................. -- -- --
Mark Hershhorn ................................ -- -- --
Frank Williams ................................ 8,139 * *
All directors and executive officers as a group
(six persons) ................................ 2,289,197 71.1% 50.6%
</TABLE>
- ------
*Less than 1%
(1) Unless otherwise indicated, the address for each named individual,
corporation or group is in care of Visual Edge Systems Inc., 7 West 51st
Street, New York, New York 10019
(2) Unless otherwise indicated, 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 which may be acquired by such
person within 60 days from the date of this Prospectus upon the exercise
of options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days of the date of this Prospectus, have been
exercised.
(3) The shares are owned by Status-One Investments Inc., a company controlled
by Earl T. Takefman. Does not include options held by Mr. Takefman and
his spouse (as to which Mr. Takefman disclaims beneficial ownership) to
acquire an aggregate of 93,000 shares of Common Stock, none of which are
exercisable within 60 days, or shares underlying the Executive Options.
See "Management -- Employment Agreements."
(4) Does not include shares underlying the Executive Options. See "Management
-- Employment Agreements."
(5) The shares are owned by Greenwich Properties Inc., a company controlled
by Barry Minsky. Does not include 50,000 shares which Mr. Minsky has
agreed to sell to Dr. Leonard Mendell immediately prior to the
consummation of this offering.
Earl T. Takefman and Alan L. Lubell may be deemed to be "promoters" of the
Company within the meaning of the rules and regulations of the Commission.
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<PAGE>
CERTAIN TRANSACTIONS
STOCK ISSUANCES AND LOANS
In March 1995, the Company issued (i) 1,708,938 shares of Common Stock to
Alan L. Lubell, its Chairman of the Board and Vice President -- Product
Development, (ii) 732,402 shares of Common Stock to Status- One Investments
Inc. ("Status-One"), a company controlled by Earl Takefman, its Chief
Executive Officer, and (iii) 488,268 shares of Common Stock to Greenwich
Properties Inc. ("Greenwich"), a company controlled by Barry Minsky, for
nominal consideration.
In March 1995, Mr. Lubell transferred 427,235 shares of Common Stock to
Status-One in accordance with the terms of a shareholders agreement, dated
March 1, 1995, by and between Status-One and Mr. Lubell (the "Shareholders
Agreement"). The Shareholders Agreement has since been terminated. Between
June 1995 and March 1996, Mr. Lubell sold an additional 102,536 shares of
Common Stock to various investors for $630,000 in the aggregate, and
Greenwich sold 9,765 shares in consideration of $60,000 in the aggregate.
Since its inception, the Company borrowed $191,750, $162,500 and $48,450,
respectively, from Mr. Lubell, Status-One and Greenwich. In December 1995,
these loans were contributed to the capital of the Company.
In March 1995, the Company issued an additional 24,413 shares of Common
Stock and granted options to purchase 116,637 shares of Common Stock to
Status-One in exchange for financing considerations arranged by Status-One.
In addition, the Company issued, in consideration for services rendered to
the Company, an additional 24,413 shares of Common Stock to Status-One, 8,139
shares to Frank Williams, 9,155 shares to Thomas Peters, 2,136 shares to
Mona-Lee Takefman, the spouse of Earl Takefman, the Company's Chief Executive
Officer, and 2,136 shares to Mark Lubell, the son of Alan Lubell, the
Company's Chairman of the Board of Directors and Vice President--Product
Development.
In April 1996, Greenwich, Status-One and Mr. Lubell transferred 180,000,
56,250 and 63,750 shares of Common Stock, respectively, to Greg Norman, upon
his exercise of an option granted to him pursuant to the terms of the
Shareholders Agreement and the Greg Norman License. Pursuant to the Greg
Norman License, the Company is required to make guaranteed payments
aggregating $3,300,000 during the three-year period commencing July 1, 1996.
RECAPITALIZATION
In March 1996, the Company effected a recapitalization of its capital
stock. Each outstanding share of Class A Common Stock was converted into the
right to receive .488268 shares of Common Stock, and each outstanding share
of Class B Common Stock was converted into the right to receive 4,882.68
shares of Common Stock. In addition, options to purchase 305,000 shares of
Class A Common Stock were converted, on the same terms and conditions, into
the right to purchase 177,871 shares of Common Stock.
LOAN GUARANTEES
As of May 31, 1996, the Company borrowed an aggregate of $507,000 from the
Bank, which is due and payable on December 31, 1996. Interest on the unpaid
principal amount of the loan accrues at the reference rate established by the
Bank from time to time (currently 8.25%). All of the Company's assets are
pledged as collateral to secure such indebtedness and Earl T. Takefman, Alan
Lubell and Barry Minsky, principal stockholders of the Company, have
guaranteed and pledged personal assets in the form of letters of credit and
certificates of deposit and in the amounts of $354,400, $106,325 and $39,275,
respectively, to secure such loan. The Company intends to use a portion of
the proceeds of this offering to repay this indebtedness which will release
the personal guarantees of Messrs. Takefman, Lubell and Minsky.
The Company is currently utilizing office space in New York, New York
provided to it at no charge by Alan L. Lubell, its Chairman of the Board and
Vice President--Product Development.
Pursuant to a Settlement Agreement entered into in May 1996, the Company
agreed to pay $35,000 to Barry Minsky in consideration for the termination of
an agreement with Mr. Minsky.
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<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01
per share. As of the date of this Prospectus, there are 3,220,000 shares of
Common Stock outstanding and no shares of Preferred Stock outstanding.
COMMON STOCK
The holders of the Common Stock are entitled to one vote for each share
held of record in the election of directors of the Company and in all other
matters to be voted on by the stockholders. There is no cumulative voting
with respect to the election of directors, with the result that the holders
of more than 50% of the shares voting for the election of directors can elect
all of the directors. Holders of Common Stock are entitled (i) to receive
such dividends as may be declared from time to time by the Board out of funds
legally available therefor and (ii) in the event of liquidation, dissolution
or winding up of the Company, to share ratably in all assets remaining after
payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Common Stock. The rights of the
holders of the Common Stock are subject to any rights that may be fixed for
holders of Preferred Stock, when and if any Preferred Stock is issued. All of
the outstanding shares of Common Stock are, and the Common Stock offered
hereby, upon issuance and sale, will be, fully paid and non-assessable. The
holders of Common Stock have no preemptive rights.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock
from time to time in one or more series, in all cases ranking senior to the
Common Stock with respect to payment of dividends and in the event of the
liquidation, dissolution or winding-up of the Company. There are no shares of
Preferred Stock currently outstanding. Pursuant to the Company's Certificate
of Incorporation, the Board of Directors, without further stockholder
approval, is authorized to issue shares of one or more series of Preferred
Stock, at any time, for such consideration and with such relative rights,
privileges, preferences and other terms as the Board may determine
(including, but not limited to, terms relating to dividend rates, redemption
rates, liquidation preferences and voting, sinking fund and conversion or
other rights). The rights and terms relating to any new series of Preferred
Stock could adversely affect the voting power or other rights of the holders
of the Common Stock or could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of the
Company.
REDEEMABLE WARRANTS
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock, at a price of $5.00, subject to adjustment in certain
circumstances, at any time after , 1997 until , 2001.
The Warrants are redeemable by the Company, upon the consent of the
Underwriter, at any time after , 1997, upon notice of not less than 30
days, at a price of $.10 per Warrant, provided that the closing bid price of
the Common Stock on all 30 of the trading days ending on the third day prior
to the day on which the Company gives notice has been at least 150%
(currently $7.50, subject to adjustment) of the then effective exercise price
of the Warrants. All warrantholders have exercise rights until the close of
business on the date fixed for redemption.
The Warrants will be issued in registered form under a Warrant Agreement
between the Company and American Stock Transfer & Trust Company as Warrant
Agent. Reference is made to said Warrant Agreement for a complete description
of the terms and conditions therein (the description herein contained being
qualified in its entirety by reference thereto).
The exercise price and number of shares of Common Stock or other
securities issuable on exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
35
<PAGE>
recapitalization, reorganization, merger or consolidation of the Company.
However, such Warrants are not subject to adjustment for issuances of Common
Stock at a price below the exercise price of the Warrants, including the
issuance of shares of Common Stock pursuant to the Plan.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the certificate completed and executed
as indicated, accompanied by full payment of the exercise price (by certified
check payable to the Company) to the Warrant Agent for the number of Warrants
being exercised. The warrantholders do not have the rights or privileges of
holders of Common Stock.
No Warrant will be exercisable unless at the time of exercise the Company
has filed a current registration statement with the Commission covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been registered or qualified or deemed to be exempt under the securities
laws of the state of residence of the holder of such Warrant. The Company
will use its best efforts to have all such shares so registered or qualified
on or before the exercise date and to maintain a current prospectus relating
thereto until the expiration of the Warrants, subject to the terms of the
Warrant Agreement. While it is the Company's intention to do so, there is no
assurance that it will be able to do so.
No fractional shares will be issued upon exercise of the Warrants.
However, if a warrantholder exercises all Warrants then owned of record by
him, the Company will pay to such warrantholder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based on
the market value of the Common Stock on the last trading day prior to the
exercise date.
REGISTRATION RIGHTS
In connection with this offering, the Company has agreed to grant to the
Underwriter certain demand and piggyback registration rights in connection
with the 260,000 shares of Common Stock issuable upon exercise of the
Underwriter's Warrants and the warrants included therein. See "Underwriting."
Pursuant to the terms of the Bridge Financing, the Company has included
the shares issued in the Bridge Financing in the Registration Statement of
which this Prospectus forms a part. The Company has agreed to use its best
efforts to keep the Registration Statement effective until the earlier of (i)
the date that all of the shares included in the Registration Statement have
been sold pursuant thereto and (ii) the date the Selling Stockholders receive
an opinion of counsel that the full amount of their shares may be freely sold
by such holders. All registration expenses related to such shares will be
paid by the Company.
The Selling Stockholders have agreed that they will not, directly or
indirectly, offer to sell, sell or otherwise dispose of any shares of Common
Stock without the prior written consent of the Underwriter for a period of
twelve months after the date of this Prospectus.
STATUTORY PROVISIONS AFFECTING STOCKHOLDERS
Following the consummation of this offering, the Company will be subject
to the State of Delaware's "business combination" statute, Section 203 of the
Delaware General Corporation Law. In general, such statute prohibits a
publicly held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction in which the interested
stockholder obtained such status or the business combination is approved by
the Board of Directors prior to the date the interested stockholder obtained
such status; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transection commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a)
persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date the "business
combination" is approved by the Board of Directors and authorized at an
annual or special meeting of stockholders by the affirmative vote of at least
66 2/3 % of the outstanding voting stock which is not owned by the
"interested stockholder." A "business combination" includes mergers, asset
sales and other transactions resulting in financial benefit to a stockholder.
36
<PAGE>
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.
DIVIDEND POLICY
Holders of Common Stock are entitled to receive such dividends as may be
declared and paid from time to time by the Board of Directors out of funds
legally available therefor. The Company intends to retain any earnings for
the operation and expansion of its business and does not anticipate paying
cash dividends in the foreseeable future. Any future determination as to the
payment of cash dividends will depend upon future earnings, results of
operations, capital requirements, the Company's financial condition and such
other factors as the Board of Directors may consider.
TRANSFER AGENT AND REGISTRAR
The transfer and registrar for the Common Stock and the warrant agent for
the Warrants is American Stock Transfer and Trust Company, New York, New
York.
REPORTS TO STOCKHOLDERS
The Company has agreed, subject to the sale of the shares of Common Stock
and Warrants offered hereby, that on or before the date of this Prospectus,
it will register its Common Stock and Warrants under the provisions of
Section 12(g) of the Exchange Act. Such registration will require the Company
to comply with periodic reporting, proxy solicitation and certain other
requirements of the Exchange Act.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 4,520,000
shares of Common Stock outstanding (assuming no exercise of the Warrants), of
which 1,520,000 shares (consisting of the 1,300,000 shares of Common Stock
offered hereby by the Company, and, subject to certain contractual
restrictions described below, the 220,000 shares being offered by the Selling
Stockholders) will be freely tradeable without restriction or further
registration under the Securities Act. All of the remaining 3,000,000 shares
outstanding are "restricted securities," as that term is defined in Rule 144
promulgated under the Securities Act, and in the future may only be sold
pursuant to a registration statement under the Securities Act, in compliance
with the exemption provisions of Rule 144 or pursuant to another exemption
under the Securities Act. Of the 3,000,000 restricted shares, an aggregate of
2,520,406 shares will be eligible for sale, without registration, under Rule
144 (subject to certain volume limitations prescribed by such rule and to the
contractual restrictions described below), commencing March 1997.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of the issuer's common stock or the average weekly trading
volume during the four calendar weeks preceding such sale, provided that
certain public information about the issuer as required by Rule 144 is then
available and the seller complies with certain other requirements. In
general, shares issued in compliance with Rule 701 promulgated under the
Securities Act may be sold by non-affiliates subject to the manner of sale
requirements of Rule 144, but without compliance with the other requirements
of Rule 144. Affiliates may sell such shares in compliance with Rule 144,
other than the holding period requirement. A person who is not an affiliate,
has not been an affiliate within three months prior to sale, and has
beneficially owned the restricted securities for at least three years is
entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.
The Company's officers, directors and stockholders (excluding the holders
of 9,776 shares of Common Stock) have agreed not to sell or dispose of any of
their securities of the Company for a period of twelve months from the date
of this Prospectus without the Underwriter's prior written consent.
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<PAGE>
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of
shares of Common Stock or the availability of such shares for sale will have
on the market prices of the Common Stock and Warrants prevailing from time to
time. However, the possibility that a substantial amount of Common Stock may
be sold in the public market may adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities.
UNDERWRITING
Whale Securities Co., L.P. (the "Underwriter") has agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase
1,300,000 shares and 1,300,000 Warrants from the Company. The Underwriter is
committed to purchase and pay for all of the Common Stock and Warrants
offered hereby if any of such securities are purchased. The Common Stock and
Warrants are being offered by the Underwriter, subject to prior sale, when,
as and if delivered to and accepted by the Underwriter and subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriter has advised the Company that it proposes to offer the
Common Stock and Warrants to the public at the public offering prices set
forth on the cover page of this Prospectus. The Underwriter may allow certain
dealers who are members of the National Association of Securities Dealers,
Inc. (the "NASD") concessions, not in excess of $. per share of Common
Stock and $. per Warrant, of which not in excess of $ per share of Common
Stock and $. per Warrant may be reallowed to other dealers which are
members of the NASD.
The Company has granted to the Underwriter an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 195,000 additional
shares of Common Stock and/or 195,000 Warrants at the public offering prices
set forth on the cover page of this Prospectus, less the underwriting
discounts and commissions. The Underwriter may exercise this option in whole
or, from time to time, in part, solely for the purpose of covering
over-allotments, if any, made in connection with the sale of the Common Stock
and/or Warrants offered hereby.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance of 3% of the gross proceeds of this offering, of which $50,000 has
been paid as of the date of this Prospectus. The Company has also agreed to
pay all expenses in connection with qualifying the Common Stock and Warrants
offered hereby for sale under the laws of such states as the Underwriter may
designate including expenses of counsel retained for such purpose by the
Underwriter.
The Company has agreed to grant to the Underwriter and/or its designees
warrants (the "Underwriter's Warrants") to purchase up to 130,000 shares of
Common Stock at an exercise price of $6.75 per share (135% of the initial
public offering price per share) and/or up to 130,000 warrants (each to
purchase one share of Common Stock at $6.75 per share) at an exercise price
of $.135 per warrant (135% of the initial public offering price per Warrant).
The Underwriter's Warrants may not be sold, transferred, assigned or
hypothecated for one year from the date of this Prospectus, except to
officers and partners of the Underwriter and members of the selling group,
and are exercisable at any time and from time to time, in whole or in part,
during the five-year period commencing on the date of this Prospectus (the
"Warrant Exercise Term"). During the Warrant Exercise Term, the holders of
the Underwriter's Warrants are given, at no cost, the opportunity to profit
from a rise in the market price of the Common Stock. To the extent that the
Underwriter's Warrants are exercised, dilution to the interests of the
Company's stockholders will occur. Further, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected
since the holders of the Underwriter's Warrants can be expected to exercise
them at a time when the Company would, in all likelihood, be able to obtain
any needed capital on terms more favorable to the Company than those provided
in the Underwriter's Warrants. Any profit realized by the Underwriter on the
sale of the Underwriter's Warrants, the underlying shares or the underlying
warrants, or the shares issuable upon exercise of such underlying warrants,
may be deemed additional underwriting compensation. Subject to certain
limitations and exclusions, the Company has agreed, at the request of the
holders of a majority of the Underwriter's Warrants, at the Company's
expense, to register the Underwriter's Warrants, the shares and warrants
underlying the Underwriter's Warrants, and the shares issuable upon exercise
38
<PAGE>
of the underlying warrants under the Securities Act on one occasion during
the Warrant Exercise Term and to include the Underwriter's Warrants and all
such underlying securities in any appropriate registration statement which is
filed by the Company during the seven years following the date of this
Prospectus.
The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation (commencing one year from the date of this
Prospectus), to pay to the Underwriter for bona fide services provided a fee
of 5% of the exercise price for each Warrant exercised; provided, however,
that the Underwriter will not be entitled to receive such compensation in
Warrant exercise transactions in which (i) the market price of shares at the
time of exercise is lower than the exercise price of the Warrants; (ii) the
Warrants are held in any discretional account; (iii) disclosure of
compensation arrangements is not made, in addition to the disclosure provided
in this Prospectus, in documents provided to holders of the Warrants at the
time of exercise; (iv) the holder of the Warrants has not confirmed in
writing that the Underwriter solicited such exercise; or (v) the solicitation
of exercise of the Warrants was in violation of Rule 10b-6 promulgated under
the Exchange Act. In addition to soliciting, either orally or in writing, the
exercise of the Warrants, such bona fide services may also include
disseminating information, either orally or in writing, to the holders of the
Warrants about the Company or the market for the Company's securities, and
assisting in the processing of the exercise of Warrants.
The Company has agreed to retain the Underwriter as a financial consultant
for a period of two years following the consummation of this offering at an
annual fee of $30,000, the entire $60,000 payable in full, in advance. The
consulting agreement with the Underwriter will not require it to devote a
specific amount of time to the performance of its duties thereunder. It is
anticipated that these consulting services will be provided by principals of
the Underwriter and/or members of the Underwriter's corporate fiance
department who, however, have not been designated as of the date hereof. In
addition, in the event that the Underwriter originates a financing or a
merger, acquisition, joint venture or other transaction to which the Company
is a party, the Underwriter will be entitled to receive a finder's fee in
consideration for origination of such transaction.
The Company has also agreed, for a period of three years from the date of
this Prospectus, if so requested by the Underwriter, to nominate and use its
best efforts to elect a designee of the Underwriter as a director of the
Company, or, at the Underwriter's option, as a non-voting adviser to the
Company's Board of Directors. The Company's officers, directors and principal
stockholders have agreed to vote their shares in favor of such designee. The
Underwriter has not yet exercised its right to designate such a person.
The Company and its officers, directors and security holders (except for
the holders of 9,776 shares of Common Stock) have agreed not to sell or
dispose of any of their securities of the Company for a period of twelve
months from the date of this Prospectus without the Underwriter's prior
written consent.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
The Underwriter has advised the Company that it does not expect to make
any sales of the securities offered hereby to discretionary accounts.
The Underwriter acted as placement agent for the Company in connection
with the Bridge Financing and was paid a placement fee of $110,000
(constituting 10% of the gross proceeds of the Bridge Financing) and received
an expense reimbursement of $25,000.
Prior to this offering, there has been no public trading market for the
Common Stock or Warrants. Consequently, the initial public offering price of
the Common Stock and Warrants and the exercise price of the Warrants have
been determined by negotiations between the Underwriter and the Company.
Among the factors considered in determining the initial public offering
prices was the Company's financial condition and prospects, the potential
market for the Company's products, market prices of similar securities of
comparable publicly-traded companies, an assessment of the Company's
management and the general condition of the securities markets at the time of
the offering.
39
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 220,000 shares may be offered and sold pursuant to
this Prospectus by the Selling Stockholders. The Company has agreed to
register the public offering of such shares under the Securities Act
concurrently with this offering and to pay all expenses in connection
therewith. The shares have been included in the Registration Statement of
which this Prospectus forms a part. None of the such shares may be sold by
the Selling Stockholders prior to twelve months after the date of this
Prospectus, without the prior written consent of the Underwriter. None of the
Selling Stockholders has ever held any position or office with the Company or
had any other material relationship with the Company. The Company will not
receive any of the proceeds from the sale of the shares by the Selling
Stockholders. The following table sets forth certain information with respect
to the Selling Stockholders:
<TABLE>
<CAPTION>
Percentage
Beneficial Beneficial Beneficial
Ownership of Amount of Ownership of Ownership of
Common Stock Common Stock Common Stock Common Stock
Selling Stockholders Prior to Sale Offered After Offering After Offering
----------------------------------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Dr. Lawrence Howard ..................... 20,000 20,000 -- --
Dr. Leonard Mendell ..................... 5,000 5,000 -- --
Dr. Steven Landman ...................... 5,000 5,000 -- --
John R. Tompson and Constance A. Tompson,
Joint Tenants with Right of
Survivorship ........................... 5,000 5,000 -- --
Allan R. Lyons .......................... 5,000 5,000 -- --
Jonathan Robinson ....................... 5,000 5,000 -- --
Michael Weissman ........................ 5,000 5,000 -- --
Isaac Kier .............................. 10,000 10,000 -- --
Craig Effron ............................ 5,000 5,000 -- --
Mark Dickstein .......................... 5,000 5,000 -- --
Robert Laikin ........................... 20,000 20,000 -- --
Lisa Grossman ........................... 10,000 10,000 -- --
Gary Newman ............................. 5,000 5,000 -- --
Albert Nocciolino ....................... 5,000 5,000 -- --
FGR Akel ................................ 5,000 5,000 -- --
Scott C. Gottlieb ....................... 5,000 5,000 -- --
Alfonso and Federico de Riveroll, Joint
Tenants with Right of Survivorship ..... 10,000 10,000 -- --
Roderick D. MacAlpine ................... 5,000 5,000 -- --
Leonard A. Albanese ..................... 5,000 5,000 -- --
Lester Lieberman ........................ 5,000 5,000 -- --
Albert Greenspoon ....................... 5,000 5,000 -- --
B&B Trading Corp. Retirement Plan ....... 5,000 5,000 -- --
Garland T. Duke, Jr. .................... 5,000 5,000 -- --
Charles J. Reilly and Kathleen M. Reilly . 5,000 5,000 -- --
James H. Cooper ......................... 5,000 5,000 -- --
Wendy and Robert Ull, Joint Tenants with Right
of Survivorship ........................ 5,000 5,000 -- --
Michael Freidman ........................ 10,000 10,000 -- --
Edward S. Rosenthal ..................... 10,000 10,000 -- --
Nicholas Kahla .......................... 5,000 5,000 -- --
Elliott Broidy .......................... 20,000 20,000 -- --
</TABLE>
The shares may be offered and sold from time to time as market conditions
permit in the over-the-counter market, or otherwise, at prices and terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The shares may be sold by one or more of the
following methods, without limitation: (a) a block trade in which a broker or
dealer so engaged will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker
40
<PAGE>
or dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchases; and (d)
face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Stockholders in amounts to be negotiated. Such broker and dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Morgan, Lewis & Bockius LLP, New York, New York. Tenzer Greenblatt
LLP, New York, New York, has acted as counsel for the Underwriter in
connection with this offering.
EXPERTS
The financial statements of Visual Edge Systems Inc. (a development stage
company) as of December 31, 1995 and for the year then ended have been
included herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP covering the
December 31, 1995 financial statements contains an explanatory paragraph that
states that the Company is in its development stage and its losses and
working capital and net capital deficiencies raise substantial doubt about
the entity's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of that
uncertainty.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
SB-2 under the Securities Act (together with all amendments and exhibits
thereto, the "Registration Statement") with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete and are qualified in their entirety
by reference to each such contract, agreement or other document which is
filed as an exhibit to the Registration Statement. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Regional Offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601, and 7 World Trade Center, 13th Floor, New York, New York
10007. Copies of such material may be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
41
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INDEPENDENT AUDITORS' REPORT ........................................................................ F-2
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1995 and March 31, 1996 (Unaudited) ............................... F-3
Statements of Operations for the year ended December 31, 1995, three months ended March 31, 1995 and
1996 (Unaudited) and period from inception (July 15, 1994) to March 31, 1996 (Unaudited) ........... F-4
Statements of Stockholders' Deficit for the year ended December 31, 1995 and three months ended March
31, 1996 (Unaudited) ............................................................................... F-5
Statements of Cash Flows for the year ended December 31, 1995, three months ended March 31, 1995 and
1996 (Unaudited) and period from inception (July 15, 1994) to March 31, 1996 (Unaudited) ........... F-6
Notes to Financial Statements ....................................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Visual Edge Systems Inc. (a development stage company):
We have audited the accompanying balance sheet of Visual Edge Systems Inc. (a
development stage company) as of December 31, 1995 and the related statements
of operations, stockholders' deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Visual Edge Systems Inc. (a
development stage company) as of December 31, 1995 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in its development stage and its losses
and working capital and net capital deficiencies raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
KPMG Peat Marwick LLP
New York, New York
April 30, 1996, except for notes 1(e), 2 and 10
which are as of May 31, 1996
See accompanying notes to financial statements.
F-2
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
-------------- -----------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash ................................................ $ 558 $ 833
-------------- -----------
Total current assets ......................... 558 833
Fixed assets, net ........................................ 606,434 558,740
Deferred organization costs, net ......................... 26,485 25,014
Deferred financing costs ................................. -- 25,000
-------------- -----------
Total assets ................................. $ 633,477 $ 609,587
============== ===========
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable .................................... $ 269,262 $ 216,280
Accrued expenses .................................... 13,718 67,109
Note payable to bank ................................ 400,000 507,000
-------------- -----------
Total current liabilities .................... 682,980 790,389
-------------- -----------
Stockholders' deficit:
Preferred Stock, 5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value, 20,000,000 shares authorized,
3,000,000 shares issued and outstanding ........... 30,000 30,000
Additional paid-in capital .......................... 385,460 385,460
Deficit accumulated during the development stage .... (464,963) (596,262)
-------------- -----------
Total stockholders' deficit .................. (49,503) (180,802)
-------------- -----------
Total liabilities and stockholders' deficit .. $ 633,477 $ 609,587
============== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
----------------------------------------------
Period from
Inception
Year Ended Three Months Ended (July 15, 1994)
December 31, March 31, to March 31,
1995 1995 1996 1996
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Product sales ..................... $ 7,267 $ -- $ 3,848 $ 11,115
License fees ...................... 125,000 -- -- 125,000
-------------- ------------ ------------ ---------------
132,267 -- 3,848 136,115
-------------- ------------ ------------ ---------------
Cost of sales ..................... 44,167 -- 23,728 67,895
General and administrative expenses . 531,984 108,242 98,148 630,132
Selling and Marketing ............. 15,240 -- 459 15,699
-------------- ------------ ------------ ---------------
591,391 108,242 122,335 713,726
-------------- ------------ ------------ ---------------
Operating loss ................... (459,124) (108,242) (118,487) (577,611)
Interest expense .................. 5,118 -- 12,812 17,930
-------------- ------------ ------------ ---------------
Loss before income taxes ......... (464,242) (108,242) (131,299) (595,541)
Provision for income taxes ........ 721 -- -- 721
-------------- ------------ ------------ ---------------
Net loss ......................... $ (464,963) $ (108,242) $ (131,299) $ (596,262)
============== ============ ============ ===============
Net loss per share ............... $ (.14) $ (.03) $ (.04) $ (.19)
============== ============ ============ ===============
Weighted average common shares and
equivalents outstanding .......... 3,220,000 3,220,000 3,220,000 3,220,000
============== ============ ============ ===============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during the
Common Stock paid-in development
Shares Amount capital stage Total
----------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ............ -- $ -- $ -- $ -- $ --
Issuance of common stock .............. 2,929,608 29,296 374,404 -- 403,700
Common stock issued for services 70,392 704 11,056 -- 11,760
Net loss for 1995 .................... -- -- -- (464,963) (464,963)
----------- ---------- ------------ ------------- -------------
Balance at December 31, 1995 ......... 3,000,000 30,000 385,460 (464,963) (49,503)
Net loss for the three months ended
March 31, 1996 (unaudited) ......... -- -- -- (131,299) (131,299)
---------- ------------ ------------- -------------
Balance at March 31, 1996
(unaudited) ....................... 3,000,000 $30,000 $385,460 $ (596,262) $ (180,802)
=========== ========== ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
-----------------------------------------------
Period from
Inception
Year Ended Three Months Ended (July 15, 1994)
December 31, March 31, to March 31,
1995 1995 1996 1996
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Operating Activities:
Net loss ...................... $ (464,963) $(108,242) $ (131,299) $ (596,262)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Stock compensation expense . 11,760 11,760 -- 11,760
Depreciation and amortization 67,686 -- 49,165 116,851
Interest expense ........... -- -- 3,400 3,400
Increase (decrease) in
accounts payable ......... 269,262 17,645 (52,982) 216,280
Increase in accrued expenses . 13,718 -- 53,391 67,109
-------------- ------------ ------------- ---------------
Net cash used in operating
activities ................. (102,537) (78,837) (78,325) (180,862)
-------------- ------------ ------------- ---------------
Investing Activities:
Capital expenditures .......... (671,177) (56,138) -- (671,177)
Deferred organization costs ... (29,428) (8,535) -- (29,428)
Deferred financing costs ...... -- -- (25,000) (25,000)
-------------- ------------ ------------- ---------------
Net cash used in investing
activities ................. (700,605) (64,673) (25,000) (725,605)
-------------- ------------ ------------- ---------------
Financing Activities:
Issuance of note payable to bank 400,000 -- 103,600 503,600
Advances from stockholders .... -- 164,950 -- --
Issuance of common stock ...... 403,700 1,000 -- 403,700
-------------- ------------ ------------- ---------------
Net cash provided by financing
activities ................. 803,700 165,950 103,600 907,300
-------------- ------------ ------------- ---------------
Increase in cash .............. 558 22,440 275 833
Cash at beginning of period ..... -- -- 558 --
-------------- ------------ ------------- ---------------
Cash at end of period ........... $ 558 $ 22,440 $ 833 $ 833
============== ============ ============= ===============
Supplemental information:
- ---------------- ................
Cash paid for interest .......... $ 5,118 $ -- $ 9,274 $ 14,392
============== ============ ============= ===============
Cash paid for income taxes ...... $ 721 $ -- $ -- $ 721
============== ============ ============= ===============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
VISUAL EDGE SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Visual Edge Systems Inc. (the "Company") was organized to develop and
market personalized videotape golf lessons featuring One-on-One
instruction by leading professional golfer Greg Norman. To date, the
Company has focused its efforts on developing computer software which
digitally combines actual video footage of a golfer's swing with a
synchronized "split-screen" comparison to Greg Norman's golf swing to
produce a 45-minute One-on-One videotape golf lesson. The Company's
proposed One-on-One personalized videotape golf lesson analyzes a golfer's
swing by comparing it to Greg Norman's swing at several different club
positions from two camera angles using Greg Norman's pre-recorded
instructional commentary and analysis and computer graphics to highlight
important golf fundamentals intended to improve a golfer's performance.
The Company intends to sell its proposed products under the name
"One-on-One with Greg Norman."
The Company was incorporated in July 1994 and commenced operations in
January 1995. The Company is a development stage company which has not
commenced generating revenue from its planned primary business activities.
Since the Company's inception, it has been primarily engaged in product
development, market testing its intended products, recruitment of key
personnel, raising capital and preparing the software and videotaped
coaching instructions used in the production of its products. As a
consequence, the Company has not generated any revenue of substance from
operations to date.
(b) Revenue Recognition
Revenue from product sales is recognized as videotape products are
delivered to the customer. Royalties and license fees are recorded as
revenue when earned.
(c) Fixed Assets
Fixed assets are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets (3 to 5
years).
(d) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(e) Loss Per Share
Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin Topic 4:D, stock issued and stock options granted during the
12-month period preceding the date of the Company's proposed initial
public offering (the IPO) have been included in the calculation of
weighted average common shares outstanding for the period prior to the
IPO, even when the impact of such incremental shares is antidilutive. The
computation of weighted average common shares and equivalents outstanding
for the year ended December 31, 1995 follows:
F-7
<PAGE>
VISUAL EDGE SYSTEMS INC.
(a Development Stage Company)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies - (Continued)
<TABLE>
<CAPTION>
<S> <C>
Weighted average common shares outstanding, exclusive of issuances
within 12 months prior to the IPO ........................ 3,000,000
Shares issued within 12 months prior to the IPO assumed to be
outstanding for the entire period. ....................... 220,000
-----------
Weighted average common shares and equivalents outstanding . 3,220,000
===========
</TABLE>
References to the number of shares and all per share data have been
restated to reflect the recapitalization (note 7).
(f) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair
value of certain financial instruments. Cash, accounts payable and accrued
expenses as reflected in the financial statements approximate fair value
because of the short-term maturity of these instruments. The carrying
value of the note payable to bank approximates its fair value since the
interest rate fluctuates with changes in market conditions.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(h) New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation," which must
be adopted by the Company in 1996. The Company has elected not to
implement the fair value based accounting method for employee stock
options, but has elected to disclose, commencing in 1996, the pro-forma
net income and earnings per share as if such method had been used to
account for stock-based compensation cost as described in the Statement.
In March 1995, the FASB issued Statement No. 121," Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which must also be adopted by the Company in 1996. The effect of
adopting this standard will be insignificant.
(i) Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the financial
position of the Company and the results of its operations as of and for
the three months ended March 31, 1996 and 1995. Results for the three
months ended March 31, 1996 are not necessarily indicative of results
which could be expected for the entire year.
(2) LIQUIDITY
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in its
development stage and its losses, working capital and net capital
deficiencies raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might arise from the outcome of this uncertainty.
F-8
<PAGE>
VISUAL EDGE SYSTEMS INC.
(a Development Stage Company)
Notes to Financial Statements
(2) Liquidity - (Continued)
To generate funds to continue the development of the Company's products,
pay the $150,000 royalty advance due June 30, 1996 (note 9(a) and commence
its planned primary business activities, the Company on May 31, 1996
raised $915,000, net of expenses, from the sale of 22 units in a private
placement for $50,000 per unit, each unit consisting of an 8% unsecured
promissory note in the principal amount of $50,000 and 10,000 shares of
the Company's common stock. The promissory notes are due on the earlier of
the consummation of the Company's planned initial public offering (IPO) of
its common stock or May 31, 1997. The relative fair market value of the
220,000 shares of common stock issued of $334,346 was reflected as an
increase in additional paid-in capital and as a discount on the promissory
notes to be amortized over the one-year term of the notes. In March 1996,
the Company entered into a letter of intent, as amended, with a placement
agent to offer 1,300,000 shares of common stock and 1,300,000 warrants for
sale. There is no assurance that the Company will be able to successfully
complete its IPO.
(3) FIXED ASSETS
Fixed assets consist of the following at December 31, 1995:
Amount Life
----------- ---------
(years)
Equipment ................................ $247,117 5
Video production costs ................... 184,282 3
Computer hardware ........................ 148,253 3
Purchased computer software .............. 91,525 3
----------- ---------
671,177
Less accumulated depreciation and amortization 64,743
-----------
$606,434
===========
(4) OPERATING LEASES
The Company is utilizing office space provided at no charge by an officer
of the Company. Accordingly, as of December 31, 1995, the Company did not
have any lease commitments.
(5) NOTE PAYABLE TO BANK
In October 1995, the Company borrowed $400,000 from a bank which was due on
demand. This note bears interest at the bank's reference rate (8.25% at
December 31, 1995). The note is secured by all of the Company's assets and
certain personal assets of certain of the Company's shareholders and is
personally guaranteed by such shareholders. In January and April 1996, the
Company borrowed an additional $107,000 and the total outstanding balance
of $507,000 was converted to a promissory note which is due December 31,
1996.
(6) INCOME TAXES
Income tax expense consists of:
Current Deferred Total
----------- ------------ ---------
Year ended December 31, 1995:
Federal ......................... -- -- --
State and local ................. $721 -- $721
----------- ------------ ---------
$721 -- $721
=========== ============ =========
F-9
<PAGE>
VISUAL EDGE SYSTEMS INC.
(a Development Stage Company)
Notes to Financial Statements
(6) Income Taxes - (Continued)
The following is a reconciliation of income tax expense to the expected
amounts computed by applying the statutory federal income tax rate to the
Company's loss before income taxes for the year ended December 31, 1995.
Income tax benefit at statutory rate ................. $ (157,800)
State and local income taxes, net of Federal income tax
benefit ............................................. 721
Increase in valuation allowance ...................... 157,800
-------------
Provision for income taxes ........................... $ 721
=============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 are presented below:
Deferred tax assets:
Deferred start-up costs ........ $ 97,500
Net operating loss carryforward . 54,300
Fixed asset depreciation ....... 6,000
-----------
157,800
Less: valuation allowance ...... (157,800)
-----------
Net deferred tax asset ......... $ --
===========
As of December 31, 1995, the Company has a tax net operating loss
carryforward of approximately $160,000 expiring in 2010. The Company has
provided a valuation allowance of $157,800 against its deferred tax assets
since it is more likely than not that the Company will not realize such
asset due to the Company's development stage nature of operations and the
pre-tax losses since inception.
(7) COMMON STOCK
During 1995, the Company's founding shareholders made capital
contributions or loaned funds to the Company which were subsequently
contributed to the Company as capital, totaling $403,700, in exchange for
5,000,000 Class A non-voting shares and 100 Class B voting shares.
On March 11, 1996, the Company's Board of Directors eliminated the Class A
and B designation of its common stock and declared a recapitalization
effective May 2, 1996, whereby .488268 of a share and 4882.68 shares of
common stock with a par value of $.01 per share was issued for each Class
A and Class B share, respectively, of common stock outstanding on that
date. In addition, options to purchase Class A common stock were converted
into the right to purchase .5831847 shares of common stock. All references
to number of shares (except shares authorized), per share data and stock
option data have been restated to reflect the recapitalization.
In March 1995, the Company issued 70,392 shares of common stock to
employees and consultants for services. The estimated market value of such
shares of $11,760 was recorded as compensation expense.
F-10
<PAGE>
VISUAL EDGE SYSTEMS INC.
(a Development Stage Company)
Notes to Financial Statements
(8) STOCK OPTIONS
In April 1996, the Company adopted the 1996 Stock Option Plan, which
provides for the granting to directors, officers, key employees and
consultants of the greater of 800,000 shares of common stock (reduced by
the number of options which may be granted to two executive officers
pursuant to their employment agreements (note 9(b) which are not granted
or, if granted, are forfeited in accordance with their terms) or 12% of the
aggregate number of the Company's common stock outstanding. Grants of
options may be incentive stock options (to a maximum of 300,000) or
non-qualified stock options and will be at such exercise prices, in such
amounts, and upon such terms and conditions, as determined by the
Compensation Committee of the Board of Directors. However, the option
exercise price may not be less than 100% of the market value at the time of
grant (110% if an incentive stock option granted to a 10% or more
stockholder) and the term of any option may not exceed ten years (unless
granted as an incentive stock option to a 10% or more stockholder, which
term may not exceed five years). The plan also provides for the automatic
grant of 5,000 non-qualified stock options upon commencement of service of
a non-employee director and 2,500 options per year per director thereafter.
Such options vest one-third on the date of grant and one third on the first
two anniversary dates and have a term of five years.
In March 1995, the Company granted 177,871 nonqualified options to purchase
common stock at an exercise price equal to the price common stock is sold
in the Company's initial public offering when it may occur. Such options
have been converted to options under the 1996 Stock Option Plan.
(9) COMMITMENTS
(a) License agreement
Effective March 1, 1995 the Company entered into a license agreement with
Greg Norman (Norman), a professional golfer, and his corporation, Great
White Shark Enterprises, Inc. (Great White Shark), pursuant to which the
Company was granted a worldwide license to use his name, likeness and
endorsement in connection with the production and promotion of the
Company's proposed products. Norman will receive royalties of 8% of all net
revenues, as defined, derived from the sale of One-on-One videotapes. Such
agreement expires on June 30, 1996. However, the Company has advised Norman
and Great White Shark that it will extend the agreement and will use a
portion of the proceeds from its private placement to pay the initial
$150,000 required to extend the agreement. The extension of the agreement,
which is for three additional years, requires the Company to pay certain
guaranteed fees, amounting to $3,300,000, to be paid quarterly to Great
White Shark and total $600,000 (including the $150,000 payment referred to
above) in the year ending June 30, 1997, $1 million in the year ending June
1998 and $1.7 million in the year ending June 30, 1999. Such guaranteed
payments will be credited against future 8% royalties due on the Company's
net revenues from the sale of the One-on-One video. In addition, the
Company has the right to renew the license agreement for two additional
periods of five years each. In the event of renewal, the Company is
obligated to make guaranteed payments of $1,300,000 during the first year
of the renewal term, increasing by $100,000 per year thereafter.
Also in March 1995, the Company entered into an Agreement with and gave
Greg Norman an option to receive 10% of the outstanding shares of the
Company from the Company's three founding shareholders. The option was
conditioned upon the Company delivering a notice to Greg Norman that it
intends to extend the License Agreement for three years, which occurred in
April 1996. In April 1996, Greg Norman exercised the option and those
shareholders transferred 300,000 shares of common stock to Greg Norman. The
estimated market value of such shares, amounting to approximately $600,000
will be recorded as a charge in the income statement in April, 1996.
F-11
<PAGE>
VISUAL EDGE SYSTEMS INC.
(a Development Stage Company)
Notes to Financial Statements
(9) Commitments - (Continued)
(b) Employment agreements
The Company entered into employment agreements with three executive
employees of the Company expiring through December 1998 which provide for
aggregate minimum annual compensation of approximately $268,000 in 1996,
$297,000 in 1997 and $250,000 in 1998. The agreements are automatically
renewed for additional one-year periods unless the Company or the employees
provide timely notice of termination. In addition, two of the employment
agreements provide for an increase in compensation commencing in July 1997,
if the Company achieves prescribed pre-tax earnings thresholds. The
agreements also provide for bonuses and severance payments ranging from
three to twelve months. In addition, two of the employment agreements
provide for options for each employee to purchase an aggregate of up to
250,000 shares of common stock, at an exercise price per share equal to the
proposed IPO price subsequent to completion of the Company's proposed
public offering. Of such options, 150,000 options shall vest and become
exercisable if the common stock trades at $10.00 or more per share for at
least five consecutive trading days during the 18-month period following
the completion of the proposed public offering, and 100,000 options shall
vest and become exercisable if the common stock trades at $15.00 or more
per share for five consecutive trading days during the 30-month period
following such completion.
(10) CONTINGENCY
In April 1996, one of the Company's principal stockholders and his
affiliated companies asserted certain claims against the Company, including
that the provisions of a stockholders agreement have been breached. In May
1996, such stockholder and his affiliated companies entered into a
settlement agreement with the Company under which they agreed to release
each other from any claims if the Company's proposed IPO is consummated on
or before December 31, 1996, and the Company agreed to pay $35,000 in
consideration of the termination of the stockholders agreement. Pursuant to
an indemnification agreement, two other principal stockholders, jointly and
severally, have agreed to indemnify and hold harmless the Company from and
against any losses, claims, damages, expenses or liabilities suffered as a
result of the above claims and, in the event the Company issues any equity
securities to any stockholder of the Company as a result of any claim,
those stockholders have agreed to deliver an equal number of shares of
common stock to the Company for cancellation.
F-12
<PAGE>
BACK COVER HAS FOUR SECTIONS
1. Picture of One-on-One van with the following text:
The Company intends to develop mobile One-on-One vans
equipped with video and personal computer equipment to market,
promote and produce the Company's proposed One-on-One
videotapes. The Company will seek to position such vans in
selected geographic areas that will service golf courses and driving
ranges in regions throughout the United States.
Conceptual artist rendering only. Actual van may differ from
rendering when developed. The Company has not yet developed any vans.
2. Graphic of a golfer being videotaped with the following text:
Videotaping your Swing
The Company anticipates that a One-on-One employee will operate
videotaping equipment at the first tee, driving range or other
suitable locations to videotape a golfer's swing.
3. Graphic of a technician in a van with the following text:
The golfer's swing would be edited inside the One-on-One van
to create a personalized videotape golf lesson in approximately
25 minutes.
4. Split-screen graphic of Greg Norman and a golfer, together with a videotape
representing the final product, with the following text:
The Company's proposed One-on-One videotape golf lessons, through
the use of synchronized "split-screen" comparisons to Greg Norman's
swing, are being designed to enable golfers to make meaningful
self-observations to improve their play. In each of the Company's
proposed video lessons, Greg Norman will emphasize the importance
of a relevant golf fundemental; demonstrate the fundamental;
comment on the golfer's execution of the fundamental; and summarize
the key fundamentals to remember.
<PAGE>
=============================================================================
No dealer, salesperson or any other individual has been authorized to give
any information or to make any representations not contained in this
Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or the
Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any security by any person in any
jurisdiction in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, imply that the information in this Prospectus is correct as of
any time subsequent to the date of this Prospectus.
------
TABLE OF CONTENTS
Page
--------
Prospectus Summary .............................. 3
Risk Factors .................................... 7
Use of Proceeds ................................. 14
Dilution ........................................ 16
Capitalization .................................. 17
Plan of Operation ............................... 18
Proposed Business ............................... 21
Management ...................................... 28
Principal Stockholders .......................... 33
Certain Transactions ............................ 34
Description of Securities ....................... 35
Shares Eligible For Future Sale ................. 37
Underwriting .................................... 38
Selling Stockholders and Plan of Distribution ... 40
Legal Matters ................................... 41
Experts ......................................... 41
Available Information ........................... 41
Index to Financial Statements ................... F-1
------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the securities offered hereby, whether or
not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
=============================================================================
<PAGE>
=============================================================================
1,300,000 SHARES OF COMMON STOCK
AND
REDEEMABLE WARRANTS TO PURCHASE 1,300,000
SHARES OF COMMON STOCK
[LOGO]
------
PROSPECTUS
------
WHALE SECURITIES CO., L.P.
, 1996
=============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "GCL") permits a corporation to indemnify certain persons made
a party or threatened to be made a party to an action by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise. In
the case of an action by or in the right of the corporation, no
indemnification may be made in respect of any matter as to which such person
was adjudged liable for negligence or misconduct in the performance of such
person's duty to the corporation unless the Delaware Court of Chancery or the
court in which such action was brought determines that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for proper expenses. To the extent such person has been successful
in the defense of any matter, such person shall be indemnified against
expenses actually and reasonably incurred by him.
The Company has adopted provisions in its By-laws which provide for
indemnification of its officers and directors to the full extent permitted
under Delaware law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the expenses that will be
incurred by the Registrant in connection with the distribution of the
securities being registered hereby:
SEC ............................................. $6,197.23
NASD filing fees ................................ $2,297.21
Nasdaq Small Cap Market listing fee ............. *
Legal fees and expenses ......................... *
Accounting fees and expenses .................... *
Printing and engraving expenses ................. *
State securities qualification fees and expenses . *
Transfer agent fees and expenses ................ *
Miscellaneous ................................... *
-----------
$
Total .......................................... *
===========
- ------
* To be supplied by amendment.
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The table below sets forth the sales of unregistered securities made by
the Company since the date of its organization on July 15, 1994. All of such
sales were private placements made in reliance upon the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, and no underwriters
were involved in such placements.
<TABLE>
<CAPTION>
Title and
Amount of
Purchaser Security Date of Sale Consideration
------------------------------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
Alan L. Lubell ................ 1,708,938
Common Stock March 1995 $ 192,350
Status-One Investments Inc. ... 732,402
Common Stock March 1995 162,750
Greenwich Properties Inc. ..... 488,268
Common Stock March 1995 48,600
Status-One Investments Inc. ... 24,413
Common Stock March 1995 Services
Frank Williams ................ 8,139
Common Stock March 1995 Services
Thomas Peters ................. 9,155
Common Stock March 1995 Services
Mona-Lee Takefman ............. 2,136
Common Stock March 1995 Services
Mark Lubell ................... 2,136
Common Stock March 1995 Services
</TABLE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
----------- -----------------------------------------------------------------------------------------------
<S> <C>
1.1 ....... Form of Underwriting Agreement.
3.1 ....... Certificate of Incorporation of the Company.
3.2 ....... By-laws of the Company.
4.1* ...... Form of Specimen Common Stock Certificate.
4.2 ....... Form of Warrant Agreement between the Company and Whale Securities Co., L.P.
4.3 ....... Form of Warrant, among American Stock Transfer & Trust Company, the Company and Whale Securities
Co., L.P.
5.1* ...... Opinion of Morgan, Lewis & Bockius LLP with respect to the legality of the Common Stock.
10.1 ...... License Agreement, dated March 1, 1995, between Great White Shark Enterprises, Inc. and the Company.
10.2 ...... Promissory Note, dated April 15, 1996, payable to the Republic National Bank of New York.
10.3 ...... Employment Agreement, dated as of January 1, 1996, between Earl Takefman and the Company.
10.4 ...... Employment Agreement, dated as of January 1, 1996, between Alan Lubell and the Company.
10.5 ...... Employment Agreement, dated as of May 1, 1996, between Thomas S. Peters and the Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
----------- ------------
<C> <C>
10.6 ...... License Agreement, dated as of November 1, 1996, between the Company and Visual Edge Systems (Australia)
Pty. Ltd.
10.7 ...... Form of Consulting Agreement between the Company and Whale Securities Co., L.P.
10.8* ..... 1996 Stock Option Plan.
10.9* ..... Employment Agreement, dated as of June 1, 1996, between the Company and Richard Parker.
10.10* .... Employment Agreement, dated as of June 1, 1996, between the Company and Ami Trauber.
10.11 ..... Assignment, dated April 19, 1996, from Thomas S. Peters to the Company.
23.1 ...... Consent of KPMG Peat Marwick LLP.
23.2* ..... Consent of Frank Williams to be named as a Director.
23.3* ..... Consent of Eddie Einhorn to be named as a Director.
23.4 ...... Consent of Mark Hershhorn to be named as a Director.
24.1 ...... Power of Attorney relating to the Company (included as part of the signature page hereof).
</TABLE>
- ------
* To be filed by amendment hereto.
(b) Financial Statement Schedules:
None.
ITEM 28. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and
(iii) include any additional or changed material information on the
plan of distribution.
(b) For determining any liability under the Act, each post-effective
amendment shall be deemed to be a new Registration Statement of the
securities offered, and the offering of securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of this offering.
(2) The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions in Item 14
above, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in such act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the company of expenses incurred or paid by a director or
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in such act and will be governed by the final
adjudication of such issue.
(4) The Company hereby undertakes:
II-3
<PAGE>
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the Company pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grants to meet all of the
requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on June 4, 1996.
VISUAL EDGE SYSTEMS INC.
By: /s/ EARL T. TAKEFMAN
-----------------------------------
Earl T. Takefman
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Earl T. Takefman and Alan L. Lubell, and each
of them such person's true and lawful attorneys- in- fact and agents, with
full power of substitution and revocation, for such person and in such
person's name, place and stead, in any and all capacities to sign any and all
amendments (including additional amendments to this Registration Statement)
and to file the same with all exhibits thereto, and the other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and things requisite and
necessary to be done, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
---------- ------ ------
/s/ EARL T. TAKEFMAN Chief Executive Officer, Director
- ------------------------ (Principal Executive Officer) June 4, 1996
Earl T. Takefman
/s/ ALAN L. LUBELL Chairman of the Board of Directors June 4, 1996
- ------------------------ (Principal Financial and Accounting
Alan L. Lubell Officer)
II-5
<PAGE>
VISUAL EDGE SYSTEMS INC.
1,300,000 Shares of Common Stock
(Par Value $.01 Per Share)
and
Warrants to Purchase 1,300,000 Shares of Common Stock
UNDERWRITING AGREEMENT
Whale Securities Co., L.P. _______________, 1996
650 Fifth Avenue
New York, New York 10019
Dear Sirs:
Visual Edge Systems Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Whale Securities Co., L.P. (the
"Underwriter") an aggregate of One Million Three Hundred Thousand (1,300,000)
shares of common stock of the Company, par value $.01 per share (the "Offered
Shares"), which Offered Shares are presently authorized but unissued shares of
the common stock, par value $.01 per share (individually "Common Share" and
collectively the "Common Shares"), of the Company, at a price of Five Dollars
($5.00) per Offered Share, and One Million Three Hundred Thousand (1,300,000)
Common Share purchase warrants (the "Offered Warrants"), at a price of Ten Cents
($.10) per Offered Warrant, entitling the holder of each Offered Warrant to
purchase, during the three (3) year period commencing _________, 1997, one (1)
Common Share, at an exercise price of Five Dollars ($5.00) (subject to
adjustment in certain circumstances). The Company shall have the right, upon the
consent of the Underwriter, to call each Offered Warrant for redemption upon not
less than thirty (30) days' written notice at any time commencing one (1) year
from the Effective Date (as hereinafter defined) at a redemption price of Ten
Cents ($.10) per Offered Warrant; provided that the closing bid price of the
Common Stock has been at least 150% (currently $7.50) of the then effective
exercise price of the Offered Warrants on all of the thirty (30) trading days
ending on the third day prior to the day on which notice is given. In addition,
the Underwriter, in order to cover over-allotments in the sale of the Offered
Shares and/or Offered Warrants, may purchase an aggregate of not more than One
Hundred Ninety Five Thousand (195,000) Common Shares (the "Optional Shares")
and/or One Hundred Ninety Five Thousand (195,000) Common Share purchase warrants
(the "Optional Warrants") entitling the holder of each Optional Warrant to
purchase one (1) Common Share on the same terms as the Offered Warrants. The
Offered Shares and the Optional Shares are hereinafter collectively referred to
as the "Shares"; and the Offered Warrants and the
<PAGE>
Optional Warrants are hereinafter collectively referred to as the "Warrants."
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement") to be dated as of the Closing Date (as hereinafter defined) by and
among the Company, the Underwriter and American Stock Transfer & Trust Company,
as warrant agent (the "Warrant Agent").
The Company also proposes to issue and sell to the Underwriter
for its own account and the accounts of its designees, warrants (the
"Underwriter's Warrants") to purchase an aggregate of One Hundred Thirty
Thousand (130,000) Common Shares (collectively, the "Underlying Shares") and One
Hundred Thirty Thousand (130,000) warrants similar but not identical to the
Warrants (collectively, the "Underlying Warrants"), which sale will be
consummated in accordance with the terms and conditions of the form of
Underwriter's Warrant filed as an exhibit to the Registration Statement. The
Underlying Shares and the Common Shares issuable upon exercise of the Warrants
and the Underlying Warrants are hereinafter sometimes referred to as the
"Warrant Shares". The Shares, the Warrants, the Underwriter's Warrants, the
Underlying Warrants and the Warrant Shares (collectively, the "Securities") are
more fully described in the Registration Statement and the Prospectus, as
defined below.
The Company hereby confirms its agreement with the Underwriter
as follows:
1. Purchase and Sale of Offered Shares and Offered Warrants.
On the basis of the representations and warranties herein contained, but subject
to the terms and conditions herein set forth, the Company hereby agrees to sell
the Offered Shares and Offered Warrants to the Underwriter, and the Underwriter
agrees to purchase the Offered Shares and Offered Warrants from the Company, at
a purchase price of $ per Offered Share and $.___ per Offered Warrant. The
Underwriter plans to offer the Offered Shares and Offered Warrants to the public
at a public offering price of $____ per Offered Share and $.___ per Offered
Warrant.
2. Payment and Delivery.
(a) Payment for the Offered Shares and Offered
Warrants will be made to the Company by certified or official bank check or
checks payable to its order in New York Clearing House funds, at the offices of
the Underwriter, 650 Fifth Avenue, New York, New York 10019, against delivery of
the Offered Shares and Offered Warrants to the Underwriter. Such payment and
delivery will be made at , New York City time, on the fifth business day
following the Effective Date, the date and time of such payment and delivery
being herein called the "Closing Date." The certificates representing the
Offered Shares and Offered Warrants to be delivered will be in such
denominations and registered in such names as the Underwriter may request not
less than three full business days prior to the Closing Date, and will
-2-
<PAGE>
be made available to the Underwriter for inspection, checking and packaging at
the office of the Company's transfer agent or correspondent in New York City,
_________________________, not less than one full business day prior to the
Closing Date.
(b) On the Closing Date, the Company will sell the
Underwriter's Warrants to the Underwriter or to its designees (limited to
officers of the Underwriter). The Underwriter's Warrants will be in the form of,
and in accordance with, the provisions of the Underwriter's Warrant attached as
an exhibit to the Registration Statement. The aggregate purchase price for the
Underwriter's Warrants is $130.00. The Underwriter's Warrants will be restricted
from sale, transfer, assignment or hypothecation for a period of one year from
the Effective Date, except to officers and partners of the Underwriter and
members of the selling group and/or their officers or partners. Payment for the
Underwriter's Warrants will be made to the Company by check or checks payable to
its order on the Closing Date against delivery of the certificates representing
the Underwriter's Warrants. The certificates representing the Underwriter's
Warrants will be in such denominations and such names as the Underwriter may
request prior to the Closing Date.
3. Option to Purchase Optional Shares and/or Optional
Warrants.
(a) For the purposes of covering any overallotments
in connection with the distribution and sale of the Offered Shares and Offered
Warrants as contemplated by the Prospectus, the Underwriter is hereby granted an
option to purchase all or any part of the Optional Shares and/or Optional
Warrants from the Company. The purchase price to be paid for the Optional Shares
and Optional Warrants will be the same price per Optional Share and Optional
Warrant as the price per Offered Share or Offered Warrant, as the case may be,
set forth in Section 1 hereof. The option granted hereby may be exercised by the
Underwriter as to all or any part of the Optional Shares and/or the Optional
Warrants at any time within 45 days after the Effective Date. The Underwriter
will not be under any obligation to purchase any Optional Shares or Optional
Warrants prior to the exercise of such option.
(b) The option granted hereby may be exercised by
the Underwriter by giving oral notice to the Company, which must be confirmed by
a letter, telex or telegraph setting forth the number of Optional Shares and
Optional Warrants to be purchased, the date and time for delivery of and payment
for the Optional Shares and Optional Warrants to be purchased and stating that
the Optional Shares and Optional Warrants referred to therein are to be used for
the purpose of covering over-allotments in connection with the distribution and
sale of the Offered Shares and Offered Warrants. If such notice is given prior
to the Closing Date, the date set forth therein for such delivery and payment
will not be earlier than either two full business days thereafter or the Closing
Date,
-3-
<PAGE>
whichever occurs later. If such notice is given on or after the Closing Date,
the date set forth therein for such delivery and payment will not be earlier
than five full business days thereafter. In either event, the date so set forth
will not be more than 15 full business days after the date of such notice. The
date and time set forth in such notice is herein called the "Option Closing
Date." Upon exercise of such option, the Company will become obligated to convey
to the Underwriter, and, subject to the terms and conditions set forth in
Section 3(d) hereof, the Underwriter will become obligated to purchase, the
number of Optional Shares and Optional Warrants specified in such notice.
(c) Payment for any Optional Shares and Optional
Warrants purchased will be made to the Company by certified or official bank
check or checks payable to its order in New York Clearing House funds, at the
office of the Underwriter, against delivery of the Optional Shares and Optional
Warrants purchased to the Underwriter. The certificates representing the
Optional Shares and Optional Warrants to be delivered will be in such
denominations and registered in such names as the Underwriter requests not less
than two full business days prior to the Option Closing Date, and will be made
available to the Underwriter for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to the Option Closing Date.
(d) The obligation of the Underwriter to purchase
and pay for any of the Optional Shares or Optional Warrants is subject to the
accuracy and completeness (as of the date hereof and as of the Option Closing
Date) of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy and completeness of the
statements of the Company or its officers made in any certificate or other
document to be delivered by the Company pursuant to this Agreement, to the
performance in all material respects by the Company of its obligations
hereunder, to the satisfaction by the Company of the conditions, as of the date
hereof and as of the Option Closing Date, set forth in Section 3(b) hereof, and
to the delivery to the Underwriter of opinions, certificates and letters dated
the Option Closing Date substantially similar in scope to those specified in
Section 5, 6(b), (c), (d) and (e) hereof, but with each reference to "Offered
Shares," "Offered Warrants" and "Closing Date" to be, respectively, to the
Optional Shares, Optional Warrants and the Option Closing Date.
4. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the Under-
writer that:
-4-
<PAGE>
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority, corporate and other, to own or lease and operate
its properties and to conduct its business as described in the Registration
Statement and to execute, deliver and perform this Agreement, the Warrant
Agreement and the Underwriter's Warrants and to consummate the transactions
contemplated hereby and thereby. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. The Company has no subsidiaries.
(b) Each of this Agreement and the Consulting
Agreement described in Section 5(r) hereof (the "Consulting Agreement") has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, and each of the Warrant Agreement and the
Underwriter's Warrants, when executed and delivered by the Company on the
Closing Date, will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms. The
execution, delivery and performance of this Agreement, the Consulting Agreement,
the Warrant Agreement and the Underwriter's Warrants by the Company, the
consummation by the Company of the transactions herein and therein contemplated
and the compliance by the Company with the terms of this Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriter's Warrants have
been duly authorized by all necessary corporate action and do not and will not,
with or without the giving of notice or the lapse of time, or both, (i) result
in any violation of the Certificate of Incorporation or By-Laws of the Company;
(ii) result in a breach of or conflict with any of the terms or provisions of,
or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company pursuant to
any indenture, mortgage, note, contract, commitment or other agreement or
instrument to which the Company is a party or by which the Company or any of its
properties or assets is or may be bound or affected; (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business; or (iv) have any effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate its properties and to conduct its
business or the ability of the Company to make use thereof.
(c) No authorization, approval, consent, order,
registration, license or permit of any court or governmental agency or body,
other than under the Securities Act of 1933, as amended (the "Act"), the
Regulations (as hereinafter defined) and applicable state securities or Blue Sky
laws, is required for the valid authorization, issuance, sale and delivery of
the Shares and Warrants to the Underwriter, and the consummation by the Company
of the transactions contemplated by this Agreement, the Consulting Agreement,
the Warrant Agreement or the Underwriter's Warrants.
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(d) The conditions for use of a registration
statement on Form SB-2 set forth in the General Instructions to Form SB-2 have
been satisfied with respect to the Company, the transactions contemplated herein
and in the Registration Statement. The Company has prepared in conformity with
the requirements of the Act and the rules and regulations (the "Regulations") of
the Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333- ) on Form SB-2 and has filed
one or more amendments thereto, covering the registration of the securities
under the Act, including the related preliminary prospectus or preliminary
prospectuses (each thereof being herein called a "Preliminary Prospectus") and a
proposed final prospectus. Each Preliminary Prospectus was endorsed with the
legend required by Item 501(a)(5) of Regulation S-B of the Regulations,
including, if applicable, Rule 430A of the Regulations. Such registration
statement including any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended at the time it becomes
effective, and the final prospectus included therein are herein, respectively,
called the "Registration Statement" and the "Prospectus," except that, (i) if
the prospectus filed by the Company pursuant to Rule 424(b) of the Regulations
differs from the Prospectus, the term "Prospectus" will also include the
prospectus filed pursuant to Rule 424(b), and (ii) if the Registration Statement
is amended or such Prospectus is supplemented after the effective date of the
Registration Statement (the "Effective Date") and prior to the Option Closing
Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(e) Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(f) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date or the Option Closing Date referred to below, will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company in connection with the Registration
Statement or Prospectus or any amendment or supplement thereto by the
Underwriter expressly for use therein.
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<PAGE>
(g) The Company had at the date or dates indicated
in the Prospectus a duly authorized and outstanding capitalization as set forth
in the Registration Statement and the Prospectus. Based on the assumptions
stated in the Registration Statement and the Prospectus, the Company will have
on the Closing Date referred to below the adjusted stock capitalization set
forth therein. Except as set forth in the Registration Statement or the
Prospectus, on the Effective Date and on the Closing Date referred to below,
there will be no options to purchase, warrants or other rights to subscribe for,
or any securities or obligations convertible into, or any contracts or
commitments to issue or sell shares of the Company's capital stock or any such
warrants, convertible securities or obligations. Except as set forth in the
Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(h) The descriptions in the Registration Statement
and the Prospectus of contracts and other documents are accurate and present
fairly the information required to be disclosed, and there are no contracts or
other documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under the
Act or the Regulations which have not been so described or filed as required.
(i) KPMG Peat Marwick LLP, the accountants who have
certified certain of the financial statements filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent public accountants within the meaning of the Act and Regulations.
The financial statements and schedules and the notes thereto filed as part of
the Registration Statement and included in the Prospectus are complete, correct
and present fairly the financial position of the Company as of the dates
thereof, and the results of operations and changes in financial position of the
Company for the periods indicated therein, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved except as otherwise stated in the Registration Statement and
the Prospectus. The selected financial data set forth in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited and unaudited
financial statements included in the Registration Statement and the Prospectus.
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<PAGE>
(j) The Company has filed with the appropriate
federal, state and local governmental agencies, and all foreign countries and
political subdivisions thereof, all tax returns, including franchise tax
returns, which are required to be filed or has duly obtained extensions of time
for the filing thereof and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same have become due; and the
provisions for income taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement are sufficient for all
accrued and unpaid foreign and domestic taxes, whether or not disputed, and for
all periods to and including the dates of such financial statements. Except as
disclosed in writing to the Underwriter, the Company has not executed or filed
with any taxing authority, foreign or domestic, any agreement extending the
period for assessment or collection of any income taxes and is not a party to
any pending action or proceeding by any foreign or domestic governmental agency
for assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against the Company.
(k) The outstanding Common Shares and outstanding
options and warrants to purchase Common Shares have been duly authorized and
validly issued. The outstanding Common Shares are fully paid and nonassessable.
The outstanding options and warrants to purchase Common Shares constitute the
valid and binding obligations of the Company, enforceable in accordance with
their terms. None of the outstanding Common Shares, options or warrants to
purchase Common Shares has been issued in violation of the preemptive rights of
any shareholder of the Company. None of the holders of the outstanding Common
Shares is subject to personal liability solely by reason of being such a holder.
The offers and sales of the outstanding Common Shares and outstanding options
and warrants to purchase Common Shares were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky laws or
exempt from such registration requirements. The authorized Common Shares and
outstanding options and warrants to purchase Common Shares conform to the
descriptions thereof contained in the Registration Statement and Prospectus.
Except as set forth in the Registration Statement and the Prospectus, on the
Effective Date and the Closing Date, there will be no outstanding options or
warrants for the purchase of, or other outstanding rights to purchase, Common
Shares or securities convertible into Common Shares.
(l) No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company within the
three years prior to the date hereof, except as disclosed in the Registration
Statement.
(m) The issuance and sale of the Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement or by the Warrants, as the case may be, the
Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable. The holders of the Securities will not be subject to personal
liability solely by reason of being such holders and none of the Securities will
be subject to preemptive rights of any shareholder of the Company.
-8-
<PAGE>
(n) The issuance and sale of the Warrants, the
Underwriter's Warrants and the Underlying Warrants have been duly authorized
and, when issued, paid for and delivered pursuant to the terms of this Agreement
or the Underwriter's Warrants, as the case may be, the Warrants, the
Underwriter's Warrants and the Underlying Warrants will constitute valid and
binding obligations of the Company, enforceable as to the Company in accordance
with their terms. The Warrant Shares have been duly reserved for issuance upon
exercise of the Warrants, the Underwriter's Warrants and the Underlying Warrants
in accordance with the provisions of the Warrants, the Underwriter's Warrants
and the Underlying Warrants. The Warrants, Underwriter's Warrants and Underlying
Warrants will conform to the descriptions thereof contained in the Registration
Statement and Prospectus.
(o) The Company is not in violation of, or in
default under, (i) any term or provision of its Certificate of Incorporation, as
amended, or By-Laws; (ii) any material term or provision or any financial
covenants of any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any of its property or
business is or may be bound or affected; or (iii) any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of the
Company's properties or business. The Company owns, possesses or has obtained
all governmental and other (including those obtainable from third parties)
licenses, permits, certifications, registrations, approvals or consents and
other authorizations necessary to own or lease, as the case may be, and to
operate its properties, whether tangible or intangible, and to conduct any of
the business or operations of the Company as presently conducted and all such
licenses, permits, certifications, registrations, approvals, consents and other
authorizations are outstanding and in good standing, and there are no
proceedings pending or, to the best of the Company's knowledge, threatened, or
any basis therefor, seeking to cancel, terminate or limit such licenses,
permits, certifications, registrations, approvals or consents or other
authorizations.
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<PAGE>
(p) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or involving the
Company's properties or business which, if determined adversely to the Company,
would, individually or in the aggregate, result in any material adverse change
in the financial position, shareholders' equity, results of operations,
properties, business, management or affairs or business prospects of the Company
or which question the validity of the capital stock of the Company or this
Agreement or of any action taken or to be taken by the Company pursuant to, or
in connection with, this Agreement; nor, to the best of the Company's knowledge,
is there any basis for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry. There are no outstanding orders, judgments or decrees
of any court, governmental agency or other tribunal naming the Company and
enjoining the Company from taking, or requiring the Company to take, any action,
or to which the Company, or the Company's properties or businesses is bound or
subject.
(q) Neither the Company nor any of its affiliates
has incurred any liability for any finder's fees or similar payments in
connection with the transactions herein contemplated.
(r) The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, rights, trade secrets, confidential information, processes
and formulations used or proposed to be used in the conduct of its business as
described in the Prospectus (collectively the "Intangibles"); to the best of the
Company's knowledge, the Company has not infringed and is not infringing with
the rights of others with respect to Intangibles; and the Company has not
received any notice of conflict with the asserted rights of others with respect
to Intangibles which could, singly or in the aggregate, materially adversely
affect its business as presently conducted or prospects, financial condition or
results of operations of the Company, and the Company knows of no basis
therefor; and, to the best of the Company's knowledge, no others have infringed
upon the Intangibles of the Company.
(s) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and the
Company's latest financial statements, the Company has not incurred any material
liability or obligation, direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of business, and has not
sustained any material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree; and since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there have not been, and prior to the Closing Date
referred to below there will not be, any changes in the capital stock or any
material increases in the long-term debt of the Company or any material adverse
change in or affecting the general affairs, management, financial condition,
shareholders' equity, results of operations or prospects of the Company,
otherwise than as set forth or contemplated in the Prospectus.
-10-
<PAGE>
(t) The Company has good and marketable title in fee
simple to all real property and good title to all personal property (tangible
and intangible) owned by it, free and clear of all security interests, charges,
mortgages, liens, encumbrances and defects, except such as are described in the
Registration Statement and Prospectus or such as do not materially affect the
value or transferability of such property and do not interfere with the use of
such property made, or proposed to be made, by the Company. The leases, licenses
or other contracts or instruments under which the Company leases, holds or is
entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company, and
all rentals, royalties or other payments accruing thereunder which became due
prior to the date of this Agreement have been duly paid, and neither the
Company, nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. The Company has not received notice of any
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. The Company has adequately insured
its properties against loss or damage by fire or other casualty and maintains,
in adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar businesses located in its geographical area.
(u) Each contract or other instrument (however
characterized or described) to which the Company is a party or by which its
property or business is or may be bound or affected and to which reference is
made in the Prospectus has been duly and validly executed, is in full force and
effect in all material respects and is enforceable against the parties thereto
in accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the best of the
Company's knowledge, any other party is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or any of its assets or business.
(v) The employment, consulting, confidentiality and
non-competition agreements between the Company and its officers and employees,
described in the Registration Statement, are binding and enforceable obligations
upon the respective parties thereto in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws or arrangements affecting
creditors' rights generally and subject to principles of equity.
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<PAGE>
(w) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974.
(x) To the best of the Company's knowledge, no labor
problem exists with any of the Company's employees or is imminent which could
adversely affect the Company.
(y) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(z) The Shares, Warrants and Warrant Shares have
been approved for listing on the Automated Quotation System of the National
Association of Securities Dealers, Inc. ("NASDAQ").
(aa) The Company's response to the Corporate Review
Memorandum of Tenzer Greenblatt LLP, counsel to the Underwriter ("Underwriter's
Counsel"), dated March 8, 1996, is true, accurate and complete.
Any certificate signed by an officer of the Company
and delivered to the Underwriter or to counsel for the Underwriter shall be
deemed to be a representation and warranty by the Company to the Underwriter as
to the matters covered thereby.
5. Certain Covenants of the Company. The Company
covenants with the Underwriter as follows:
(a) The Company will not at any time, whether before
the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with the sales of the Shares and
Warrants by the Underwriter or a dealer, file or publish any amendment or
supplement to the Registration Statement or Prospectus of which the Underwriter
has not been previously advised and furnished a copy, or to which the
Underwriter shall object in writing.
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<PAGE>
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the Underwriter
immediately, and, if requested by the Underwriter, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares and/or the Warrants for offering or sale in any jurisdiction, or of the
initiation of any proceedings for any of such purposes. The Company will use its
best efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and to obtain as soon as possible the lifting
thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter,
without charge, from time to time until the Effective Date, as many copies of
each Preliminary Prospectus as the Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
two signed copies of the Registration Statement as originally filed and of all
amendments thereto, whether filed before or after the Registration Statement
becomes effective, two copies of all exhibits filed therewith and two signed
copies of all consents and certificates of experts.
(d) The Company will comply with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Offered Shares and Offered Warrants, in any
Optional Shares and Optional Warrants which may be issued and sold, and in the
Warrant Shares underlying such Warrants. If, at any time when a prospectus
relating to such Securities is required to be delivered under the Act, any event
occurs as a result of which the Registration Statement and Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) The Company will furnish such proper informa-
tion as may be required and otherwise cooperate in qualifying the
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<PAGE>
Securities for offering and sale under the securities or Blue Sky laws relating
to the offering or for sale in such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification will be required in
any jurisdiction where, solely as a result thereof, the Company would be subject
to service of general process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction.
(f) The Company will make generally available to its
security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Underwriter as soon as practicable and in any event not later
than 45 days after the end of its fiscal quarter in which the first anniversary
date of the effective date of the Registration Statement occurs, an earning
statement meeting the requirements of Rule 158(a) under the Act covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
(g) For a period of five years from the Effective
Date, the Company will deliver to the Underwriter and to Underwriter's Counsel
on a timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-C, 10-KSB (or 10-K) and 10-QSB (or 10-Q)
and exhibits thereto, filed or furnished to the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. (the " NASD")
on the date each such report or document is so filed or furnished; (ii) as soon
as practicable, copies of any reports or communications (financial or other) of
the Company mailed to its security holders; (iii) as soon as practicable, a copy
of any Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the Company
from time to time; (iv) monthly statements setting forth such information
regarding the Company's results of operations and financial position (including
balance sheet, profit and loss statements and data regarding outstanding
purchase orders) as is regularly prepared by management of the Company; and (v)
such additional information concerning the business and financial condition of
the Company as the Underwriter may from time to time reasonably request and
which can be prepared or obtained by the Company without unreasonable effort or
expense. The Company will furnish to its shareholders annual reports containing
audited financial statements and such other periodic reports as it may determine
to be appropriate or as may be required by law.
(h) Neither the Company nor any person that con-
trols, is controlled by or is under common control with the Company will take
any action designed to or which might be reasonably expected to cause or result
in the stabilization or manipulation of the price of the Shares or Warrants.
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<PAGE>
(i) If the transactions contemplated by this
Agreement are consummated, the Underwriter shall retain the $50,000 previously
paid to it, and the Company will pay or cause to be paid the following: all
costs and expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to, the Company's legal and
accounting fees and disbursements; the costs of preparing, printing and
delivering the Registration Statement, Prospectus and amendments, post-effective
amendments and supplements thereto, the Underwriting Agreement and related
documents and "Blue Sky" memoranda (all in such quantities as the Underwriter
may require); the costs of preparing and printing stock certificates and warrant
certificates; filing fees, costs and expenses incurred in filing and clearing
the offering with the National Association of Securities Dealers, Inc. (the
"NASD") and either the Boston Stock Exchange or the Pacific Stock Exchange;
filing fees, costs and expenses (including reasonable fees and disbursements of
counsel) incurred in qualifying the offering under the "Blue Sky" laws of the
states specified by the Underwriter; transfer taxes; transfer agent and
registrar fees; and the costs of placing a "tombstone" advertisement in such
publications as the Underwriter shall determine; and all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 5(i).
In addition, at the Closing Date or the Option Closing Date, as
the case may be, the Underwriter will deduct from the payment for the Offered
Shares and Offered Warrants or any Optional Shares and/or Optional Warrants
purchased three percent (3%) of the gross proceeds of the offering (less the sum
of $50,000 previously paid to the Underwriter), as payment for the Underwriter's
non-accountable expense allowance relating to the transactions contemplated
hereby, which amount will include the fees and expenses of counsel for the
Underwriter.
(j) If the Company decides not to proceed with the
offering for any reason, or if the Underwriter decides not to proceed with the
offering because of a breach by the Company of its representations, warranties,
or covenants in this letter or in the Underwriting Agreement or as a result of
material adverse changes in the affairs of the Company, the Company will be
obligated to reimburse the Underwriter for its accountable expenses up to the
sum of Fifty Thousand Dollars ($50,000), inclusive of amounts theretofore paid
pursuant to this letter. If the Underwriter decides not to proceed with the
offering for any other reason the Company will only be obligated to reimburse
the Underwriter for its accountable expenses up to the sum of Twenty-Five
Thousand Dollars ($25,000), inclusive of amounts theretofore paid pursuant to
this letter. In no event, however, will the Underwriter, in the event the
offering is terminated, be entitled to retain or receive more than an amount
equal to its actual accountable out-of-pocket expenses.
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<PAGE>
(k) The Company intends to apply the net proceeds
from the sale of the Shares and Warrants for the purposes set forth in the
Prospectus. The Company will file with the Commission all required reports on
Form S-R in accordance with the provisions of Rule 463 promulgated under the Act
and will provide a copy of each such report to the Underwriter and its counsel.
(l) During the period of twelve (12) months from the
date hereof, (i) none of the Company's officers, directors or security holders
will offer for sale or sell or otherwise dispose of, directly or indirectly, any
securities of the Company, in any manner whatsoever, whether pursuant to Rule
144 of the Regulations or otherwise; provided that, notwithstanding the
foregoing, a group of securityholders beneficially owning less than five
thousand (5,000) shares of Common Stock, individually, and less than one hundred
thousand (100,000) shares of Common Stock, in the aggregate (such
securityholders being referred to herein as the "Minority Shareholders"), may be
excluded from the provisions of this Section 5(l); and, provided further that,
in the event the closing bid quotation for the Common Stock has been at least
Ten Dollars ($10.00) for twenty (20) consecutive trading days at any time after
nine (9) months following the Effective Date and prior to the end of the
aforementioned twelve (12) month period, then, in such event, the provisions of
this Section 5(l) shall terminate on the day following such twenty (20)-trading
day period; and (ii) no holders of registration rights relating to securities of
the Company will exercise any such registration rights, in each case, without
the prior written consent of the Underwriter. The Company will deliver to the
Underwriter the undertakings as of the date hereof of its officers, directors
and security holders (other than the Minority Shareholders) to this effect;
provided that the Company will use its best efforts to obtain the undertaking of
all of the Minority Shareholders.
(m) The Company will not file any registration
statement relating to the offer or sale of any of the Company's securities,
including any registration statement on Form S-8, during the twelve (12) months
following the date hereof without the Underwriter's prior written consent.
(n) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(o) The Company will use its best efforts to
maintain the listing of the Shares and Warrants on NASDAQ for so long as the
Shares, and Warrants are qualified for such listing.
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(p) The Company will, concurrently with the
Effective Date, register the class of equity securities of which the Shares are
a part under Section 12(g) of the Exchange Act and the Company will maintain the
registration for a minimum of five years after the Effective Date.
(q) Subject to the sale of the Offered Shares and
Offered Warrants, the Underwriter and its successors will have the right to
designate a nominee for election, at its or their option, either as a member of
or a non-voting advisor to the Board of Directors of the Company, and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of five years from the Effective Date. Each of the Company's current
officers, directors and shareholders (other than the Minority Shareholders)
agrees to vote all of the Common Shares owned by such person so as to elect and
continue in office such nominee of the Underwriter. Following the election of
such nominee as a director or advisor, such person shall receive no more or less
compensation than is paid to other non-officer directors of the Company for
attendance at meetings of the Board of Directors of the Company and shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings including, but not limited to, food, lodging and transportation.
The Company agrees to indemnify and hold such director or advisor harmless, to
the maximum extent permitted by law, against any and all claims, actions, awards
and judgments arising out of his service as a director or advisor and, in the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, to include such director or advisor as
an insured under such policy. The rights and benefits of such indemnification
and the benefits of such insurance shall, to the extent possible, extend to the
Underwriter insofar as it may be or may be alleged to be responsible for such
director or advisor. The Company will deliver to the Underwriter the
undertakings as of the date hereof of its officers, directors and shareholders
(other than the Minority Shareholders) to vote their Common Shares in accordance
with the provisions of this Section 5(q).
If the Underwriter does not exercise its
option to designate a member of or advisor to the Company's Board of Directors,
the Underwriter shall nonetheless have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors. The Company agrees to give the Underwriter notice of
each such meeting and to provide the Underwriter with an agenda and minutes of
the meeting no later than it gives such notice and provides such items to the
directors.
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(r) The Company agrees to employ the Underwriter or
a designee of the Underwriter as a financial consultant on a non-exclusive basis
for a period of two years from the Closing Date, pursuant to a separate written
consulting agreement between the Company and the Underwriter and/or such
designee, at an annual rate of Thirty Thousand Dollars ($30,000) (exclusive of
any accountable out-of-pocket expenses), payable in full in advance on the
Closing Date. In addition, the consulting agreement will provide that the
Company will pay the Underwriter a graduated finder's fee (based on five percent
(5%) of the first $5,000,000 of consideration, four percent (4%) of the next
$1,000,000 of consideration, three percent (3%) of the next $1,000,000 of
consideration, two percent (2%) of the next $1,000,000 of consideration and one
per cent (1%) of any consideration over $8,000,000) in the event the Underwriter
originates a financing, merger, acquisition, joint venture or other transaction
to which the Company is a party. The Company further agrees to deliver a duly
and validly executed copy of said consulting agreement, in form and substance
acceptable to the Underwriter, on the Closing Date.
(s) Subject to the provisions of applicable law, the
Underwriter shall be entitled to receive a warrant solicitation fee of 5% of the
aggregate exercise price of the Warrants for each Warrant exercised during the
period commencing one year after the Effective Date; provided, however, that the
Underwriter will not be entitled to receive such compensation in Warrant
exercise transactions in which (i) the market price of the Common Shares at the
time of exercise is lower than the exercise price of the Warrants; (ii) the
Warrants are held in any discretionary account; (iii) disclosure of compensation
arrangements is not made in the Registration Statement and in documents provided
to holders of Warrants at the time of exercise; (iv) the holder thereof has not
confirmed in writing that the Underwriter solicited the exercise of the
Warrants; or (v) the solicitation or exercise of the Warrants was in violation
of Rule 10b-6 promulgated under the Exchange Act.
(t) The Company shall retain a transfer agent for
the Common Shares and Warrants, reasonably acceptable to the Underwriter, for a
period of five years following the Effective Date. In addition, for a period of
five years from the Effective Date, the Company, at its own expense, shall cause
such transfer agent to provide the Underwriter, if so requested in writing, with
copies of the Company's daily transfer sheets, and, when requested by the
Underwriter, a current list of the Company's security holders, including a list
of the beneficial owners of securities held by a depository trust company and
other nominees.
(u) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Underwriter, within a reasonable period
from the date hereof, four bound volumes, including the Registration Statement,
as amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
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(v) The Company shall, as of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or Moody's Industrial Manual (Moody's OTC Industrial
Manual not being sufficient for these purposes) and shall use its best efforts
to have the Company listed in such manual and shall maintain such listing for a
period of five years from the Effective Date.
(w) For a period of five years from the Effective
Date, the Company shall provide the Underwriter, on a not less than annual
basis, with internal forecasts setting forth projected results of operations for
each quarterly and annual period in the two fiscal years following the
respective dates of such forecasts. Such forecasts shall be provided to the
Underwriter more frequently than annually if prepared more frequently by
management, and revised forecasts shall be prepared and provided to the
Underwriter when required to reflect more current information, revised
assumptions or actual results that differ materially from those set forth in the
forecasts.
(x) For a period of five (5) years from the
Effective Date, or until such earlier time as the Common Shares and Warrants are
listed on the New York Stock Exchange or the American Stock Exchange, the
Company shall cause its legal counsel to provide the Underwriter with a list, to
be updated at least annually, of those states in which the Common Shares and
Warrants may be traded in non-issuer transactions under the Blue Sky laws of the
50 states.
(y) For a period of five years from the Effective
Date, the Company shall continue to retain KPMG Peat Marwick LLP (or such other
nationally recognized accounting firm acceptable to the Underwriter) as the
Company's independent public accountants.
(z) For a period of five years from the Effective
Date, the Company, at its expense, shall cause its then independent certified
public accountants, as described in Section 5(y) above, to review (but not
audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10- QSB (or 10-Q) quarterly report and the mailing of
quarterly financial information to shareholders.
(aa) So long as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act as shall
be necessary to enable the sale of the Common Shares underlying the Warrants and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant as they request and as otherwise required by law and, to
furnish to the Underwriter and dealers as many copies of each such Prospectus as
the Underwriter or dealer may reasonably request. In addition, for so long as
any Warrant is outstanding, the Company will promptly notify the Underwriter of
any material change in the financial condition, business, results of operations
or properties of the Company.
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(ab) For a period of twenty-five days from the
Effective date, the Company will not issue press releases or engage in any other
publicity without the Underwriter's prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(ac) The Company will enter into employment
agreements with Earl Takefman and Alan Lubell, containing terms satisfactory to
the Underwriter, and will not increase or authorize an increase in the
compensation of Messrs. Takefman and Lubell beyond those increases and bonuses
provided for in such employment agreements, without the Underwriter's prior
written consent, for a period of three (3) years following the Effective Date.
In addition, the terms of employment agreements, if any, to be entered into by
the Company with any senior executives to be hired during the period commencing
on the date hereof and ending on the first anniversary of the Effective Date
must be acceptable to the Underwriter;
(ad) Commencing on or prior to the Effective Date,
the Company will retain a financial public relations firm reasonably acceptable
to the Underwriter;
(ae) The Company will not use any portion of the
proceeds derived from the proposed offering to repay any indebtedness, other
than the Bridge Financing (as defined in the Registration Statement), up to Five
Hundred Thousand Dollars ($500,000) to repay outstanding bank indebtedness and
customary trade payables incurred in the ordinary course of business, without
the prior written consent of the Underwriter;
(af) For a period of three (3) years following the
Effective Date, the Company will promptly submit to the Underwriter copies of
accountants' management reports and similar correspondence between the Company's
accountants and the Company;
(ag) For a period of three (3) years following the
Effective Date, the Company will not offer or sell any of its securities
pursuant to Regulation S without the prior written consent of the Underwriter;
and
(ah) For a period of three (3) years following the
Effective Date, the Company will provide to the Underwriter ten (10) days
written notice prior to any issuance by the Company of any equity securities or
securities exchangeable for or convertible into equity securities of the
Company, except for (i) shares of Common Stock issuable upon exercise of
currently outstanding options and warrants or conversion of currently
outstanding convertible securities and (ii) options available for future grant
pursuant to any stock option plan in effect on the Effective Date.
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6. Conditions of the Underwriter's Obligation to Purchase
Shares from the Company. The obligation of the Underwriter to purchase and pay
for the Offered Shares and Offered Warrants which it has agreed to purchase from
the Company is subject (as of the date hereof and the Closing Date) to the
accuracy of and compliance in all material respects with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company or its officers made pursuant hereto, to the performance in all material
respects by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement will have become
effective not later than .M., New York City time, on the day following the date
of this Agreement, or at such later time or on such later date as the
Underwriter may agree to in writing; prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or will be pending
or, to the best of the Underwriter's or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriter's Counsel.
(b) At the time that this Agreement is executed and
at the Closing Date, there will have been delivered to the Underwriter a signed
opinion of Morgan, Lewis & Bockius LLP, counsel for the Company ("Company
Counsel"), dated as of the date hereof or the Closing Date, as the case may be
(and any other opinions of counsel referred to in such opinion of Company
Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority, corporate and other, and all licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business as described
in the Registration Statement. The Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. To the best of Company Counsel's knowledge, the
Company has no subsidiaries.
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(ii) The Company has full power and
authority, corporate and other, to execute, deliver and perform this Agreement,
the Consulting Agreement, the Warrant Agreement and the Underwriter's Warrants
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement, the Consulting Agreement,
the Warrant Agreement and the Underwriter's Warrants by the Company, the
consummation by the Company of the transactions herein and therein contemplated
and the compliance by the Company with the terms of this Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriter's Warrants have
been duly authorized by all necessary corporate action, and each of this
Agreement and the Consulting Agreement has been duly executed and delivered by
the Company. Each of this Agreement and the Consulting Agreement is (assuming
for the purposes of this opinion that it is valid and binding upon the other
party thereto), and each of the Warrant Agreement and the Underwriter's
Warrants, when executed and delivered by the Company on the Closing Date, will
be, valid and binding obligations of the Company, enforceable in accordance with
their respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions set
forth in Section 7 hereof and the contribution provisions set forth in Section 8
hereof may be limited by the federal securities laws or public policy underlying
such laws.
(iii) The execution, delivery and
perfor- mance of this Agreement, the Consulting Agreement, the Warrant Agreement
and the Underwriter's Warrants by the Company, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the
Company with the terms of this Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter's Warrants do not, and will not, with or without
the giving of notice or the lapse of time, or both, (A) result in a violation of
the Certificate of Incorporation or By-Laws of the Company, (B) result in a
breach of or conflict with any terms or provisions of, or constitute a default
under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to any indenture,
mortgage, note, contract, commitment or other material agreement or instrument
to which the Company is a party or by which the Company or any of the Company's
properties or assets are or may be bound or affected; (C) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of the Company's properties or business; or (D) have any effect on any
permit, certification, registration, approval, consent, license or franchise
necessary for the Company to own or lease and operate its properties and to
conduct its business or the ability of the Company to make use thereof.
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(iv) To the best of Company Counsel's
knowledge, no authorization, approval, consent, order, registration, license or
permit of any court or governmental agency or body (other than under the Act,
the Regulations and applicable state securities or Blue Sky laws) is required
for the valid authorization, issuance, sale and delivery of the Shares and
Warrants or the Underwriter's Warrants to the Underwriter, and the consummation
by the Company of the transactions contemplated by this Agreement, the
Consulting Agreement, the Warrant Agreement or the Underwriter's Warrants.
(v) The Registration Statement has
become effective under the Act; to the best of Company Counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act or applicable state securities laws.
(vi) The Registration Statement and
the Prospectus, as of the Effective Date, and each amendment or supplement
thereto as of its effective or issue date (except for the financial statements
and other financial data included therein or omitted therefrom, as to which
Company Counsel need not express an opinion) comply as to form in all material
respects with the requirements of the Act and Regulations; and the conditions
for use of a registration statement on Form SB-2 have been satisfied by the
Company.
(vii) The descriptions in the
Registration Statement and the Prospectus of statutes, regulations, government
classifications, contracts and other documents (including opinions of such
counsel); and the response to Item 13 of Form SB-2 have been reviewed by Company
Counsel, and, based upon such review, are accurate in all material respects and
present fairly the information required to be disclosed, and there are no
material statutes, regulations or government classifications, or, to the best of
Company Counsel's knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement, which are not so described
or filed as required.
None of the material provisions of the
contracts or instruments described above violates any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or any of its assets or businesses.
(viii) The outstanding Common Shares
and outstanding options and warrants to purchase Common Shares have been duly
authorized and validly issued. The outstanding Common Shares are fully paid and
nonassessable. The outstanding options and warrants to purchase Common Shares
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. None of the outstanding Common Shares, options or
warrants to purchase Common Shares has been issued in violation of the
preemptive rights of any shareholder of the Company. None of
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the holders of the outstanding Common Shares is subject to personal liability
solely by reason of being such a holder. The offers and sales of the outstanding
Common Shares and outstanding options and warrants to purchase Common Shares
were at all relevant times either registered under the Act and the applicable
state securities or Blue Sky laws or exempt from such registration requirements.
The authorized Common Shares and outstanding options and warrants to purchase
Common Shares conform to the description thereof contained in the Registration
Statement and Prospectus. To the best of Company Counsel's knowledge, except as
set forth in the Prospectus, no holders of any of the Company's securities has
any rights, "demand", "piggyback" or otherwise, to have such securities
registered under the Act.
(ix) The issuance and sale of the
Shares and the Warrant Shares have been duly authorized and, when the Shares and
the Warrant Shares have been issued and duly delivered against payment therefor
as contemplated by this Agreement or by the Warrants, as the case may be, the
Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable, and the holders thereof will not be subject to personal liability
solely by reason of being such holders. Neither the Shares nor the Warrant
Shares are subject to preemptive rights of any shareholder of the Company. The
certificates representing the Securities are in proper legal form.
(x) The issuance and sale of the War-
rants, the Underwriter's Warrants and the Underlying Warrants have been duly
authorized and, when paid for, issued and delivered pursuant to the terms of
this Agreement or the Underwriter's Warrants, as the case may be, the Warrants,
the Underwriter's Warrants and the Underlying Warrants will constitute the valid
and binding obligations of the Company, enforceable in accordance with their
terms, to issue and sell the Warrant Shares and/or Underlying Warrants. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly, validly and sufficiently taken. The Warrants,
Underwriter's Warrants and Underlying Warrants conform to the descriptions
thereof contained in the Registration Statement and Prospectus.
(xi) Upon delivery of the Offered
Shares and Offered Warrants to the Underwriter against payment therefor as
provided in this Agreement, the Underwriter (assuming it is a bona fide
purchaser within the meaning of the Uniform Commercial Code) will acquire good
title to the Offered Shares and Offered Warrants, free and clear of all liens,
encumbrances, equities, security interests and claims.
(xii) Assuming that the Underwriter
exer- cises the over-allotment option to purchase any of the Optional Shares and
Offered Warrants and makes payment therefor in accordance with the terms of this
Agreement, upon delivery of the Optional Shares and Optional Warrants so
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purchased to the Underwriter hereunder, the Underwriter (assuming it is a bona
fide purchaser within the meaning of the Uniform Commercial Code) will acquire
good title to such Optional Shares and Optional Warrants, free and clear of
any liens, encumbrances, equities, security interests and claims.
(xiii) To the best of Company
Counsel's knowledge, there are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries before any governmental agency, court
or tribunal, foreign or domestic, or before any private arbitration tribunal,
pending or threatened against the Company, or involving its properties or
business, other than as described in the Prospectus, such description being
accurate, and other than litigation incident to the kind of business conducted
by the Company which, individually and in the aggregate, is not material.
(xiv) The Company owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of Company Counsel's knowledge, the Company has not
infringed and is not infringing with the rights of others with respect to
Intangibles; and, to the best of Company Counsel's knowledge, the Company has
not received any notice of conflict with the asserted rights of others with
respect to Intangibles which might, singly or in the aggregate, materially
adversely affect its business, results of operations or financial condition and
such counsel is not aware of any licenses with respect to the Intangibles which
are required to be obtained by the Company. The opinions described in this
Section 6(b)(xiv) may be given by Company Counsel in reliance on the opinion of
an attorney, reasonably acceptable to Underwriter's Counsel, practicing in the
patent area.
(xv) Company Counsel has participated
in reviews and discussions in connection with the preparation of the
Registration Statement and the Prospectus, and in the course of such reviews and
discussions and such other investigation as Company Counsel deemed necessary, no
facts came to its attention which lead it to believe that (A) the Registration
Statement (except as to the financial statements and other financial data
contained therein, as to which Company Counsel need not express an opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which Company Counsel need not express an opinion)
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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In rendering its opinion, Company Counsel
may rely upon the certificates of government officials and officers of the
Company as to matters of fact, provided that Company Counsel shall state that
they have no reason to believe, and do not believe, that they are not justified
in relying upon such opinions or such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
The opinion letter delivered pursuant to
this Section 6(b) shall state that any opinion given therein qualified by the
phrase "to the best of our knowledge" is being given by Company Counsel after
due investigation of the matters therein discussed.
(c) At the Closing Date, there will have been
delivered to the Underwriter a signed opinion of Underwriter's Counsel, dated as
of the Closing Date, to the effect that the opinions delivered pursuant to
Section 6(b) hereof appear on their face to be appropriately responsive to the
requirements of this Agreement, except to the extent waived by the Underwriter,
specifying the same, and with respect to the incorporation and legal existence
of the Company, the validity of the Shares and Warrants sold by the Company, the
validity of this Agreement (subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions set forth in Section 7 hereof and the contribution
provisions set forth in Section 8 hereof may be limited by the federal
securities laws or public policy underlying such laws) and such other related
matters as the Underwriter may require.
(d) At the Closing Date (i) the Registration State-
ment and the Prospectus and any amendments or supplements thereto will contain
all material statements which are required to be stated therein in accordance
with the Act and the Regulations and will conform in all material respects to
the requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
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Prospectus indicates might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the business, property,
financial condition or results of operations of the Company, other than as set
forth in the Registration Statement and the Prospectus. At the Closing Date,
there will be delivered to the Underwriter a certificate signed by the Chairman
of the Board or the President or a Vice President of the Company, dated the
Closing Date, evidencing compliance with the provisions of this Section 6(d) and
stating that the representations and warranties of the Company set forth in
Section 4 hereof were accurate and complete in all material respects when made
on the date hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to or as of the Closing Date; and that, as of
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to the best of his knowledge, are contemplated or threatened. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter or Underwriter's Counsel may
reasonably request.
(e) At the time that this Agreement is executed and
at the Closing Date, the Underwriter will have received a signed letter from
KPMG Peat Marwick LLP, dated the date such letter is to be received by the
Underwriter and addressed to it, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as reported on by them, in their opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
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and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or increases in total or per share net loss compared with the
corresponding period in the preceding year or any change in the capitalization
or long-term debt of the Company, except in all cases as set forth in or
contemplated by the Registration Statement and the Prospectus, and (B) the
unaudited interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus, do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity with generally accepted
accounting principles and practices on a basis substantially consistent with the
audited financial statements included in the Registration Statement or the
Prospectus; and (iii) they have compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and information may be derived from the general
accounting records of the Company, and excluding any questions requiring an
interpretation by legal counsel) with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter, and found them to be in
agreement.
(f) There shall have been duly tendered to the
Underwriter certificates representing the Offered Shares and the Offered
Warrants to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Shares
and Warrants by the Underwriter.
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<PAGE>
(h) No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date or the Option Closing Date, as the case may be, for
any member firm of the NASD to execute transactions (as principal or as agent)
in the Shares or Warrants, and no proceedings for the purpose of taking such
action shall have been instituted or shall be pending, or, to the best of the
Underwriter's or the Company's knowledge, shall be contemplated by the
Commission or the NASD. The Company represents at the date hereof, and shall
represent as of the Closing Date or Option Closing Date, as the case may be,
that it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(i) All proceedings taken at or prior to the Closing
Date or the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares or Warrants shall be reasonably
satisfactory in form and substance to the Underwriter and to Underwriter's
Counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may request for the purpose of enabling them
to pass upon the matters referred to in Section 6(c) hereof and in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company, the performance of any covenants of the Company,
or the compliance by the Company with any of the conditions herein contained.
If any of the conditions specified in this Section
6 have not been fulfilled, this Agreement may be terminated by the Underwriter
on notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold
harmless the Underwriter, each officer, director, partner, employee and agent of
the Underwriter, and each person, if any, who controls the Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or on behalf of
the Company, filed in any jurisdiction in order to qualify the Shares and
Warrants under the securities laws thereof (hereinafter "application"), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, unless such untrue statement or
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<PAGE>
omission was made in such Registration Statement, Preliminary Prospectus,
Prospectus or application in reliance upon and in conformity with information
furnished in writing to the Company in connection therewith by the Underwriter
or any such person through the Underwriter expressly for use therein; provided,
however, that the indemnity agreement contained in this Section 7(a) with
respect to any Preliminary Prospectus will not inure to the benefit of the
Underwriter (or to the benefit of any other person that may be indemnified
pursuant to this Section 7(a)) if (A) the person asserting any such losses,
claims, damages, expenses or liabilities purchased the Shares and/or Warrants
which are the subject thereof from the Underwriter or other indemnified person;
(B) the Underwriter or other indemnified person failed to send or give a copy of
the Prospectus to such person at or prior to the written confirmation of the
sale of such Shares and/or Warrants to such person; and (C) the Prospectus did
not contain any untrue statement or alleged untrue statement or omission or
alleged omission giving rise to such cause, claim, damage, expense or liability.
(b) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), to which they or
any of them may become subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer or controlling person for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares and
Warrants under state securities or Blue Sky laws), or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Underwriter expressly for use therein.
(c) Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
any indemnifying party under this Section 7, the indemnified party will notify
the indemnifying party in writing of the commencement thereof, and the
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<PAGE>
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel satisfactory to
the indemnified party and the payment of expenses) insofar as such action
relates to an alleged liability in respect of which indemnity may be sought
against the indemnifying party. After notice from the indemnifying party of its
election to assume the defense of such claim or action, the indemnifying party
shall no longer be liable to the indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable judgment of the
indemnified party or parties, it is advisable for the indemnified party or
parties to be represented by separate counsel, the indemnified party or parties
shall have the right to employ a single counsel to represent the indemnified
parties who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties thereof against the
indemnifying party, in which event the fees and expenses of such separate
counsel shall be borne by the indemnifying party. Any party against whom
indemnification may be sought under this Section 7 shall not be liable to
indemnify any person that might otherwise be indemnified pursuant hereto for any
settlement of any action effected without such indemnifying party's consent,
which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 hereof (subject to the limitations thereof) and it is
finally determined, by a judgment, order or decree not subject to further
appeal, that such claim for indemnification may not be enforced, even though
this Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriter (including, for this purpose, any
contribution by or on behalf of each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, partner, employee and agent of the
Underwriter) as a second entity, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any of them may be subject, so
that the Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share and per Warrant set forth
on the cover page of the Prospectus represents of the initial public offering
price per Share and per Warrant set forth on the cover page of the Prospectus
and the Company is responsible for the remaining portion; provided, however,
that if applicable law does not permit such allocation, then, if applicable law
permits, other relevant equitable considerations such as the relative fault of
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<PAGE>
the Company and the Underwriter in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be considered.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the Company or by the Underwriter, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Underwriter agree that it would be unjust and
inequitable if the respective obligations of the Company and the Underwriter for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 8. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) will be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee and agent of the Under-writer will have the
same rights to contribution as the Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who has signed the
Registration Statement and each director of the Company will have the same
rights to contribution as the Company, subject in each case to the provisions of
this Section 8. Anything in this Section 8 to the contrary notwithstanding, no
party will be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 8 is intended
to supersede, to the extent permitted by law, any right to contribution under
the Act or the Exchange Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of the
Underwriter, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Shares and the Warrants.
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice
to the Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
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<PAGE>
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Shares and Offered Warrants for public offering.
The time when the Underwriter "releases the Offered Shares and Offered Warrants
for public offering" for the purposes of this Section 10 means the time when the
Underwriter releases for publication the first newspaper advertisement, which is
subsequently published, relating to the Offered Shares and Offered Warrants, or
the time when the Underwriter releases for delivery to members of a selling
group copies of the Prospectus and an offering letter or an offering telegram
relating to the Offered Shares and Offered Warrants, whichever will first occur.
(b) This Agreement, including without limitation,
the obligation to purchase the Offered Shares and the Offered Warrants and the
obligation to purchase the Optional Shares and/or Optional Warrants after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares and
Offered Warrants or the Optional Shares and Optional Warrants, as the case may
be, if, prior to such time, any of the following shall have occurred: (i) the
Company withdraws the Registration Statement from the Commission or the Company
does not or cannot expeditiously proceed with the public offering; (ii) the
representations and warranties in Section 4 hereof are not materially correct or
cannot be complied with; (iii) trading in securities generally on the New York
Stock Exchange or the American Stock Exchange will have been suspended; (iv)
limited or minimum prices will have been established on either such Exchange;
(v) a banking moratorium will have been declared either by federal or New York
State authorities; (vi) any other restrictions on transactions in securities
materially affecting the free market for securities or the payment for such
securities, including the Offered Shares and Offered Warrants or the Optional
Shares and Optional Warrants, will be established by either of such Exchanges,
by the Commission, by any other federal or state agency, by action of the
Congress or by Executive Order; (vii) trading in any securities of the Company
shall have been suspended or halted by any national securities exchange, the
NASD or the Commission; (viii) there has been a materially adverse change in the
condition (financial or otherwise), prospects or obligations of the Company;
(ix) the Company will have sustained a material loss, whether or not insured, by
reason of fire, flood, accident or other calamity; (x) any action has been taken
by the government of the United States or any department or agency thereof
which, in the judgment of the Underwriter, has had a material adverse effect
upon the market or potential market for securities in general; or (xi) the
market for securities in general or political, financial or economic conditions
will have so materially adversely changed that, in the judgment of the
Underwriter, it will be impracticable to offer for sale, or to enforce contracts
made by the Underwriter for the resale of, the Offered Shares and Offered
Warrants or the Optional Shares and Offered Warrants, as the case may be.
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<PAGE>
(c) If this Agreement is terminated pursuant to
Section 6 hereof or this Section 10 or if the purchases provided for herein are
not consummated because any condition of the Underwriter's obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
11. Information Furnished by the Underwriter to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and
8 hereof, the only information given by the Underwriter to the Company for use
in the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to stabilizing the market price of Shares and Warrants, the
information in the __ paragraph on page __ with respect to concessions and
reallowances, and the information in the ___ paragraph on page ___ with respect
to the determination of the public offering price, as such information appears
in any Preliminary Prospectus and in the Prospectus.
12. Notices and Governing Law. All communications hereunder
will be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telegraphed to, the
following addresses: if to the Underwriter, to Whale Securities Co., L.P., 650
Fifth Avenue, New York, New York 10019, Attention: William G. Walters, with a
copy to Tenzer Greenblatt LLP, Attention: Robert J. Mittman, Esq., 405 Lexington
Avenue, New York, New York 10174; if to the Company, addressed to it at 7 West
51st Street, New York, New York 10019, Attention: Chief Executive Officer, with
a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York
10178, Attention: David W. Pollack, Esq.
This Agreement shall be deemed to have been made and
delivered in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (2) waives any objection
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<PAGE>
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding.
13. Parties in Interest. This Agreement is made solely for the
benefit of the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter, each officer, director, partner,
employee and agent of the Underwriter, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares or
Warrants from the Underwriter, as such purchaser.
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<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
VISUAL EDGE SYSTEMS INC.
By:
--------------------------------
Name:
Title:
Confirmed and accepted in New York, N.Y., as of the date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:
--------------------------------
Name:
Title:
Each of the Undersigned hereby
accepts and agrees to be bound by
the provisions of Sections 5(l),
(q) and (r) of this Agreement, as
the same may be applied to such
person as an officer, director
and/or shareholder of the Company.
--------------------------------
--------------------------------
--------------------------------
--------------------------------
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CERTIFICATE OF INCORPORATION
OF
GOLF VISION, INC.
* * * * * * * * * *
1. The name of the corporation is
GOLF VISION, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust company.
3. The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity which corporations may be organized under
the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is fifteen hundred (1500) each without par value.
5. The name and mailing address of each incorporator
<PAGE>
is as follows:
NAME MAILING ADDRESS
---- ---------------
M. A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
K. A. Widdoes Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
6. The corporation is to have perpetual existence.
7. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
8. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 15th day of July, 1994.
/s/ M. A. Brzoska
/s/ K. A. Widdoes
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * * * *
Golf Vision, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Golf Vision, Inc. be
amended by changing the First and Fourth Articles thereof so that, as
amended, said Articles shall be and read as follows:
"First: The name of the Corporation is Visual Edge Systems. Inc.
Fourth: The total number of shares of stock which the corporation shall
have authority to issue is twenty million (20,000,000) and par value of
each such share is one cent ($0.01) amounting in the aggregate to two
hundred thousand dollars ($200,000)."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written
<PAGE>
2
consent to said amendment in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Golf Vision, Inc. has caused this certificate to
be signed by Alan Lubell, its chairman, this 16th day of march, 1995.
GOLF VISION,
By: /s/ Alan Lubell
----------------
Name: Alan Lubell
Title: Chairman
<PAGE>
BY-LAWS
OF
VISUAL EDGE SYSTEMS INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Board of Directors,
for the purpose of electing Directors and for the transaction of such other
business as may be properly brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman of
the Board or the President and shall be called by the Chairman of the Board, the
President or the Secretary at the request in writing of stockholders holding
together at least twenty-five percent of the number of shares of stock
outstanding and entitled to vote at such meeting. Any special meeting of the
stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors or the officer
calling the meeting may designate. At a special meeting
<PAGE>
of the stockholders, no business shall be transacted and no corporate action
shall be taken other than that stated in the notice of the meeting unless all of
the stockholders are present in person or by proxy, in which case any and all
business may be transacted at the meeting even though the meeting is held
without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting
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<PAGE>
of the stockholders at which the holders of any class of stock of the
Corporation shall be entitled to vote separately as a class, the holders of a
majority in number of the total outstanding shares of such class, present in
person or represented by proxy, shall constitute a quorum for purposes of such
class vote unless the representation of a larger number of shares of such class
shall be required by law, by the Certificate of Incorporation or by these
By-Laws.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present in
person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any
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<PAGE>
business which might have been transacted by them at the original meeting. If
the adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.
SECTION 6. Organization. The Chairman of the Board or, in his absence, the
President shall call all meetings of the stockholders to order, and shall act as
Chairman of such meetings. In the absence of the Chairman of the Board and the
President, the holders of a majority in number of the shares of stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings of
the stockholders; but in the absence of the Secretary, the Chairman may appoint
any person to act as Secretary of the meeting. It shall be the duty of the
Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open, either at a place within the city where the meeting is to be held,
which
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<PAGE>
place shall be specified in the notice of the meeting or, if not so specified,
at the place where the meeting is to be held, for the ten days next preceding
the meeting, to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, and shall be produced and kept at
the time and place of the meeting during the whole time thereof and subject to
the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
stockholder upon the books of the Corporation. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise provided by law or by the Certificate of Incorporation, Directors
shall be elected by a plurality of the votes cast at a meeting of stockholders
by the stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of
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<PAGE>
the votes cast at a meeting of stockholders by the stockholders entitled to vote
thereon.
Shares of the capital stock of the Corporation belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
SECTION 8. Inspectors. When required by law or directed by the presiding
officer or upon the demand of any stockholder entitled to vote, but not
otherwise, the polls shall be opened and closed, the proxies and ballots shall
be received and taken in charge, and all questions touching the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided at any meeting of the stockholders by two or more Inspectors who may
be appointed by the Board of Directors before the meeting, or if not so
appointed, shall be appointed by the presiding officer at the meeting. If any
person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken or
which may be taken at any
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annual or special meeting of the stockholders of the Corporation, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be 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. Prompt notice of the taking of
any such corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
none of whom need be stockholders of the Corporation. The number of Directors
constituting the Board of Directors shall be fixed from time to time by
resolution passed by a majority of the Board of Directors. The Directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected at
the annual meeting of stockholders, and shall hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal.
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SECTION 2. Removal, Vacancies and Additional Directors. The stockholders
may, at any special meeting the notice of which shall state that it is called
for that purpose, remove, with or without cause, any Director and fill the
vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future date, a
majority of the Directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
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Director so chosen shall hold office as herein provided in connection with the
filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its meetings
in such place or places in the State of Delaware or outside the state of
Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every Director at least
five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the Chairman of the Board, the
President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting shall
be given by mailing the same at least two days before the meeting or by causing
the same to be transmitted by telegraph, cable or wireless at least one day
before the
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meeting to each Director. Unless otherwise indicated in the notice thereof, any
and all business other than an amendment of these By-Laws may be transacted at
any special meeting, and an amendment of these By-Laws may be acted upon if the
notice of the meeting shall have stated that the amendment of these By-Laws is
one of the purposes of the meeting. At any meeting at which every Director shall
be present, even though without any notice, any business may be transacted,
including the amendment of these By-Laws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article
II, a majority of the members of the Board of Directors in office (but, unless
the Board shall consist solely of one Director, in no case less than one-third
of the total number of Directors nor less than two Directors) shall constitute a
quorum for the transaction of business and the vote of the majority of the
Directors present at any meeting of the Board of Directors at which a quorum is
present shall be the act of the Board of Directors. If at any meeting of the
Board there is less than a quorum present, a majority of those present may
adjourn the meeting from time to time.
SECTION 7. Organization. The Chairman of the Board or, in his absence, the
President shall preside at all meetings of the Board of Directors. In the
absence of the Chairman of the Board and the President, a Chairman shall be
elected from the
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Directors present. The Secretary of the Corporation shall act as Secretary of
all meetings of the Directors; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting.
SECTION 8. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially
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all of the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
these By-Laws; and unless such resolution, these By-Laws, or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by
the Certificate of Incorporation or by these By-Laws, the members of the Board
of Directors or any committee designated by the Board, may participate in a
meeting of the Board or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members or the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed
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with the minutes of proceedings of the Board or committee, as the case may be.
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation shall be a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary and a
Treasurer, and such additional officers, if any, as shall be elected by the
Board of Directors pursuant to the provisions of Section 7 of this Article III.
The Chairman of the Board, the President, one or more Vice Presidents, the
Secretary and the Treasurer shall be elected by the Board of Directors at its
first meeting after each annual meeting of the stockholders. The failure to hold
such election shall not of itself terminate the term of office of any officer.
All officers shall hold office at the pleasure of the Board of Directors. Any
officer may resign at any time upon written notice to the Corporation. Officers
may, but need not, be Directors. Any number of offices may be held by the same
person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
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rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation as
set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined bY the Board of
Directors.
SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman of
the Board shall be the chief executive officer of the Corporation and, subject
to the control of the Board of Directors, shall have general charge and control
of all its business and affairs and shall have all powers and shall perform all
duties incident to the office of Chairman of the Board. He shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors.
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SECTION 3. Powers and Duties of the President. The President shall be the
chief operating officer of the Corporation and, subject to the control of the
Board of Directors and the Chairman of the Board, shall have general charge and
control of all its operations and shall have all powers and shall perform all
duties incident to the office of President. In the absence of the Chairman of
the Board, he shall preside at all meetings of the stockholders and at all
meetings of the Board of Directors and shall have such other powers and perform
such other duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors or the Chairman of the Board.
SECTION 4. Powers and Duties of the Vice Presidents. Each Vice President
shall have all powers and shall perform all duties incident to the office of
Vice President and shall have such other powers and perform such other duties as
may from time to time be assigned to him by these By-Laws or by the Board of
Directors, the Chairman of the Board or the President.
SECTION 5. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors or
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the President shall authorize and direct; he shall have charge of the stock
certificate books, transfer books and stock ledgers and such other books and
papers as the Board of Directors or the President shall direct, all of which
shall at all reasonable times be open to the examination of any Director, upon
application, at the office of the Corporation during business hours; and
whenever required by the Board of Directors, the Chairman of the Board or the
President shall render statements of such accounts; and he shall have all powers
and shall perform all duties incident to the office or Secretary and shall also
have such other powers and shall perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman of the Board or the President.
SECTION 6. Powers and Duties of the Treasurer. The Treasurer shall have
custody of, and when proper shall pay out, disburse or otherwise dispose of, all
funds and securities of the Corporation which may have come into his hands; he
may endorse or behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositaries as the Board of Directors may
designate; he shall sign all receipts and vouchers for payments made to the
Corporation; he shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and
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whenever required by the Board of Directors, the Chairman of the Board or the
President shall render statements of such accounts; he shall, at all reasonable
times, exhibit his books and accounts to any Director of the Corporation upon
application at the office of the Corporation during business hours; and he shall
have all powers and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors, the Chairman of the Board or the Prersident.
SECTION 7. Additional Officers. The Board of Directors may from time to
time elect such other officers (who may but need not be Directors), including a
Controller, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board or the President.
The Board of Directors may from time to time by resolution delegate to any
Assistant Treasurer or Assistant Treasurers any of the powers or duties herein
assigned to the Treasurer; and may similarly delegate to any Assistant Secretary
or Assistant Secretaries any of the powers or duties herein assigned to the
Secretary.
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SECTION 8. Giving of Bond by Officers. All officers of the Corporation, if
required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.
SECTION 9. Voting Upon Stocks. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote, or in the name of the Corporation to execute proxies to vote, at
any meeting of stockholders of any corporation in which the Corporation may hold
stock, and at any such meeting shall possess and may exercise, in person or by
proxy, any and all rights, powers and privileges incident to the ownership of
such stock. The Board of Directors may from time to time, by resolution, confer
like powers upon any other person or persons.
SECTION 10. Compensation of Officers. The officers of the Corporation shall
be entitled to receive such compensation for their services as shall from time
to time be determined by the Board of Directors.
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ARTICLE IV
Indemnification of Directors and Officers
Section 1. Nature of Indemnity. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit proceeding, whether civil, criminal,
administrative or investigative, by reason or the fact that he is or was or has
agreed to become a Director or officer of the Corporation, or is or was serving
or has agreed to serve at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action, suit or proceeding by reason of
the fact that he is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests
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of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful; except that in the case
of an action or suit by or in the right of the Corporation to procure a judgment
in its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnificaticn shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
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Section 2. Successful Defense. To the extent that a Director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
of this Article IV or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in correction therewith.
Section 3. Determination that Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
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Section 4. Advance Payment of Expenses. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Direcor or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IV.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or proceeding.
Section 5. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or
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previously existing or any action, suit, or proceeding previously or thereafter
brought or threatened based in whole or in part upon any such state of facts.
Such a contract right may not be modified retroactively without the consent of
such Director, officer. emolovee or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
Section 6. Severability. If this Article IV or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
iindemnify each employee or agent of the Corporation as to costs, charges and
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expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Section 7. Subrogation. In the event of payment of indemnification to a
person described in Section 1 of this Article IV, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
Section 8. No Duplication of Payments. The Corporation shall not be liable
under this Article IV to make any payment in connection with any claim made
against a person described in Section 1 of this Article IV to the extent such
person has otherwise received payment (under any insurance policy, by-law or
otherwise) of the amounts otherwise payable as indemnity hereunder.
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ARTICLE V
Stock-Seal-Fiscal Year
SECTION 1. Certificates For Shares of Stock. The certificates for shares of
stock of the Corporation shall be in such form, not inconsistent with the
Certificate of Incorporation, as shall be approved by the Board of Directors.
All certificates shall be signed by the Chairman of the Board, the President or
a Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates had not ceased to be such
officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented thereby
with the number of such shares and the date of issue thereof shall be entered on
the books of the Corporation.
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Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost Stolen or Destroyed Certificates. Whenever a person owning
a certificate for shares of stock of the Corporation alleges that it has been
lost, stolen or destroyed, he shall file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
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SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof, in person or
by his attorney duly authorized in writing, upon surrender and cancellation of
certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article IV.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration or certificates for shares of stock of the
Corporation.
SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than sixty (60) nor less than ten (10) days before
the date of such meeting, or (ii) in the case of corporate action to be taken by
consent in writing without a meeting, prior to, or more than ten (10) days
after, the date upon which the resolution
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fixing the record date is adopted by the Board of Directors, or (iii) more than
sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is delivered to the Corporation; and the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
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Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a suitable
seal, containing the name of the Corporation, which seal shall be kept in the
custody of the Secretary. A duplicate of the seal may be kept and be used by any
officer of the Corporation designated by the Board of Directors, the Chairman of
the Board or the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be such
fiscal year as the Board of Directors from time to time by resolution shall
determine.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by
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the Board of Directors, countersigned by such officers of the Corporation
and/or other persons as the Board of Directors from time to time shall
designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depository
by the Treasurer and/or such other officers or persons as the Board of Directors
from time to time may designate.
SECTION 2. Loans. No loans and no renewals of any loans shall be contracted
on behalf of the Corporation except as authorized by the Board of Directors.
When authorized so to do, any officer or agent of the Corporation may effect
loans and advances for the Corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. When authorized so to do, any
officer or agent of the Corporation, may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
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Section 3. Contracts. Except as otherwise provided in these By-Laws or by
law or as otherwise directed by the Board of Directors, the Chairman of the
Board, the President or any Vice President shall be authorized to execute and
deliver, in the name and on behalf of the Corporation, all agreements, bonds,
contracts, deeds, mortgages, and other instruments, either for the Corporation's
own account or in a fiduciary or other capacity, and the seal of the
Corporation, if appropriate, shall be affixed thereto by any of such officers or
the Secretary or an Assistant Secretary. The Board of Directors, the Chairman of
the Board, the President or any Vice President designated by the Board of
Directors, the Chairman of the Board or the President may authorize any other
officer, employee or agent to execute and deliver, in the name and on behalf of
the Corporation, agreements, bonds, contracts, deeds, mortgages, and other
instruments, either for the Corporation's own account or in a fiduciary or other
capacity, and, if appropriate, to affix the seal of the Corporation thereto. The
grant of such authority by the Board or any such officer may be general or
confined to specific instances.
SECTION 4. Waivers of Notice. Whenever any notice whatever is required to
be given by law, by the Certificate of Incorporation or by these By-Laws to any
person or persons, a waiver thereof in writing, signed by the person or persons
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entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
SECTION 5. Offices Outside of Delaware. Except as otherwise required by the
laws of the State of Delaware, the Corporation may have an office or offices and
keep its books, documents and papers outside of the State of Delaware at such
place or places as from time to time may be determined by the Board of Directors
or the Chairman of the Board.
ARTICLE VII
Amendments
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof, may be altered,
amended or repealed or new By-Laws may be adopted by the holders of a majority
of the total outstanding stock of the Corporation entitled to vote at any annual
meeting or at any special meeting, provided, in the case of any special meeting,
that notice of such proposed alteration, amendment, repeal or adoption is
included in the notice of the meeting.
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WARRANT AGREEMENT dated as of __________, 1996 between Visual
Edge Systems, Inc., a Delaware corporation (the "Company"), and Whale Securities
Co., L.P. (hereinafter referred to as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter
100,000 warrants (the "Warrants") to purchase up to 130,000 shares (the
"Shares") of Common Stock of the Company, par value $.01 per share (the "Common
Stock") and up to 130,000 Common Stock purchase warrants (the "Underlying
Warrants"); and
WHEREAS, the Underwriter has agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _____________, 1996
between the Underwriter and the Company, to act as the underwriter in connection
with the Company's proposed public offering (the "Public Offering") of 1,300,000
shares of Common Stock (the "Public Shares") at an initial public offering price
of $5.00 per Public Share and 1,300,000 warrants (the "Public Warrants") at an
initial public offering price of $.10 per Public Warrant; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriter or officers and partners of the
Underwriter and members of the selling group and/or their officers or partners,
in consideration for, and as part of the Underwriter's compensation in
connection with, the Underwriter acting as the Underwriter pursuant to the
Underwriting Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises, the payment
by the Underwriter or its designees to the Company of ONE HUNDRED THIRTY DOLLARS
($130.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Underwriter, and/or its designees who are
officers or partners of the Underwriter or members of the Selling Group in
connection with the Public Offering, are hereby granted the right to purchase,
at any time from _____________, 1996 until 5:00 P.M., New York time, on
_________, 2001 (the "Warrant Exercise Term"), up to 130,000 fully-paid and
non-assessable Shares at an initial exercise price (subject to adjustment as
provided in Article 6 hereof) of $6.75 per Share and up to 130,000 Underlying
Warrants at an initial exercise price (subject to adjustment as provided in
Article 6 hereof) of $.135 per Underlying Warrant. The Underlying Warrants are
each exercisable to purchase one fully-paid and non-assessable share of Common
Stock at a price of $6.75 per share (the "Underlying Warrant Shares"). The
Underlying Warrants are exercisable at any time commencing ______, 1997 until
5:00 P.M., New York City time on ________, 2000. The Holder may purchase, upon
exercise of this Warrant, either the Shares or the Underlying Warrants or both.
Except as provided in Sections 13 hereof, the Shares and the Underlying Warrants
are in all respects identical to the Public Shares and Public Warrants being
sold to the public pursuant to the terms and provisions of the Underwriting
Agreement.
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2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
3.1. Cash Exercise. The Warrants initially are
exercisable at a price of $6.75 per Share purchased and $.135 per Underlying
Warrant purchased, payable in cash or by check to the order of the Company, or
any combination of cash or check, subject to adjustment as provided in Article 8
hereof. Upon surrender of the Warrant Certificate(s) with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
(as hereinafter defined) for the Shares and Underlying Warrants purchased, at
the Company's principal offices in New York City (currently located at 7 West
51st Street, New York, New York 10019) the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Shares so purchased and/or a certificate or certificates
for the Underlying Warrants so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder hereof, in
whole or in part (but not as to fractional Shares or fractional Underlying
Warrants). In the case of the purchase of less than all the Shares or Underlying
Warrants purchasable under any Warrant Certificate, the Company shall cancel
said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares or
Underlying Warrants purchasable thereunder.
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3.2. Cashless Exercise. At any time during the
Warrant Exercise Term, the Holder may, at its option, exchange the Warrants
represented by such Holder's Warrant Certificate for the purchase of Shares, in
whole or in part (a "Warrant Exchange"), into the number of Shares determined in
accordance with this Section 3.2, by surrendering such Warrant Certificate at
the principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such exchange,
the number of Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange or, if
later, the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new Warrant Certificate of like tenor evidencing the Shares which
were subject to the surrendered Warrant Certificate and not included in the
Warrant Exchange, shall be issued as of the Exchange Date and delivered to the
Holder within three (3) days following the Exchange Date. In connection with any
Warrant Exchange, the Holder's Warrant Certificate for the purchase of Shares
shall represent the right to subscribe for and
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acquire (I) the number of Shares (rounded to the next highest integer) equal to
(A) the number of Shares specified by the Holder in its Notice of Exchange (the
"Total Share Number") less (B) the number of Shares equal to the quotient
obtained by dividing (i) the product of the Total Share Number and the existing
Exercise Price per Share (as hereinafter defined) by (ii) the current Market
Price (as hereinafter defined) of a Public Share. Market Price (as hereinafter
defined) of a Public Share. "Market Price" at any date shall be deemed to be the
last reported sale price, or, in case no such reported sale takes place on such
day, the average of the last reported sale prices for the last three trading
days, in either case as officially reported by the principal securities exchange
on which the Common Stock is listed or admitted to trading or as reported in the
NASDAQ National Market System, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or quoted on the NASDAQ National
Market System, the closing bid price as furnished by (i) the National
Association of Securities Dealers, Inc. through NASDAQ or (ii) a similar
organization if NASDAQ is no longer reporting such information.
4. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares purchased and certificates for the Underlying
Warrants purchased, and upon the exercise of the Underlying Warrants, the
issuance of certificates for the Underlying Warrant Shares purchased, shall be
made forthwith (and in any event within three business days thereafter) without
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charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Article 5 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the
Shares and the Underlying Warrants shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company. Warrant Certificates and certificates representing the
Underlying Warrants shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
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Upon exercise, in part or in whole, of the Warrants,
certificates representing the Shares and the Underlying Warrants purchased, and
upon exercise, in whole or in part, of the Underlying Warrants, certificates
representing the Underlying Warrant Shares purchased (collectively, the "Warrant
Securities"), shall bear a legend substantially similar to the following:
"The securities represented by this certificate and the other
securities issuable upon exercise thereof have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof, and that the
Warrants may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for a period of one (1) year from the date
hereof, except to officers and partners of the Underwriter or to any member of
the selling group participating in the distribution to the public of the Public
Shares and Public Warrants and/or their respective officers or partners.
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6. Price.
6.1. Initial and Adjusted Exercise Price. The
initial exercise price of each Warrant shall be 6.75 per Share and $.135 per
Underlying Warrant. The adjusted exercise price per Share and the adjusted
exercise price per Underlying Warrant shall be the price which shall result from
time to time from any and all adjustments of the initial exercise price per
Share or per Underlying Warrant, as the case may be, in accordance with the
provisions of Article 8 hereof.
6.2. Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. Registration Rights.
7.1. Registration Under the Securities Act of
1933. None of the Warrants, the Shares, the Underlying Warrants, or the
Underlying Warrant Shares have been registered for purposes of public
distribution under the Securities Act of 1933, as amended (the "Act").
7.2. Registrable Securities. As used herein the term
"Registrable Security" means each of the Warrants, the Shares, the Underlying
Warrants, the Underlying Warrant Shares and any shares of Common Stock issued
upon any stock split or stock dividend in respect of such Shares or Underlying
Warrant Shares; provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a Registrable Security
when, as of the date of determination, (i) it has been effectively registered
under the Act and disposed of pursuant thereto, (ii) registration under the Act
is no longer required for subsequent public distribution of such security, or
(iii) it has ceased to be outstanding. The term "Registrable Securities" means
any and/or all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be made in the definition of
"Registrable Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Article 7.
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7.3. Piggyback Registration. If, at any time during the seven
years following the date of this Agreement, the Company proposes to prepare and
file one or more post-effective amendments to the registration statement filed
in connection with the Public Offering or any new registration statement or
post-effective amendments thereto covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders (in any
such case, other than in connection with a merger, acquisition or pursuant to
Form S-8 or successor form) (for purposes of this Article 7, collectively, the
"Registration Statement"), it will give written notice of its intention to do so
by registered mail ("Notice"), at least thirty (30) business days prior to the
filing of each such Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a "Requesting Holder"),
made within twenty (20) business days after receipt of the Notice, that the
Company include any of the Requesting Holder's Registrable Securities in the
proposed Registration Statement, the Company shall, as to each such Requesting
Holder, use its best efforts to effect the registration under the Act of the
Registrable Securities which it has been so requested to register ("Piggyback
Registration"), at the Company's sole cost and expense and at no cost or expense
to the Requesting Holders.
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Notwithstanding the provisions of this Section 7.3, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.3 (irrespective of whether any written request
for inclusion of Registrable Securities shall have already been made) to elect
not to file any such proposed Registration Statement, or to withdraw the same
after the filing but prior to the effective date thereof.
7.4. Demand Registration.
(a) At any time during the Warrant
Exercise Term, any "Majority Holder" (as such term is defined in Section 7.4(d)
below) of the Registrable Securities shall have the right (which right is in
addition to the piggyback registration rights provided for under Section 7.3
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission") on one occasion, at the sole expense of the
Company, a Registration Statement and such other documents, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Majority Holder) in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof. The Company shall use it best efforts to
cause the Registration Statement to become effective under the Act and to
maintain the effectiveness of the Registration Statement until the earlier of
(i) the date that all the Registrable Securities have been sold, or (ii) the
date the holders thereof receive an opinion of counsel to the Company that all
of the Registrable Securities may be freely traded without registration under
the Act, under Rule 144 of the Act or otherwise.
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(b) The Company covenants and agrees to
give written notice of any Demand Registration Request to all holders of the
Registrable Securities within ten (10) days from the date of the Company's
receipt of any such Demand Registration Request. After receiving notice from the
Company as provided in this Section 7.4(b), holders of Registrable Securities
may request the Company to include their Registrable Securities in the
Registration Statement to be filed pursuant to Section 7.4(a) hereof by
notifying the Company of their decision to have such securities included within
ten (10) days of their receipt of the Company's notice.
(c) In addition to the registration rights
provided for under Section 7.3 hereof and subsection (a) of this Section 7.4, at
any time during the Warrant Exercise Term, any Majority Holder (as defined below
in Section 7.4(d)) of Registrable Securities shall have the right, exercisable
by written request to the Company, to have the Company prepare and file with the
Commission, on one occasion in respect of all holders of Registrable Securities,
a Registration Statement so as to permit a public offering and sale of such
Registrable Securities for nine (9) consecutive months, provided, however, that
all costs incident thereto shall be at the expense of the holders of the
Registrable Securities included in such Registration Statement. If a Majority
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Holder shall give notice to the Company at any time of its or their desire to
exercise the registration right granted pursuant to this Section 7.4(c), then
within ten (10) days after the Company's receipt of such notice, the Company
shall give notice to the other holders of Registrable Securities advising them
that the Company is proceeding with such registration and offering to include
therein the Registrable Securities of such holders, provided they furnish the
Company with such appropriate information in connection therewith as the Company
shall reasonably request in writing.
(d) The term "Majority Holder" as used in
Section 7.4 hereof shall mean any holder, or any combination of holders of
Registrable Securities, if included in such holders' Registrable Securities are
that aggregate number of shares of Common Stock (including Shares already
issued, Shares issuable pursuant to the exercise of outstanding Warrants,
Underlying Warrant Shares already issued and Underlying Warrant Shares issuable
pursuant to the exercise of outstanding Underlying Warrants) as would constitute
a majority of the aggregate number of shares of Common Stock (including Shares
already issued, Shares issuable pursuant to the exercise of outstanding
Warrants, Underlying Warrant Shares already issued and Underlying Warrant Shares
issuable pursuant to the exercise of outstanding Underlying Warrants) included
in all the Registrable Securities.
7.5. Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
(a) In connection with any registration
under Section 7.4 hereof, the Company shall file the Registration
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Statement as expeditiously as possible, but in any event no later than twenty
(20) days following receipt of any demand therefor, shall use its best efforts
to have any such Registration Statement declared effective at the earliest
possible time, and shall furnish each holder of Registrable Securities such
number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs, fees
and expenses in connection with all Registration Statements filed pursuant to
Sections 7.3 and 7.4(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The holders of Registrable Securities included in any Registration Statement
filed pursuant to Section 7.4(c) hereof will pay all costs, fees and expenses in
connection with such Registration Statement.
(c) The Company will take all necessary
action which may be required in qualifying or registering the Registrable
Securities included in a Registration Statement, for offering and sale under the
securities or blue sky laws of such states as are requested by the holders of
such securities.
(d) The Company shall indemnify any holder
of the Registrable Securities to be sold pursuant to any Registration Statement
and any underwriter or person deemed to be an underwriter under the Act and each
person, if any, who controls such holder or underwriter or person deemed to be
an underwriter within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all
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loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement to the same extent and with
the same effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter as set forth in Section 7 of the Underwriting
Agreement and to provide for just and equitable contribution as set forth in
Section 8 of the Underwriting Agreement.
(e) Any holder of Registrable Securities
to be sold pursuant to a registration statement, and its successors and assigns,
shall severally, and not jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage or expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such holder, or its
successors or assigns, for specific inclusion in such Registration Statement to
the same extent and with the same effect as the provisions pursuant to which the
Underwriter has agreed to indemnify the Company as set forth in Section 7 of the
Underwriting Agreement and to provide for just and equitable contribution as set
forth in Section 8 of the Underwriting Agreement.
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(f) Nothing contained in this Agreement
shall be construed as requiring any holder to exercise his Warrants or the
Underlying Warrants prior to the initial filing of any registration statement or
the effectiveness thereof.
(g) If the Company shall fail to comply
with the provisions of this Article 7, the Company shall, in addition to any
other equitable or other relief available to the holders of Registrable
Securities, be liable for any or all incidental, special and consequential
damages sustained by the holders of Registrable Securities, requesting
registration of their Registrable Securities.
(h) Except as set forth in Section 7.5(j)
hereof, the Company shall not permit the inclusion of any securities other than
the Registrable Securities to be included in any Registration Statement filed
pursuant to Section 7.4 hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a Registration Statement filed
pursuant to Section 7.4 hereof, without the prior written consent of the
Majority Holders, which consent shall not be unreasonably withheld.
(i) The Company shall deliver promptly to
each holder of Registrable Securities participating in the offering in which
such Holder's shares are being registered pursuant to Section 7.3 hereof and
requesting the correspondence and memoranda described in this Section 7.5(i) and
to the managing underwriter, if any, copies of all correspondence between the
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Commission and the Company, its counsel or auditors and all memoranda relating
to discussions with the Commission or its staff with respect to the Registration
Statement and permit each holder of Registrable Securities and underwriters to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the Registration Statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such holder
of Registrable Securities or underwriter shall reasonably request.
(j) Upon the written request therefor by any
holders of Registrable Securities, the Company shall include in the Registration
Statement covering any of the Registrable Securities any other securities of the
Company held by such holders of Registrable Securities as of the date of filing
of such Registration Statement, including, without limitation, restricted shares
of Common Stock, options, warrants or any other securities convertible into
shares of Common Stock.
8. Adjustments of Exercise Price and Number of Securities. The
following adjustments apply to the Exercise Price of the Warrants with respect
to the Shares and the number of Shares purchasable upon exercise of the
Warrants. In the event the Exercise Price per Share and/or the number of Shares
so purchasable is adjusted, then the Exercise Price of the Warrants
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relating to the Underlying Warrants and the number of underlying Warrants
purchasable hereunder shall be adjusted in the same proportion.
8.1. Computation of Adjusted Price. In case the
Company shall at any time after the date hereof pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, then upon such
dividend or distribution the Exercise Price in effect immediately prior to such
dividend or distribution shall forthwith be reduced to a price determined by
dividing:
(a) an amount equal to the total number of
shares of Common Stock outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by
(b) the total number of shares of Common
Stock outstanding immediately after such issuance or sale.
For the purposes of any computation to be
made in accordance with the provisions of this Section 8.1, the Common Stock
issuable by way of dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the opening of business on
the date following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution.
8.2. Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
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8.3. Adjustment in Number of Securities. Upon
each adjustment of the Exercise Price pursuant to the provisions of this Article
8, the number of Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full number by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price,
provided, however, that if an event occurs that results in an adjustment of the
number and/or price of the shares of Common Stock issuable upon exercise of the
Public Warrants pursuant to Section 9 of the Warrant Agreement by and among the
Company, the Underwriter and American Stock Transfer & Trust Company dated as of
___________, 1996 ("Public Warrant Agreement"), resulting in automatic
adjustment in the number and/or price of the Underlying Warrant Shares issuable
upon exercise of the Underlying Warrants pursuant to Section 8.5 hereof, then
the adjustment provided for in this Section 8.3 shall not, in such instance,
result in any further adjustment in the aggregate number of shares of Common
Stock ultimately issuable upon exercise of the Underlying Warrants.
8.4. Reclassification, Consolidation, Merger, etc.
In case of any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in the case of
any consolidation of the Company with, or merger of the Company into, another
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corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holders were the owners of both the Shares
and the Underlying Warrant Shares immediately prior to any such events, at a
price equal to the product of (x) the number of shares of Common Stock issuable
upon exercise of the Holders' Warrants and the Underlying Warrants and (y) the
exercise prices for the Warrants and Underlying Warrants in effect immediately
prior to the record date for such reclassification, change, consolidation,
merger, sale or conveyance as if such Holders had exercised the Warrants and the
Underlying Warrants.
8.5. Adjustment of Underlying Warrants' Exercise
Price and Securities Issuable Upon Exercise of Underlying Warrants. With respect
to any of the Underlying Warrants, whether or not the Warrants have been
exercised and whether or not the Warrants are issued and outstanding, the
exercise price for, and the number of, Underlying Warrant Shares issuable upon
exercise of the Underlying Warrants shall be automatically adjusted in
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accordance with Section 9 of the Public Warrant Agreement, upon the occurrence
of any of the events described therein. Thereafter, until the next such
adjustment or until otherwise adjusted in accordance with this Section 8, the
Underlying Warrants shall be exercisable at such adjusted exercise price and for
such adjusted number of Underlying Warrant Shares.
8.6. Dividends and Other Distributions with
Respect to Outstanding Securities. In the event that the Company shall at any
time prior to the exercise of all Warrants make any distribution of its assets
to holders of its Common Stock as a liquidating or a partial liquidating
dividend, then the holder of Warrants who exercises his Warrants after the
record date for the determination of those holders of Common Stock entitled to
such distribution of assets as a liquidating or partial liquidating dividend
shall be entitled to receive for the Warrant Price per Warrant, in addition to
each share of Common Stock, the amount of such distribution (or, at the option
of the Company, a sum equal to the value of any such assets at the time of such
distribution as determined by the Board of Directors of the Company in good
faith) which would have been payable to such holder had he been the holder of
record of the Common Stock receivable upon exercise of his Warrant on the record
date for the determination of those entitled to such distribution. At the time
of any such dividend or distribution, the Company shall make appropriate
reserves to ensure the timely performance of the provisions of this Subsection
8.6.
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<PAGE>
8.7. Subscription Rights for Shares of Common
Stock or Other Securities. In the case that the Company or an affiliate of the
Company shall at any time after the date hereof and prior to the exercise of all
the Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the shareholders of
the Company, the Holders of the unexercised Warrants shall be entitled, in
addition to the shares of Common Stock or other securities receivable upon the
exercise of the Warrants, to receive such rights at the time such rights are
distributed to the other shareholders of the Company.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
securities in such denominations as shall be designated by the Holder thereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificates, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
-21-
<PAGE>
10. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares or fractions of Underlying Warrants upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of Shares and Underlying Warrants.
11. Reservation and Listing of Securities.
The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon the exercise of the Warrants and the Underlying Warrants, such
number of shares of Common Stock as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all Shares issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. The Company further covenants and agrees
that upon exercise of the Underlying Warrants and payment of the respective
Underlying Warrant exercise price therefor, all Underlying Warrant Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
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<PAGE>
Warrants and the Underlying Warrants and all Underlying Warrants to be listed on
or quoted by NASDAQ or listed on such national securities exchanges as requested
by the Underwriter.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders
of its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution payable otherwise
than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a consoli-
-23-
<PAGE>
dation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety
shall be proposed; or
(d) reclassification or change of the
outstanding shares of Common Stock (other than a change in par
value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), consolidation of
the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result
in any reclassification or change of the outstanding shares of
Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as
aforesaid), or a sale or conveyance to another corporation of
the property of the Company as an entirety is proposed; or
(e) The Company or an affiliate of the
Company shall propose to issue any rights to subscribe for
shares of Common Stock or any other securities of the Company
or of such affiliate to all the shareholders of the Company;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
-24-
<PAGE>
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Underlying Warrants.
The form of the certificates representing the Underlying
Warrants (and the form of election to purchase shares of Common Stock upon the
exercise of the Underlying Warrants and the form of assignment printed on the
reverse thereof) shall be substantially as set forth in Exhibit "A" to the
Public Warrant Agreement, provided, however, (i) each Underlying Warrant
issuable upon exercise of the Warrants shall evidence the right to initially
purchase one fully paid and non-assessable share of Common Stock in respect of
the Underlying Warrant at an initial purchase price of $6.75 per share at any
time commencing _____, 1997 until __________, 2000 and (ii) the Target
Redemption Price (as defined in the Public Warrant Agreement) of the Underlying
Warrants is 150% of the then effective exercise price of the Underlying
Warrants. As set forth in Section 8.5 of this Agreement, the exercise price of
the Underlying Warrants and the number of shares of Common Stock issuable upon
-25-
<PAGE>
the exercise of the Underlying Warrants are subject to adjustment, whether or
not the Warrants have been exercised and the Underlying Warrants have been
issued, in the manner and upon the occurrence of the events set forth in Section
9 of the Public Warrant Agreement, which is hereby incorporated herein by
reference and made a part hereof as if set forth in its entirety herein. Subject
to the provisions of this Agreement and upon issuance of the Underlying
Warrants, each registered holder of such Underlying Warrants shall have the
right to purchase from the Company (and the Company shall issue to such
registered holders) up to the number of fully paid and non-assessable Underlying
Warrant Shares (subject to adjustment as provided herein and in the Public
Warrant Agreement), free and clear of all preemptive rights of shareholders,
provided that such registered holder complies, in connection with the exercise
of such holders' Underlying Warrants, with the terms governing exercise of the
Public Warrants set forth in the Public Warrant Agreement, and pays the
applicable exercise price, determined in accordance with the terms of the Public
Warrant Agreement. Upon exercise of the Underlying Warrants, the Company shall
forthwith issue to the registered holder of any such Underlying Warrants, in
such holder's name or in such name as may be directed by such holder,
certificates for the number of Underlying Warrant Shares so purchased. The
Underlying Warrants shall be transferable in the manner provided in the Public
Warrant Agreement, and upon any such transfer, a new Underlying Warrant shall be
issued promptly to the transferee. The Company covenants to, and agrees with,
each Holder that without the prior written consent of all the
-26-
<PAGE>
Holders, the Public Warrant Agreement will not be modified, amended, cancelled,
altered or superseded, and that the Company will send to each Holder,
irrespective of whether or not the Warrants have been exercised, any and all
notices required by the Public Warrant Agreement to be sent to holders of the
Public Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to
the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the
Company may designate by notice to the Holders.
15. Supplements and Amendments.
The Company and the Underwriter may from time to time
supplement or amend this Agreement without the approval of any Holders of the
Warrants and/or Warrant Securities in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any provisions herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not to
adversely affect the interests of the Holders of Warrant Certificates.
-27-
<PAGE>
16. Successors.
All the covenants and provisions of this Agreement by or for
the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on
_________, 2004. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date when all Warrants and Underlying Warrants have been exercised
and all Warrant Securities have been resold to the public; provided, however,
that the provisions of Section 7 shall survive such termination until the close
of business on __________, 2007.
18. Governing Law.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the laws of said
State.
19. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Underwriter and any other
registered holder or holders of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Underwriter and any other holder or holders of the Warrant Certificates or
Warrant Securities.
-28-
<PAGE>
20. Counterparts.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] VISUAL EDGE SYSTEMS INC.
Name:
Title:
Attest:
- -----------------------
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:
--------------------------------
Name:
Title:
-29-
<PAGE>
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _________, 2001
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co.,
L.P. or registered assigns, is the registered holder of _______ Warrants to
purchase, at any time from ___________, 1996 until 5:00 P.M. New York City time
on __________, 2001 ("Expiration Date"), up to ___________ fully-paid and
non-assessable shares of common stock, par value $.01 per share ("Common
Stock"), of Visual Edge Systems Inc., a Delaware corporation (the "Company"), at
an initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $____ per share of Common Stock, upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of ________, 1996 between the Company and Whale Securities
Co., L.P. (the "Warrant Agreement"). Payment of the Exercise Price may be made
in cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _________, 1996 VISUAL EDGE SYSTEMS INC.
[SEAL] By:
----------------------------
Name:
Title:
Attest:
- ----------------------
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Shares of
Common Stock and herewith tenders in payment for such securities, cash or a
certified or official bank check payable in New York Clearing House Funds to the
order of Visual Edge Systems Inc. in the amount of $ , all in accordance with
the terms hereof. The undersigned requests that a certificate for such
securities be registered in the name of______________________________________
_________________, whose address is __________________, and that such
Certificate be delivered to__________________, whose address is _____________.
Dated: Signature:
------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
-----------------------------------
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
---------------------------------------
hereby sells, assigns and transfers unto
- -----------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
- -------------------------------
- -------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _________, 2001
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co.,
L.P., or registered assigns, is the registered holder of
__________________________ (_______) Warrants to purchase, at any time from
___________, 1996 until 5:00 P.M. New York City time on __________, 2001
("Expiration Date"), an aggregate of up to _______________________________
(_______) common stock purchase warrants, each common stock purchase warrant
entitling the holder thereof to purchase one share of common stock, par value
$.01 per share (collectively, the "Underlying Warrants"), of Visual Edge Systems
Inc., a Delaware corporation (the "Company"), at an initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $____ per
Underlying Warrant, upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of
_____________, 1996 between the Company and Whale Securities Co., L.P. (the
"Warrant Agreement"). Payment of the Exercise Price may be made in cash, or by
certified or official bank check in New York Clearing House funds payable to the
order of the Company, or any combination of cash or check.
The Underlying Warrants issuable upon exercise of the Warrants
will be exercisable at any time from ________, 1997 until 5:00 P.M. Eastern Time
______, 2000, each Underlying Warrant entitling the holder thereof to purchase
one fully-paid and non-assessable share of common stock of the Company, at an
<PAGE>
initial exercise price, subject to adjustment in certain events, of $5.00 per
share. The Underlying Warrants are issuable pursuant to the terms and provisions
of a certain agreement dated as of ________, 1996 by and among the Company,
Whale Securities Co., L.P. and American Stock Transfer & Trust Company (the
"Public Warrant Agreement"). The Public Warrant Agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to
(except as otherwise provided in the Warrant Agreement) for a description of the
rights, limitations of rights, manner of exercise, anti-dilution provisions and
other provisions with respect to the Underlying Warrants.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that, upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
<PAGE>
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _________, 1996 VISUAL EDGE SYSTEMS INC.
[SEAL] By:
------------------------------
Name:
Title:
Attest:
- ----------------------
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Underlying
Warrants and herewith tenders, in payment for such securities, cash or a
certified or official bank check payable in New York Clearing House Funds to the
order of Visual Edge Systems, Inc. in the amount of $_________ , all in
accordance with the terms hereof. The undersigned requests that a certificate
for such securities be registered in the name of ______________________________
, whose address is ___________________ , and that such Certificate be delivered
to _________________________ , whose address is _____________.
Dated: Signature:
--------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
--------------------------------
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED__________________________________________
hereby sells, assigns and transfers unto
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
- --------------------------------
- --------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
VISUAL EDGE SYSTEMS, INC.
a Delaware corporation
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Warrant Agent
and
WHALE SECURITIES CO., L.P.
Underwriter
WARRANT AGREEMENT
<PAGE>
Table of Contents
Section Page
1 Appointment of Warrant Agent ................... 1
2 Form of Warrant ............................... 2
3 Countersignature and Registration .............. 3
4 Transfers and Exchanges ........................ 3
5 Exercise of Warrants; Payment of Warrant
Solicitation Fee ............................ 4
6 Payment of Taxes ............................... 8
7 Mutilated or Missing Warrants .................. 9
8 Reservation of Common Stock .................... 9
9 Warrant Price; Adjustments ..................... 11
10 Fractional Interest ............................ 18
11 Notices to Warrantholders ...................... 18
12 Disposition of Proceeds on Exercise of
Warrants ....................................... 20
13 Redemption of Warrants ......................... 21
14 Merger or Consolidation or Change of Name
of Warrant Agent ............................... 21
15 Duties of Warrant Agent ........................ 22
16 Change of Warrant Agent ........................ 26
17 Identity of Transfer Agent ..................... 27
18 Notices ........................................ 27
19 Supplements and Amendments ..................... 29
20 New York Contract .............................. 29
21 Benefits of this Agreement ..................... 30
22 Successors ..................................... 30
Exhibit A - Form of Warrant ....................
<PAGE>
WARRANT AGENT AGREEMENT dated as of , 1996, by and among
Visual Edge Systems, Inc., a Delaware corporation (the "Company"), Whale
Securities Co., L.P. (the "Underwriter") and American Stock Transfer & Trust
Company, as warrant agent (hereinafter called the "Warrant Agent").
WHEREAS, the Company proposes to issue and sell to the public
up to 1,495,000 shares of the common stock of the Company par value $.01 per
share (hereinafter, together with the stock of any other class to which such
shares may hereafter have been changed, called "Common Stock"), and up to
1,495,000 Common Stock Purchase Warrants (the "Warrants");
WHEREAS, each Warrant will entitle the holder to pur-
chase one share of Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange and exercise of the
Warrants;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as Warrant Agent for the Company in accordance
with the instructions hereinafter set forth in this Agreement, and the Warrant
Agent hereby accepts such appointment.
<PAGE>
Section 2. Form of Warrant. The text of the Warrants and of
the form of election to purchase Common Stock to be printed on the reverse
thereof shall be substantially as set forth in Exhibit A attached hereto. Each
Warrant shall entitle the registered holder thereof to purchase one share of
Common Stock at a purchase price of Five Dollars ($5.00), at any time from
___________, 1997 until 5:00 p.m. Eastern time, on __________, 2000 (the
"Warrant Exercise Period"). The warrant price and the number of shares of Common
Stock issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future President or Vice President of the Company, attested to by
the manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the issuance by the Warrant
Agent either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration dates of the Warrants
fall on a Saturday or Sunday, or on a legal holiday on which the New York Stock
Exchange is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on
the next succeeding business day.
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Section 3. Countersignature and Registration. The Warrant
Agent shall maintain books for the transfer and registration of the Warrants.
Upon the initial issuance of the Warrants, the Warrant Agent shall issue and
register the Warrants in the names of the respective holders thereof. The
Warrants shall be countersigned manually or by facsimile by the Warrant Agent
(or by any successor to the Warrant Agent then acting as warrant agent under
this Agreement) and shall not be valid for any purpose unless so countersigned.
Warrants may, however, be so countersigned by the Warrant Agent (or by its
successor as Warrant Agent) and be delivered by the Warrant Agent,
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall
transfer, from time to time, any outstanding Warrants upon the books to be
maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be cancelled by the Warrant Agent.
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request. Warrants may be exchanged at the option of the
holder thereof, when surrendered at the office of the Warrant Agent, for another
Warrant, or other Warrants of different denominations of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock.
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Section 5. Exercise of Warrants; Payment of Warrant
Solicitation Fee.
(a) Subject to the provisions of this Agreement, each
registered holder of Warrants shall have the right, which may be exercised
commencing at the opening of business on the first day of the Warrant Exercise
Period, to purchase from the Company (and the Company shall issue and sell to
such registered holder of Warrants) the number of fully paid and non-assessable
shares of Common Stock specified in such Warrants upon surrender of such
Warrants to the Company at the office of the Warrant Agent, with the form of
election to purchase on the reverse thereof duly filled in and signed, and upon
payment to the Company of the warrant price, determined in accordance with the
provisions of Sections 9 and 10 of this Agreement, for the number of shares of
Common Stock in respect of which such Warrants are then exercised. Payment of
such warrant price shall be made in cash or by certified check or bank draft to
the order of the Company. Subject to Section 6, upon such surrender of Warrants
and payment of the warrant price, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
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registered holder of such Warrants and in such name or names as such registered
holder may designate, a certificate or certificates for the number of full
shares of Common Stock so purchased upon the exercise of such Warrants. Such
certificate or certificates shall be deemed to have been issued, and any person
so designated to be named therein shall be deemed to have become a holder of
record of such shares of Common Stock, as of the date of the surrender of such
Warrants and payment of the warrant price as aforesaid. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the
registered holders thereof, either as an entirety or from time to time for a
portion of the shares specified therein and, in the event that any Warrant is
exercised in respect of less than all of the shares of Common Stock specified
therein at any time prior to the date of expiration of the Warrants, a new
Warrant or Warrants will be issued to the registered holder for the remaining
number of shares of Common Stock specified in the Warrant so surrendered, and
the Warrant Agent is hereby irrevocably authorized to countersign and to deliver
the required new Warrants pursuant to the provisions of this Section and of
Section 3 of this Agreement and the Company, whenever requested by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on behalf of
the Company for such purpose. Anything in the foregoing to the contrary
notwithstanding, no Warrant will be exercisable unless at the time of exercise
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the Company has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended (the "Act"), covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been so registered or qualified or deemed to be exempt under the securities
laws of the state of residence of the holder of such Warrant. The Company shall
use its best efforts to have all shares so registered or qualified on or before
the date on which the Warrants become exercisable.
(b) If at the time of exercise of any Warrant after (i)
______, 1997 (i) the market price of the Company's Common Stock is equal to or
greater than the then purchase price of the Warrant, (ii) the exercise of the
Warrant is solicited by the Underwriter at such time while the Underwriter is a
member of the National Association of Securities Dealers, Inc. ("NASD"), (iii)
the Warrant is not held in a discretionary account, (iv) disclosure of the
compensation arrangement is made in documents provided to the holders of the
Warrants; and (v) the solicitation of the exercise of the Warrant is not in
violation of Rule 10b-6 (as such rule or any successor rule may be in effect as
of such time of exercise) promulgated under the Securities Exchange Act of 1934,
then the Underwriter shall be entitled to receive from the Company upon exercise
of each of the Warrants so exercised a fee of five percent (5%) of the aggregate
price of the Warrants so exercised (the "Exercise Fee"). The procedures for
payment of the warrant solicitation fee are set forth in Section 5(c) below.
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(c) (1) Within five (5) days of the last day of each month
commencing with _______, 1997, the Warrant Agent will notify the Underwriter of
each Warrant Certificate which has been properly completed for exercise by
holders of Warrants during the last month. The Company and Warrant Agent shall
determine, in their sole and absolute discretion, whether a Warrant Certificate
has been properly completed. The Warrant Agent will provide the Underwriter with
such information, in connection with the exercise of each Warrant, as the
Underwriter shall reasonably request.
(2) The Company hereby authorizes
and instructs the Warrant Agent to deliver to the Underwriter the Exercise Fee
promptly after receipt by the Warrant Agent from the Company of a check payable
to the order of the Underwriter in the amount of the Exercise Fee. The Warrant
Agent shall not issue the shares of Common Stock issuable upon exercise of the
Warrants until receipt and forwarding of such check to the Underwriter. In the
event that an Exercise Fee is paid to the Underwriter with respect to a Warrant
which the Company or the Warrant Agent determines is not properly completed for
exercise or in respect of which the Underwriter is not entitled to an Exercise
Fee, the Underwriter will return such Exercise Fee to the Warrant Agent which
shall forthwith return such fee to the Company.
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(d) The Underwriter and the Company may at any time, after
____________, 1997, and during business hours, examine the records of the
Warrant Agent, including its ledger of original Warrant certificates returned to
the Warrant Agent upon exercise of Warrants. Notwithstanding any provision to
the contrary, the provisions of paragraph 5(b) and 5(c) may not be modified,
amended or deleted without the prior written consent of the Underwriter.
Section 6. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Common Stock
issuable upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of any certificates of shares of
Common Stock in a name other than that of the registered holder of Warrants in
respect of which such shares are issued, and in such case neither the Company
nor the Warrant Agent shall be required to issue or deliver any certificate for
shares of Common Stock or any Warrant until the person requesting the same has
paid to the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
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Section 7. Mutilated or Missing Warrants. In case any of the
Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction and, in case of a lost, stolen or destroyed
Warrant, indemnity, if requested, also satisfactory to them. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such reasonable charges as the Company or the Warrant Agent may prescribe.
Section 8. Reservation of Common Stock. There have been
reserved, and the Company shall at all times keep reserved, out of the
authorized and unissued shares of Common Stock, a number of shares of Common
Stock sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the transfer agent for the shares of Common
Stock and every subsequent transfer agent for any shares of the Company's Common
Stock issuable upon the exercise of any of the rights of purchase aforesaid are
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares of Common Stock as shall be required for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates of such
shares, validly issued and outstanding, fully paid and non-assessable and listed
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on any national securities exchange upon which the other shares of Common Stock
are then listed. So long as any unexpired Warrants remain outstanding, the
Company will file such post-effective amendments to the registration statement
(Form SB-2, Registration No. 333-________) (the "Registration Statement") filed
pursuant to the Act with respect to the Warrants (or other appropriate
registration statements or post-effective amendment or supplements) as may be
necessary to permit it to deliver to each person exercising a Warrant, a
prospectus meeting the requirements of Section 10(a)(3) of the Act and otherwise
complying therewith, and will deliver such a prospectus to each such person. To
the extent that during any period it is not reasonably likely that the Warrants
will be exercised, due to market price or otherwise, the Company need not file
such a post-effective amendment during such period. The Company will keep a copy
of this Agreement on file with the transfer agent for the shares of Common Stock
and with every subsequent transfer agent for any shares of the Company's Common
Stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is irrevocably authorized to requisition from time
to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed stock certificates for that purpose. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be cancelled by the Warrant Agent
and shall thereafter be delivered to the Company, and such cancelled
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Warrants shall constitute sufficient evidence of the number of shares of Common
Stock which have been issued upon the exercise of such Warrants. Promptly after
the date of expiration of the Warrants, the Warrant Agent shall certify to the
Company the total aggregate amount of Warrants then outstanding, and thereafter
no shares of Common Stock shall be subject to reservation in respect of such
Warrants which shall have expired.
Section 9. Warrant Price; Adjustments.
(a) The warrant price at which Common Stock shall be
purchasable upon the exercise of the Warrants shall be $____ per share or after
adjustment, as provided in this Section, shall be such price as so adjusted (the
"Warrant Price").
(b) The Warrant Price shall be subject to adjustment
from time to time as follows:
(i) In case the Company shall at any time
after the date hereof pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, then upon such dividend or distribution
the Warrant Price in effect immediately prior to such dividend or distribution
shall forthwith be reduced to a price determined by dividing:
(A) an amount equal to the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution multiplied by the Warrant Price in effect immediately prior to
such dividend or distribution, by
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(B) the total number of shares of
Common Stock outstanding immediately after such issuance or sale. For the
purposes of any computation to be made in accordance with the provisions of this
clause (i), the following provisions shall be applicable: Common Stock issuable
by way of dividend or other distribution on any stock of the Company shall be
deemed to have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
(ii) In case the Company shall at any time
subdivide or combine the outstanding Common Stock, the Warrant Price shall
forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination to the nearest one cent. Any such adjustment shall
become effective at the time such subdivision or combination shall become
effective.
(iii) Within a reasonable time after the
close of each quarterly fiscal period of the Company during which the Warrant
Price has been adjusted as herein provided, the Company shall:
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(A) file with the Warrant Agent a
certificate signed by the President or Vice President of the Company and by the
Treasurer or Assistant Treasurer or the Secretary or an Assistant Secretary of
the Company, showing in detail the facts requiring all such adjustments
occurring during such period and the Warrant Price after each such adjustment;
and
(B) the Warrant Agent shall have no
duty with respect to any such certificate filed with it except to keep the same
on file and available for inspection by holders of Warrants during reasonable
business hours, and the Warrant Agent may conclusively rely upon the latest
certificate furnished to it hereunder. The Warrant Agent shall not at any time
be under any duty or responsibility to any holder of a Warrant to determine
whether any facts exist which may require any adjustment of the Warrant Price,
or with respect to the nature or extent of any adjustment of the Warrant Price
when made, or with respect to the method employed in making any such adjustment,
or with respect to the nature or extent of the property or securities
deliverable hereunder. In the absence of a certificate having been furnished,
the Warrant Agent may conclusively rely upon the provisions of the Warrants with
respect to the Common Stock deliverable upon the exercise of the Warrants and
the applicable Warrant Price thereof.
(iv) Notwithstanding anything contained herein to the
contrary, no adjustment of the Warrant Price shall be made if the amount of such
adjustment shall be less than $.05, but in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to not less than $.05.
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(v) In the event that the number of outstanding shares of
Common Stock is increased by a stock dividend payable in Common Stock or by a
subdivision of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to Subsection (b) of
this Section by reason of such dividend or subdivision, the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be increased in
proportion to such increase in outstanding shares. In the event that the number
of shares of Common Stock outstanding is decreased by a combination of the
outstanding Common Stock, then, from and after the time at which the adjusted
Warrant Price becomes effective pursuant to this Section 9(b) by reason of such
combination, the number of shares of Common Stock issuable upon the exercise of
each Warrant shall be decreased in proportion to such decrease in the
outstanding shares of Common Stock.
(vi) In case of any reorganization or reclassification of
the outstanding Common Stock (other than a change in par value, or from par
value to no par value, or as a result of a subdivision or combination), or in
case of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
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reclassification of the outstanding Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, the holder of each Warrant then outstanding
shall thereafter have the right to purchase the kind and amount of shares of
Common Stock and other securities and property receivable upon such
reorganization, reclassification, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which the holder of such Warrant
shall then be entitled to purchase; such adjustments shall apply with respect to
all such changes occurring between the date of this Warrant Agreement and the
date of exercise of such Warrant.
(vii) Subject to the provisions of this Section 9, in case
the Company shall, at any time prior to the exercise of the Warrants, make any
distribution of its assets to holders of its Common Stock as a liquidating or a
partial liquidating dividend, then the holder of Warrants who exercises his
Warrants after the record date for the determination of those holders of Common
Stock entitled to such distribution of assets as a liquidating or partial
liquidating dividend shall be entitled to receive for the Warrant Price per
Warrant, in addition to each share of Common Stock, the amount of such
distribution (or, at the option of the Company, a sum equal to the value of any
such assets at the time of such distribution as determined by the Board of
Directors of the Company in good faith), which would
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have been payable to such holder had he been the holder of record of the Common
Stock receivable upon exercise of his Warrant on the record date for the
determination of those entitled to such distribution.
(viii) In case of the dissolution, liquidation or winding
up of the Company, all rights under the Warrants shall terminate on a date fixed
by the Company, such date to be no earlier than ten (10) days prior to the
effectiveness of such dissolution, liquidation or winding up and not later than
five (5) days prior to such effectiveness. Notice of such termination of
purchase rights shall be given to the last registered holder of the Warrants, as
the same shall appear on the books of the Company maintained by the Warrant
Agent, by registered mail at least thirty (30) days prior to such termination
date.
(ix) In case the Company shall, at any time prior to the
expiration of the Warrants and prior to the exercise thereof, offer to the
holders of its Common Stock any rights to subscribe for additional shares of any
class of the Company, then the Company shall give written notice thereof to the
last registered holder thereof not less than thirty (30) days prior to the date
on which the books of the Company are closed or a record date is fixed for the
determination of the stockholders entitled to such subscription rights. Such
notice shall specify the date as to which the books shall be closed or record
date fixed with respect to such offer of subscription and the right of the
holder thereof to participate in such offer of subscription shall terminate if
the Warrant shall not be exercised on or before the date of such closing of the
books or such record date.
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(x) Any adjustment pursuant to the aforesaid provisions of
this Section 9 shall be made on the basis of the number of shares of Common
Stock which the holder thereof would have been entitled to acquire by the
exercise of the Warrant immediately prior to the event giving rise to such
adjustment.
(xi) Irrespective of any adjustments in the Warrant Price
or the number or kind of shares purchasable upon exercise of the Warrants,
Warrants previously or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant Agreement.
(xii) The Company may retain a firm of independent public
accountants (who may be any such firm regularly employed by the Company) to make
any computation required under this Section 9, and any certificate setting forth
such computation signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 9.
(xiii) If at any time, as a result of an adjustment made
pursuant to Section 9(b)(vi) above, the holders of a Warrant or Warrants shall
become entitled to purchase any securities other than shares of Common Stock,
thereafter the number of such securities so purchasable upon exercise of each
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Warrant and the Warrant Price for such shares shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained in Sections
9(b)(ii) through (v).
Section 10. Fractional Interest. The Warrants may only be
exercised to purchase full shares of Common Stock and the Company shall not be
required to issue fractions of shares of Common Stock on the exercise of
Warrants. However, if a Warrant holder exercises all Warrants then owned of
record by him and such exercise would result in the issuance of a fractional
share, the Company will pay to such Warrant holder, in lieu of the issuance of
any fractional share otherwise issuable, an amount of cash based on the market
value of the Common Stock of the Company on the last trading day prior to the
exercise date.
Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Warrant Price and the
number of shares of Common Stock issuable upon exercise of a Warrant, then and
in each such case the Company shall give written notice thereof to the Warrant
Agent, which notice shall state the Warrant Price resulting from such adjustment
and the increase or decrease, if any, in the number of shares purchasable at
such price upon the exercise of a Warrant, setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.
The Company shall also mail such notice to the holders of the Warrants at their
addresses appearing in the Warrant register. Failure to give or mail such
notice, or any defect therein, shall not affect the validity of the adjustments.
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(b) In case at any time:
(i) the Company shall pay dividends payable
in stock upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock; or
(ii) the Company shall offer for subscrip-
tion pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights; or
(iii) there shall be any capital reorgani-
zation or reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale or substantially all of its assets to,
another corporation; or
(iv) there shall be a voluntary or involun-
tary dissolution, liquidation or winding up of the Company; then in any one or
more of such cases, the Company shall give written notice in the manner set
forth in Section 11(a) of the date on which (A) a record shall be taken for such
dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their
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Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up as the case may be. Such notice shall be given at
least thirty (30) days prior to the action in question and not less than thirty
(30) days prior to the record date in respect thereof. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of any
of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial statements
and reports, proxy statements and other documents that are sent to its
stockholders to be sent by first-class mail, postage prepaid, on the date of
mailing to such stockholders, to each registered holder of Warrants at his
address appearing in the warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of
Warrants.
(i) The Warrant Agent shall promptly forward to
the Company all monies received by the Warrant Agent for the purchase of shares
of Common Stock through the exercise of such Warrants.
(ii) The Warrant Agent shall keep copies of this Agreement
available for inspection by holders of Warrants during normal business hours.
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Section 13. Redemption of Warrants. The Warrants are
redeemable by the Company upon the consent of the Underwriter, in whole or in
part, on not less than thirty (30) days' prior written notice at a redemption
price of $.10 per Warrant at any time commencing _________, 1997; provided that
(i) the closing bid quotation of the Common Stock on all thirty (30) trading
days ending on the third day prior to the day on which the Company gives notice
of redemption has been at least 150% of the then effective exercise price of the
Warrants (the "Target Redemption Price") and (ii) the Warrants are currently
exercisable. The redemption notice shall be mailed to the holders of the
Warrants at their addresses appearing in the Warrant register. Holders of the
Warrants will have exercise rights until the close of business on the date fixed
for redemption.
Section 14. Merger or Consolidation or Change of Name of
Warrant Agent. Any corporation or company which may succeed to the corporate
trust business of the Warrant Agent by any merger or consolidation or otherwise
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible to serve as a successor Warrant
Agent under the provisions of Section 16 of this Agreement. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but
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not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned. In all such cases such Warrants
shall have the full force provided in the Warrants and in the Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Warrants, by their acceptance thereof, shall be bound:
(i) The statements of fact and recitals contained
herein and in the Warrants shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be taken by it.
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrants except as herein expressly provided.
(ii) The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants in this Agreement
or in the Warrants to be complied with by the Company.
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(iii) The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to any holder
of any Warrant in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
(iv) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant for any action
taken in reliance on any notice, resolution, waiver, consent, order, certificate
or other instrument believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties.
(v) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
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(vi) The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceeding, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights and interests may appear.
(vii) The Warrant Agent and any stockholder,
director, officer, partner or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall
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preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(viii) The Warrant Agent shall act hereunder solely
as agent and its duties shall be determined solely by the provisions hereof.
(ix) The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys, agents or employees, and the Warrant
Agent shall not be answerable or accountable for any such attorneys, agents or
employees or for any loss to the Company resulting from such neglect or
misconduct, provided reasonable care had been exercised in the selection and
continued employment thereof.
(x) Any request, direction, election, order or
demand of the Company shall be sufficiently evidenced by an instrument signed in
the name of the Company by its President or a Vice President or its Secretary or
an Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
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Section 16. Change of Warrant Agent. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company notice in writing, and to the holders of the Warrants notice by mailing
such notice to the holders at their addresses appearing on the Warrant register,
of such resignation, specifying a date when such resignation shall take effect.
The Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and the like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Warrant Agent or after the
Company has received such notice from a registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under New York
or federal law. After appointment, the successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed and the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent all
cancelled Warrants, records and property at the time held by it
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hereunder, and execute and deliver any further assurance or conveyance necessary
for the purpose. Failure to file or mail any notice provided for in this
Section, however, or any defect therein, shall not affect the validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the
appointment of any transfer agent for the shares of Common Stock or of any
subsequent transfer agent for the shares of Common Stock or other shares of the
Company's Common Stock issuable upon the exercise of the rights of purchase
represented by the Warrants, the Company will file with the Warrant Agent a
statement setting forth the name and address of such transfer agent.
Section 18. Notices. Any notice pursuant to this Agreement to
be given by the Warrant Agent, or by the registered holder of any Warrant to the
Company, shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another is filed in writing by the Company with the
Warrant Agent) as follows:
Visual Edge Systems, Inc. 7 West 51st Street New York, New
York 10019
Attention: Chief Executive Officer
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and a copy thereof to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: David W. Pollack, Esq.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder of any Warrant to the Warrant Agent shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York
Attention: George Karfunkel
Any notice pursuant to this Agreement to be given by the
Warrant Agent or by the Company to the Underwriter shall be sufficiently given
if sent by first-class mail, postage prepaid, addressed (until another address
if filed in writing with the Warrant agent) as follows:
Whale Securities Co., L.P.
650 Fifth Avenue
New York, New York 10019
Attention: William G. Walters
and a copy thereof to:
Tenzer Greenblatt LLP
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405 Lexington Avenue
New York, New York 10174
Attention: Robert J. Mittman, Esq.
Section 19. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement in order
to cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrants and which
shall not adversely affect the interest of the holders of Warrants.
Section 20. New York Contract. This Agreement and each Warrant
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and shall be construed in accordance with the laws of New York
applicable to agreements to be performed wholly within New York.
Section 21. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Warrant Agent and the registered holders of the Warrants any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrants.
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Section 22. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company, the Warrant Agent or the
Underwriter shall bind and inure to the benefit of their respective successors
and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this
Agreement on the date first above written.
VISUAL EDGE SYSTEMS, INC.
By:
---------------------------------
Name:
Title:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
---------------------------------
Name:
Title:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:
---------------------------------
Name:
Title:
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EXHIBIT 10.1
LICENSE AGREEMENT
THIS AGREEMENT is made as of March 1, 1995 (the "Agreement"), by and
between Greg Norman and Great White Shark Enterprises, Inc. (collectively
"Norman") and Visual Edge Systems Inc., a Delaware corporation ("Licensee").
RECITALS
A. Norman holds and controls the right to use, and to license the use of,
Greg Norman's name, image and likeness, caricature, endorsement, signature,
photographs and all biographical materials and all facsimiles thereof and all
goodwill pertaining thereto, for the purpose of trading on his name, reputation
and goodwill.
B. Subject to the terms and conditions hereinafter set forth, Licensee
wishes to license from Norman, and Norman is willing to grant to the Licensee,
certain endorsement rights which may be exploited in connection with the
promotion of the Concept (as defined hereafter).
AGREEMENT
In consideration of the above recitals and mutual promises and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
I.1 In this Agreement, unless otherwise specified or expressly required by the
context, all defined terms appearing in this Agreement shall have the
meanings ascribed thereto elsewhere herein or in this Article I, as
applicable:
I.1.1 "Advance' shall have the meaning ascribed to it in Article 2.1
hereof;
I.1.2 "Affiliate" means any officer, director, or principal shareholder of
Licensee, or any other person who (or which) controls, is controlled
by or is under the common control with (a) Licensee or (b) any such
officer director or principal shareholder;
I.1.3 "Agreement" means this Agreement as may be amended or supplemented;
I.1.4 "Authorized Territory" means the entire world;
I.1.5 "Business Day" means any day other than a Saturday, Sunday or any
other day which is specified or provided for as a holiday by the
United States, Canadian, or Florida State governments;
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I.1.6 "Canadian Trade Marks Act" means the Trade Marks Act of Canada,
cited as 1952-53 c. 29 (Can.), as amended from time to time, and
the "American Trade Marks Act" means that certain act set forth at
15 U.S.C.A. s.1051 et seq., as amended from time to time, or any
successor statutory scheme to either thereof;
I.1.7 "Concept" means an automated, operator less videotaping system
that produces the Product consistent with the section entitled
"System Design" of Section III. "Product Description" in the
Business Plan of Golf Vision, Inc. dated January 27, 1995;
I.1.8 "Contract Quarter" means the period of three (3) consecutive
months following the commencement of the Contract Year.
I.1.9 "Contract Year" means the period commencing on the first day of
the first month following the Equity Date.
I.1.10 "Customer" means any Person to whom or which a Sale is made;
I.1.11 "Dollars" or "$" means legal currency of United States;
I.1.12 "Equity" means a share certificate representing ten (10%) percent
of the issued and outstanding participating shares in the capital
stock of the Licensee. The shares shall be non-voting but shall
have all other rights and privileges of other shares in the
Licensee and shall be issued to Norman under the terms as
described in the attached letter
I.1.13 "Equity Date" means the date referred to in Paragraph 2.1 hereof;
1.1.14 "Guaranteed Fees" means the guaranteed non-refundable fees payable
by Licensee pursuant to Paragraph 5.1 hereof;
I.1.15 "Initial Term" shall have the meaning ascribed to it in Paragraph
2.1 hereof;
I.1.16 "Legal Opinion" means a letter of opinion signed by the Attorneys
for the Licensee attesting to the fact that the share certificate
registered in the name of Norman attached to such letter,
represents ten (10%) percent of the issued and outstanding
participating non-voting shares in the capital stock of the
Licensee, but have all other rights and privileges of other shares
in the Licensee.
I.1.17 "Net Revenues" means total revenues, computed in United States
Dollars, derived by Licensee and its Affiliates from the Sale of
the Products at retail to Customers, which may exclude customary
discounts, allowances, payments to golf club or range owners or
golf professionals, sales taxes and returns of Products actually
credited to Customers, provided that the total of these exclusions
from the total Sales revenues of Licensee shall
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not be greater than 20% of the total retail Sales of the Product.
I.1.18 "Norman Identification" shall mean any words or symbols or
photographic or graphic representations, and Norman's signature or
statements by Norman or combination thereof which identify Norman
such as, for example, Norman's name and likeness, including any
non-registered nicknames such as "Shark" or "Great White Shark",
and including the right of use of any trademarks which are
currently registered in and owned by Norman and which are listed
on Schedule A to this Agreement and all common law rights therein
and thereto. The Norman Identification shall not include the Shark
Logo which is exclusively licensed to Reebok International Ltd.
I.1.19 "Person" or "Persons" mean severally or collectively, as
applicable, an individual, partnership, corporation, association,
trust or other entity, other than the parties hereto;
I.1.20 "Personal Appearance" means Greg Norman's appearance at any
gathering sponsored, hosted or organized by Licensee for
promotional or client-relations purposes, which appearance shall
occur on a calendar day during the Term, shall not exceed six (6)
hours in duration and shall not require Greg Norman's presence
prior to 9:00 a.m. or later than 9:00 p.m. local time on such day;
I.1.21 "Photography Session" means Greg Norman's participation in a video
taping session in which film will be taken of Greg Norman to be
used in connection with the sale and promotion of the Concept,
which session shall occur on a Business Day during the Term, shall
not exceed eight (8) hours in duration and shall not require Greg
Norman's presence prior to 9:00 a.m. or later than 9:00 p.m. local
time on such day;
I.1.22 "Product" or "Products" means severally a video tape delivered to
a consumer upon use of the Concept which has Greg Norman's golf
swing or any other golf professional's swing compared to the
user's golf swing as described in the section entitled "The Video
Golf Lesson" of Section III. of the "Product Description" in the
Business Plan for Golf Vision, Inc. dated January 27, 1995;
I.1.23 "Provision" or "Provisions" means severally or collectively as
applicable, all terms, conditions, provisions, covenants,
obligations, undertakings, warranties and representations
contained in this Agreement;
I.1.24 "Prototypes" means a maximum of six prototypes of the Concept to
be manufactured and tested by the Licensee during the Initial
Term:
I.1.25 "Right" or "Rights" means severally or collectively, as
applicable, the right to use the Norman Identification and Trade
Marks for the purposes of producing the Concept and promoting and
advertising the Concept to the public in the Authorized Territory
through the use of radio and television commercials and still
photographs for point of sale
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and/or print advertising materials, including posters, programs,
sales materials and advertisements in consumer and trade magazines
and newspapers;
I.1.26 "Rights Fees" means the Guaranteed Fees or the Royalties whichever
is the greater;
I.1.27 "Royalty" or "Royalties' means severally or collectively, as
applicable, the royalty payments required to be made pursuant to
Paragraph 5.2 hereof;
I.1.28 "Royalty Statement" or "Royalty Statements" means severally and
collectively, as applicable, the true, accurate and complete
statements furnished by Licensee to Norman, setting forth the
quantities of the Product sold during the period covered thereby,
each of which statements shall be certified as accurate by the
Chief Financial Officer of Licensee or its nominee, and shall be
delivered concurrently with the payment of Royalties pursuant to
Paragraph 5.4 hereof;
1.1.29 "Sale" or "Sales" mean severally or collectively, as applicable, a
sale or sales of the Product made to any person within the
Authorized Territory;
1.1.30 "Trade Mark" or "Trade Marks" mean severally or collectively, as
applicable, those certain registered and unregistered trade marks,
trade names, logos and insignias relating to or associated with
Norman described in Exhibit "A" attached hereto (and not including
the Trade Mark known as the Shark Logo which is exclusively
licensed to Reebok International Ltd.), including any and all
trade marks, trade names, service marks or service names which
Norman shall register or in which Norman shall have a proprietary
right after the date hereof, the use and conditions of use of
which are stipulated in Article IX hereof; but said terms do not
refer to any trade marks, trade names, logos or insignias which
relate to or are associated with Licensee, which do not contain as
a part thereof any of the Trade Marks, and which have no
relationship or association with Norman; and "trade marks" and
"trade names" have the meaning ascribed to them in the Canadian
Trade Marks Act, the American Trade Marks Act and under all
applicable laws, rules and regulations of each other jurisdiction
having applicability;
I.1.31 "Term" means the Initial Term together with any extension and/or
renewal thereof: and
I.1.32 "Workday" means any day, or portion thereof, during the Term on
which a Personal Appearance or Photography Session shall be
scheduled; provided that, if any combination of a Photography
Session and Personal Appearance are scheduled on the same Workday,
the total number of hours for which Greg Norman shall be required
to render services shall not exceed eight (8) hours.
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ARTICLE II
TERM
II.1 Subject to Article X hereof, the Initial Term of this Agreement shall
commence as of the first day of March 1995 and shall expire upon the earlier of
(i) the date upon which the Licensee delivers the Equity, the Legal Opinion and
the first Contract Quarter's Guaranteed Fee ("Advance") to Norman, or (ii) June
30. 1996.
II.2 In the event that the Licensee delivers the Equity, the Legal Opinion and
the Advance to Norman prior to June 30, 1996, this Agreement shall be
automatically renewed for a period of three (3) Contract Years commencing July
1, 1996 and expiring June 30, 1999, (the "first Term"). In addition, the
Licensee shall have the right to renew this Agreement for two (2) additional
periods of five (5) years each (the "Renewal Term"). Any such renewal shall be
subject to the same terms and conditions as are contained herein save and except
that the Guaranteed Fees for each Renewal Term shall be as set forth in Article
V and there shall be no Advance paid at the commencement of any Renewal Term.
Any such renewal shall be exercised by the Licensee forwarding written notice to
Norman at least 60 days prior to the expiration of the First Term or any Renewal
Term thereafter.
ARTICLE III
GRANT AND PERFORMANCE
III.1 Subject to the Provisions of this Agreement, during the Term, Norman
hereby grants to Licensee the right and license to use the Rights in association
with the Concept and the promotion of the Concept in all manners and media of
communication throughout the Authorized Territory. Licensee hereby retains
Norman to provide the Rights and Norman hereby accepts such retainer.
Notwithstanding the foregoing during the Initial Term the right and license
herein granted shall be limited to the Prototypes.
III.2 Subject to the Provisions of this Agreement and Licensee's compliance with
all terms and conditions hereof, Licensee shall have the right, during the
Initial Term to require Greg Norman to attend two (2) Photography Sessions.
Following the Initial Term the Licensee shall have the right during each year of
the Term, to require Norman to provide such services for two (2) Workdays per
year, each of which shall occur in Palm Beach or Martin Counties, Florida.
Notwithstanding the foregoing, Norman may in his sole discretion, agree to
perform Workday services at a location other than Palm Beach or Martin Counties,
Florida if requested to do so by Licensee. Licensee shall utilize such Workdays
either for a Personal Appearance or Photography Session, in its sole discretion.
If Licensee fails to use any Workday during a given year during the Term,
Licensee shall not be entitled to carry over such unused Workday to subsequent
fiscal years. Notwithstanding the foregoing, following the Initial Term, the
Licensee shall have the right during the first year of the Term, to require
Norman to provide such services for three (3)
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Work Days per year provided that no more than two (2) of the three (3) Work Days
shall be consecutive Work Days and provided further that during the next
following year of the Term Norman shall only be required to provide such
services for one (1) Work Day.
III.3 Subject to the Provisions of this Agreement, Greg Norman shall attend a
Personal Appearance or participate in a Photography Session on such date and at
such time and place that Licensee requests. Licensee shall notify Norman of the
proposed time and date of any such Workday at least thirty (30) days prior
thereto, and thereafter:
III.3.1 Norman's approval and confirmation of his availability on such
date shall be deemed to have been given if, upon the expiration of ten
(10) days following the date Norman receives notice thereof, Norman
has not notified Licensee in writing if his unavailability is due to a
prior bona fide contractual commitment or his illness or injury, and
if Norman notifies Licensee of his unavailability, the requested
Workday shall be rescheduled based upon Norman's availability; and
III.3.2 if, notwithstanding Greg Norman's approval and confirmation of
his availability on such a date as shall have been earlier given, Greg
Norman's illness or injury prevents his performing services on the
actual designated Workday, Greg Norman shall use his best efforts to
attend a rescheduled Workday as soon as possible thereinafter, subject
always to the prior bona fide contractual commitments of Norman, and
in such event, Norman shall not be responsible for any costs or
expenses incurred by Licensee in connection therewith
III.4 Without limiting the generality of Paragraph 3.3 hereof, Licensee
specifically acknowledges that Greg Norman's commitments to the Professional
Golf Association Tour (PGA Tour) are prior bona fide contractual commitments
within the meaning of Paragraph 3.3 hereof, and that Greg Norman will be deemed
to be unavailable and unable to render personal services at any time during the
entire PGA Tour season provided however, that Norman may, in his sole
discretion, schedule a Workday during any such PGA Tour season, which Workday
shall be mutually acceptable to Norman and Licensee.
III.5 Licensee specifically acknowledges that all of the commitments now and
hereafter existing of Norman to any and all other Persons entitled to use all or
any portion of the Norman Identification and/or Norman personal services are
prior bona fide contractual commitments within the meaning of paragraph 3.3
hereof; provided that, nothing contained herein shall be deemed a waiver by
Licensee of the terms of Article VII hereof.
III.6 Greg Norman agrees that he will use his best efforts to render his
personal services hereunder in a competent, cooperative and artistic manner.
Notwithstanding the foregoing and provided Greg Norman shall not be required to
perform in any manner that may be likely to cause him bodily injury or illness,
Greg Norman shall comply with whatever reasonable instructions, suggestions and
recommendations Licensee may give in connection with the
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rendition of his personal services.
III.7 If Greg Norman is unable to provide his personal services hereunder as the
result of the occurrence of any event or circumstance over which Norman has no
control (including without limitation, war, civil commotion, riot, earthquake,
fire, flood, inclement weather, strikes, work stoppage or slowdown, power
outages or other acts of God), then Greg Norman shall not be deemed to be in
breach hereunder as long as such personal services are provided by Greg Norman
as soon after the termination or cessation of such event or circumstance as is
reasonably practicable; and, in such event, the Term shall be extended for a
period equal to the duration of any such event or circumstance.
III.8 Greg Norman agrees that he shall cooperate and allow the Licensee to have
issued a life insurance policy on the life of Greg Norman in the amount of
$10,000,000.00. The Licensee shall pay for all premiums in respect of this life
insurance policy and shall arrange that all medical tests which may be
reasonably required by the insurers shall take place at Greg Norman's
convenience at his home in Martin County, Florida.
ARTICLE IV
RIGHT OF PRIOR APPROVAL
IV.1 Norman shall have the right of prior approval of the Prototypes and the
final Concept, as well as the final form of the manner in which Licensee
proposes to exercise or utilize the Rights on the advertising and promotion of
the Prototypes and the Concept. Before finalizing the form of the Concept and of
any and all advertising or promotional material which in any way includes or
makes use of the Norman Identification, Licensee shall forward to Norman a
written proposal setting forth:
IV.1.1 the proposed final form of the Concept;
IV.1.2 the proposed manner in which Greg Norman would be required to
render personal services hereunder;
IV.1.3 any proposed script, story board, layout or other material to
be used in connection with the Concept.
Norman's approval of any such proposal submitted by Licensee shall be
conclusively deemed to have been given if Norman has not notified Licensee of
his objection thereto within ten (10) days from the date Norman receives such
written proposal. Licensee agrees that it shall not be unreasonable for Norman
to withhold such approval if (a) Norman, in his sole and absolute discretion,
deems that the granting of such approval would conflict with or cause Norman or
Licensee to be in breach of any existing or pending contractual commitment
between Norman or any other person or (b) the proposed advertising or
promotional material (i) utilizes the Norman
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Identification, or any part thereof, in conjunction, directly or indirectly,
with the name, image, likeness or endorsements of any other Person, (ii)
identifies, names, or otherwise refers to any supplier or manufacturer of any of
the component parts or other accessories used in connection with, or forming
part of, the Concept, (iii) requires Greg Norman to appear in clothing or to
hold, or be photographed with, any golf equipment or paraphernalia such that
Norman will be in breach of any other existing or pending contractual
commitments, or (iv) is not consistent with Licensee's obligations under
Paragraph 4.2 hereof.
IV.2 Licensee shall, at all times:
IV.2.1 act with good taste and judgment in using the Rights;
IV.2.2 portray and depict Norman in the Concept and in all advertising
and promotional materials in a positive and enhancing manner and
not depict or refer to Norman in a negative, degrading,
argumentative, or controversial fashion or manner;
IV.2.3 ensure that the Rights will not, without Norman's prior consent
(which consent may be withheld by Norman in his sole discretion,
be used by Licensee or any other person to endorse or promote any
other concept, personage, matter or thing whatsoever:
IV.2.4 ensure that the Concept is, and continues to be manufactured and
distributed in strict accordance with Licensee's past practices
and internal quality standards, as well as in strict compliance
with all acceptable laws, regulations and other rules of each
national state, local or other governmental body or agency having
jurisdiction;
IV.2.5 ensure to the best of Licensee's knowledge that the Concept, and
Licensee's use of the Rights in association or connection
therewith, will in no way infringe upon or violate any Trade Mark
or Trade Name, or any trade mark, patent, patent rights, trade
names, copyrights or other proprietary or contractual rights of
any Person whatsoever;
IV.3 Subject to Paragraph 4.2 hereof, and upon the deemed or actual receipt of
Norman's approval as set forth in Paragraph 4.1 hereof, Licensee shall have the
right to (a) produce and market the Concept as so approved and (b) make copies
of, publish and distribute, in the manner approved by Norman, such approved
advertising or promotional materials in connection with the Concept within the
Authorized Territory, provided that Licensee shall not sell or otherwise
distribute such advertising or promotional materials to the public for gain.
Licensee shall not (i) deviate or depart form the terms of the written proposal
referred to in said paragraph 4.1 or (ii) revise, modify or create new versions
of any advertising or promotional materials, including television or radio
commercials, that shall not have been submitted to and approved by Norman, in
either such event without Norman's prior written approval, which approval shall
be obtained in accordance with the terms of Article IV
IV.4 Subject to the provisions of this Article IV and of Article IX hereof, the
Concept and all
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print advertising and other promotional materials produced hereunder shall be
and remain the sole and absolute property of Licensee forever.
ARTICLE V
CONSIDERATION FOR RIGHTS
V.1 Provided that this Agreement is extended beyond the Initial Term, Licensee
hereby agrees to pay Norman, without deduction or set off, a Guaranteed Fee of
$3,300,000 for the First Term, due and payable in equal quarterly installments
on the first day of each Contract Quarter of the First Term based on the
following schedule: First Contract Year - $600,000.00; Second Contract Year -
$1,000,000.00; Third Contract Year - $1,700,000.00. Thereafter the Guaranteed
Fee in first year of a Renewal Term shall be $1,300,000 and shall increase in
each subsequent Contract Year of any Renewal Term by the sum of $100,000 payable
in equal quarterly installments on the first day of each Contract Quarter of the
Term. The foregoing, collectively, are referred to as the "Guaranteed Fees". In
the event that this Agreement is not extended beyond the Initial Term. the
Licensee shall nevertheless pay Norman the sum of $50,000 on June 30, 1996.
V.2 Provided that this Agreement is extended beyond the Initial Term, Licensee
shall pay to Norman, without deduction or offset, except as otherwise provided
in section 5.3 hereof, a royalty payment equal to 8% of all Net Revenue derived
from Sales of the Product.
V.3 The Guaranteed Fees paid pursuant to Paragraph 5.1 hereof shall be credited
against the Royalties payable pursuant to paragraph 5.2 hereof and the Royalties
paid pursuant to paragraph 5.2 hereof shall be credited against the balance of
the Guaranteed Fees payable pursuant to paragraph 5.1 hereof;
V.4 Following the Initial Term and throughout the remainder of the First Term
and any Renewal Terms, Licensee shall furnish Royalty Statements to Norman on
the last day of the month immediately following the end of each Contract
Quarter, stating the Net Revenues and the amount of the Product sold by Licensee
during the applicable preceding Contract Quarter Licensee shall furnish Norman
with a final Royalty Statement sixty (60) days following the expiration of each
Contract Year of the Term. Royalties shall be payable in accordance with and
concurrently with the delivery of the relevant Royalty Statement after deducting
any Guaranteed Fee previously paid, as provided in paragraph 5.3.
V.5 Licensee shall keep and maintain true, accurate and complete books of
account, records and other pertinent accounting data of its gross Sales of the
Product, including the gross Sales of the Product to or by each Affiliate, if
any, and such books, records and other accounting data shall be kept for a
period of not less than two (2) years after the later date upon which the last
required Royalty Statement is furnished to Norman.
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V.6 All Royalty Statements shall be furnished to Norman whether or not any
Product shall have been sold during the accounting period to which such Royalty
Statement refers. Receipt or acceptance by Norman of any Royalty Statement, or
any of the sums paid thereunder, shall not preclude Norman from challenging the
correctness thereof any time. At Norman's option, Norman may cause, at any time
and from time to time, during the Term or within two (2) years following the
termination of the this Agreement, upon twenty one (21) days' prior notice to
Licensee, a complete audit to be made of Licensee's entire business affairs and
records relating to Sales Statement(s) furnished by Licensee hereunder. Such
audit shall be conducted in a manner which interferes minimally with Licensee's
business. If such audit shall disclose a discrepancy of five percent (5%) or
more between the Royalties theretofore computed and paid by Licensee to Norman
for such period and the Royalties that should have been paid by Licensee to
Norman for such period as disclosed by such audit, then Licensee shall promptly
reimburse Norman for the reasonable costs of such audit, and shall promptly pay
to Norman the amount of such deficiency.
V.7 The Rights Fees shall be payable by Licensee to Norman in any event,
regardless of whether Licensee uses any or all of the Rights herein granted.
V.8 Licensee shall pay, or promptly reimburse Norman for, all reasonable
pre-approved expenses incurred by him in performing any personal services
hereunder, including without limitation:
V.8.1 The expenses incurred by Norman in performing his personal services
hereunder on a first class basis;
V.8.2 If Norman's services required hereunder are performed outside the
Florida area, first-class travel (including air travel, if elected by
Norman of his private aircraft not to exceed $2 500 per operating hour
(not to exceed $50,000.00 in any Contract Year and not to be charged
if Norman is already at the requested location) first-class hotel and
other accommodations (including meals and lodging), and reasonable out
of pocket expenses incurred by Norman and one other person, that may
be designated by him;
V.8.3 In connection with the performance of any personal services requested
by Norman hereunder, the expense of limousine transportation for him
(and any other person specified in Paragraph 5.8.2 hereunder) from his
home or hotel at which he may be staying, as applicable, to the
location of the Photography Session or Personal Appearance, as
applicable, and from such location back to Norman's home or hotel;
V.9 All amounts payable under this Agreement shall be paid in United States
Dollars. Norman may elect to have payments made by check, wire transfer or bank
transfer. Unless such election has been made in writing, all payments shall be
made by check drawn to the order of Norman and delivered to Bessemer Trust
Company of Florida, 222 Royal Palm Way, Palm Beach, FL 33480. Past due payments
hereunder shall bear interest at the rate of one percent (1%) per month. All
such checks shall be delivered by Licensee to Norman's address indicated below
unless Licensee shall have been notified otherwise.
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V.10 In the event that the shares of the Licensee are ever offered in any
publicly traded securities market, the shares issued to Norman under this
Agreement shall be converted to have full voting privileges.
ARTICLE VI
REPRESENTATIONS. WARRANTIES AND COVENANTS
VI.1 In addition to all other representations, warranties and covenants of
Licensee herein, Licensee hereby represents, warrants and covenants to and with
Norman as follows:
VI.1.1 Licensee is a corporation duly organized, validly existing and in
good standing under the laws of Delaware and has all requisite corporate
power and authority to execute and deliver this Agreement, to perform all
its duties and obligations set forth herein and to use the Rights. This
Agreement is a valid and binding obligation of Licensee, enforceable
against it in accordance with its terms;
VI.1.2 Neither the execution and delivery of this Agreement, nor the
performance by Licensee of any of the Provisions hereof, constitutes a
breach of or a default under Licensee's Charter or Bylaws, as amended, or
any other charter documents of Licensee; any agreement, instrument or other
document to which Licensee is a party or by which any of its assets or
properties may be bound or affected; or any judgment, order, regulation.
statute, ordinance or rule having any applicability to Licensee or any of
its assets or properties;
VI.1.3 The Concept is, and shall at all times during the Term continue to
be, manufactured and distributed by Licensee in accordance with all
national, state, local, and other laws, regulations, rules and orders
having applicability thereto, and all advertising and promotional materials
used by Licensee in connection with the Concept will be in compliance with
all national, state, local and other laws, regulations, rules and standards
having applicability thereto;
VI.1.4 Licensee shall, at all times during the Term, remain duly qualified
to carry out its business and to manufacture and distribute the Concept in
all jurisdictions in which it conducts business;
VI.1.5 Norman shall not be under any obligation to pay any commission or
other fee to Licensee, or any agent or representative thereof, on account
of this Agreement;
VI.2 Norman hereby represents and warrants to Licensee that (a) he has the full
right and power to enter into this Agreement, to perform all of his obligations
hereunder and to grant all rights hereunder without violating the legal or
equitable of any other Person, (b) neither the
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execution and delivery of this Agreement, nor the Performance by Norman of any
other Provisions hereof, constitutes a breach of or a default under any
agreement, instrument or other document to which Norman is a party or by which
any of his assets or properties may be bound or affected or any judgment, order,
regulation, statute, ordinance or rule having applicability to Licensee or any
of his assets or properties (c) this Agreement is a valid and binding obligation
of Norman, enforceable against him in accordance with its terms; (d) Licensee
shall not be under any obligation to pay any commissions to any agent or
representative of Norman on account of this Agreement.
ARTICLE VII
NON-COMPETITION AND EXCLUSIVITY
VII.1 Subject to the provisions of this Article VII, during the Term, Norman
shall not enter into any agreement to grant any rights similar to the Rights to
any Person with respect to any concept which is the same as or confusingly
similar to the Concept or the Product. The parties agree that the
self-instructional golf video product known as Better Golf or any other form of
golf instructional video or multi-media presentation for teaching golf
techniques is not the same as or confusingly similar to the Concept of the
Product.
VII.2 The restrictions set forth in Article VII are not intended to preclude and
shall not preclude Norman from appearing in the sports, entertainment, news or
information portion of:
VII.2. 1 any form of media whatsoever, including, without limitation, print
media, television programs and broadcasts, radio programs and broadcasts,
television and radio series, newscasts, documentaries, video tapes and
video discs that do not compete with the Product; sound tracks, motion
pictures and any other form of media that has been, or may in the future
be, conceived, developed or invented, by any process, instrumentation or
device now known or hereafter developed; or
VII.2.2 any athletic tournament match or outing
in which or in connection with which concepts or services are advertised,
publicized, featured or otherwise dealt with that are the same as or confusingly
similar to or competitive with the Concept or the Product.
VII.3 Licensee acknowledges and agrees that the grant to it of the Rights is
restricted to use in the Concept by Licensee within the Authorized Territory,
and Licensee agrees that it has no right or entitlement to, and that it shall
not:
VII.3.1 use the Rights in connection with the promotion, sale or other
dealings with any other concept or concepts;
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VII.3.2 license or permit others to use or rely upon any or all the Rights
except in association with the Concept;
VII.3.3 permit or authorize the use of the Norman Identification in any
joint promotion of the Concept with any other concepts or services, whether
of its own or any other Person, without the prior written approval of
Norman, which approval may be withheld in his sole and absolute discretion.
VII.4 The parties agree that the use of any portion of the self-instructional
golf video product known as Better Golf in connection with the Product is
subject to the consent of the owners of Eagle One Pty. Ltd., the proprietor of
Better Golf, which Norman agrees to attempt to obtain by April 1, 1995. The
parties further agree that this Agreement is subject to Norman's confirmation on
or before April 1, 1995 from Eagle One Pty. Ltd. that no conflict exists between
the Better Golf program and the Concept.
ARTICLE VIII
INDEMNITY
VIII.1 Licensee shall indemnify, and shall save, defend and hold Norman, and his
heirs, executors, and representatives (individually an "Indemnitee"), free and
harmless from and against any and all claims, demands, causes of action, losses,
damages, expenses and/or other liabilities (including without limitation,
reasonable attorneys' fees and court costs) which the Indemnitee may incur or to
which such Indemnitee may be subject, relating to or arising out of (a)
Licensee's breach of any of the Provisions of this Agreement; (b) Norman's
actions or omissions in connection with the performance of his obligations under
this Agreement, including, but not limited to, any actions or omissions which
constitute negligence on the part of Norman; (c) the manufacture, sale,
promotion, advertisement and/or distribution of the Concept (including without
limitation. the sale of any damaged, nonconforming or defective Product),
regardless of who manufactured or distributed the Product giving rise to any
such claim; (d) any allegation or claim that Licensee (i) has violated any state
or federal securities laws, or otherwise committed any acts or omissions
constituting fraud, willful misconduct or negligence, whether such allegation is
brought as a derivative action or by a shareholder of Licensee on his/her own
capacity and/or (ii) has misrepresented the nature of the relationship between
Norman and Licensee, or the nature of the Rights obtained from Norman pursuant
to this Agreement; and/or (e) the wrongful use or violation by Licensee of any
copyrights, trademarks, trade names or other proprietary rights which may be the
property of any third party.
VIII.2 Norman shall indemnify, and shall save, defend, and hold Licensee, its
shareholders, directors, officers, employees, agents and other representatives
(individually, a "Licensee Indemnitee"), free and harmless, from and against any
and all claims, demands causes of action, losses, damages, expenses and/or
liabilities (including, without limitation, reasonable attorneys' fees and court
costs) relating to or arising out of (a) Norman's breach of any of the
Provisions of
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this Agreement and/or (b) any allegation or claim that Norman has misrepresented
the nature of the relationship between himself and Licensee, or the nature of
the Rights granted by Norman to Licensee pursuant this Agreement.
VIII.3 Licensee shall, at its own expense, place and maintain insurance of an
amount, type and form with an insurance company approved and satisfactory to
Norman, or under any existing insurance which Licensee shall have in force and
effect from time to time, in Licensee's sole discretion, to fully protect Norman
from all potential claims and demands of whatsoever nature and kind made against
Norman that Licensee is required to indemnify against hereunder. Norman shall be
an additional named insured under all such contracts of insurance which shall be
maintained in full force and effect by Licensee from the date hereof to and
including the expiry of six (6) months following the termination of this
Agreement. Licensee shall ensure that Norman shall receive not less than thirty
(30) day's prior notice of the insurance company's (or companies') intention to
cancel such contracts of insurance, and that Norman shall receive notice of any
and all defaults by Licensee under such contracts of insurance. Licensee's
obligation to place and maintain insurance pursuant to this paragraph 8.3 may
not be revoked, amended or otherwise modified in any manner whatsoever by the
parties hereto, without the prior written approval of Norman, which approval may
be withheld in his sole and absolute discretion.
VIII.4 Licensee shall, within fifteen (15) days following the execution of this
Agreement, forward to Norman appropriate certificates of insurance indicating
compliance by Licensee with the requirements of Paragraph 8.3 hereof.
ARTICLE IX
TRADE MARKS
IX.1 Licensee acknowledges that Norman is the sole and absolute owner of all
Trade Marks; its use of such Trade Marks will inure to the sole benefit of
Norman (and Licensee shall acquire no rights therein by virtue of this
Agreement); and Licensee shall not, without the prior written consent of Norman,
which consent may be withheld in his sole discretion, use or attempt to use, or
register or attempt to register any such Trade Marks under the Canadian Trade
Marks Act, the American Trade Marks Act or any other similar legislation of any
other country or jurisdiction. The prior written consent of Norman, if provided,
may be conditioned upon any and all such terms and provisions as he may, is his
sole and absolute discretion. determine.
IX.2 Licensee acknowledges that nothing herein contained shall obligate Norman
to:
IX.2. 1 register any Trade Marks under the Canadian Trade Marks Act, the
American Trade Marks Act, or any other similar legislation of Canada, the
United States or under corresponding laws or legislation of any other
country, state, or jurisdiction.
IX.2.2 dissuade any third party from using, attempting to use, registering
or attempting to
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register any Trade Mark or Trade Marks; or
IX.2.3 indemnify or hold Licensee harmless from or against any loss,
liability, expense, damages, claims, suits, proceedings, actions,
judgments, assessments, penalties, orders for specific performance or
otherwise, indemnities and costs of any kind whatever those arising out of
or occurring as a result if the use by Licensee of the Trade Marks.
IX.3 Nothing contained in this Article IX shall prevent Licensee from using any
of the Norman Identification in connection with the advertising, promotion or
Sale of the Concept within the Authorized Territory.
IX.4 If requested by Norman, Licensee shall use its best efforts to assist
Norman in executing any and all agreements and instruments and filing all
applicable to enable documents that may be necessary or appropriate to enable
Norman to obtain protection with respect to each and every Trade Mark that may
be included in any advertising or promotional materials used by Licensee
hereunder
IX.5 If either party discovers that the Rights are infringed, it shall
communicate the details to the other party. Licensee shall thereupon have the
right, but not the obligation, to take whatever action it deems necessary,
including the filing of lawsuits to protect the rights of the parties to this
Agreement and to terminate such infringement. Norman shall cooperate with
Licensee if Licensee takes any such action, but all expenses of Licensee shall
be borne by Licensee. If Licensee recovers any damages or compensation for any
action it takes hereunder in excess of its costs of prosecution of the
infringement. such damages or compensation shall be subject to the Royalty. In
the event that Licensee does not bring an action in respect of the infringement,
Norman shall also have the right, but not the obligation, to take any such
action, in which case Licensee shall cooperate with Norman, but all of Norman's
expenses shall be borne by Norman. In this event, Norman shall receive 100% of
any damages or compensation it recovers for any such infringement.
ARTICLE X
DEFAULT AND TERMINATION
X.1 Norman may, at his option, terminate this Agreement if:
X.1.1 Licensee fails to make any payment to Norman when due;
X.1.2 Licensee breaches or fails to observe, perform or keep any material
Provision on its part to be observed, performed or kept pursuant to
this Agreement, including without imitation, any material
representation, warranty or covenant of Licensee hereunder,
X.1.3 Licensee (a) files, or has filed against it, and does not take
immediate steps to
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quash, any petition for bankruptcy, reorganization, arrangement or
other protection under any state, federal or other applicable
jurisdiction's bankruptcy, insolvency or similar laws: (b) is declared
bankrupt or becomes insolvent; (c) consents to the appointment of a
receiver, trustee or assignee for the benefit of its creditors or
makes any such assignment for the benefit of creditors; or (d)
winds-up or ceases to carry on the business and affairs of Licensee
X.2 If Norman shall exercise his option to terminate this Agreement upon the
occurrence of any one or more of the events stipulated in Paragraph 10.1 hereof,
then this Agreement shall terminate ninety (90) days after notice thereof to
Licensee, provided that if Licensee shall have failed to make any payment
required by Paragraph 10.1.1 hereof, Licensee shall have ten (10) Business Days
from receipt of written notice of such default by which to cure such default and
provided further that, upon the occurrence of any other event specified in
Paragraph 10.1 hereof, (other than as stipulated in said Paragraph 10.1.1)
Licensee shall have thirty (30) days from the date of such notice from Norman to
Licensee to cure such default. Neither the termination of this Agreement by
Norman nor Norman's right to so terminate this Agreement shall be its exclusive
remedy and neither shall in any way affect:
X.2. 1 the obligation of Licensee to pay the Rights Fees or any other
amounts hereunder;
X.2.2 the right of Norman to enforce the receipt and collection of the
Rights Fees of other amounts payable by the Licensee hereunder;
X.2.3 the right of Norman to enforce any of the Provisions of this
Agreement against Licensee;
X.2.4 the right of Norman to sue for damages or to seek and obtain
equitable relief (including without limitation, injunctive relief or
an order for specific performance), or
X.2.5 the right of Norman to pursue any other legal or equitable
remedies, whether for a breach of this Agreement by Licensee or
otherwise.
X.3 With particular reference to Paragraph 10.2.4 hereof, the parties
acknowledge and agree that the failure of Licensee to observe, perform or keep
all of the Provisions on its part to be so observed, performed or kept, would
result in irreparable harm and injury to Norman which could not be adequately
compensated for in damages and that, in such event, Norman shall be entitled to
equitable relief (including without limitation, specific performance, temporary
restraining orders and/or preliminary or permanent injunctions), in addition to
all other remedies to which Norman may be entitled hereunder or at law.
X.4 Licensee may, at its option, terminate this Agreement if, and only if, Greg
Norman (a) dies; (b) voluntarily enters a substance abuse clinic, center or
similar program; (c) commits an act or becomes involved in any situation or
occurrence within the Authorized Territory that results in
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a criminal conviction therein which, in the good faith discretion of Licensee,
would materially damage or impair the goodwill or reputation of Norman; or (d)
breaches or fails to observe, perform or keep any material Provision on his part
to be observed, performed or kept pursuant to this Agreement. If Licensee shall
exercise its option to terminate this Agreement as provided in this Paragraph
10.5, then this Agreement shall terminate ninety (90) days after notice thereof
to Norman. Licensee shall not be entitled to claim the return of any moneys paid
to Norman prior to termination or to claim any further or other relief or
damages against Norman. If Licensee so terminates this Agreement, Norman shall
nonetheless be entitled to receive and retain all of the Rights Fees, including
all Royalties accrued to the date of such termination.
X.5 Upon the termination of this Agreement, all rights granted hereunder to
Licensee (including without limitation. the Rights) shall forthwith cease,
terminate and revert to Norman and Licensee shall have no other or further right
to utilize or exploit the Rights thereafter. Upon such expiration or
termination, Licensee shall:
X.5.1 forthwith cease use of the Rights in any manner whatsoever,
including without limitation, the cessation of the use of any Trade
Marks and any still photographs, prints or other advertising,
promotional or sales materials, regardless of the media or form in
which they are used, in which the Norman Identification are used:
X.5.2 not make use of or otherwise distribute any further copies of
any advertising or promotional materials approved hereunder in any
manner whatsoever; and
X.5.3 forthwith destroy or transfer to any Person designated by Norman
any such advertising or promotional materials which it then or
thereafter has in its possession or under its control and use its best
efforts to remove or cause the removal of, all existing copies of such
materials from public display, provided however, that Licensee shall
be allowed to keep a limited number of copies of the Product and a
limited number of copies of any advertising or promotional materials
relating thereto, for historical and/or administrative purposes.
Licensee hereby agrees that such copies retained pursuant to this
Paragraph 10.5.3 shall not be used for any commercial purposes
whatsoever.
Notwithstanding the foregoing, during the six (6) consecutive months following
the termination of this Agreement, Licensee shall be permitted to distribute and
sell its then existing inventory of the Product and utilize any existing signage
that depicts Greg Norman and the Provisions of this Agreement shall continue to
apply during such period, including without limitation, all Provisions relating
to the Royalties payable with respect to Sales of the Product during such six
(6) month period and Licensee's obligation to provide Royalty Statements
pursuant to Article V hereof.
Within thirty (30) days following such termination, Licensee shall furnish to
Norman a certificate of an officer of Licensee certifying it compliance with
the Provisions of this Paragraph 10.5.
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ARTICLE XI
NOTICES
XI.1 Notwithstanding any other Provision of this Agreement to the contrary, all
notices, consents, approvals, requests, communications or other documentation to
be given, made or obtained under this Agreement, shall be in writing and shall
be deemed given when delivered personally, transmitted by facsimile or 48 hours
after deposit in the United States or Canadian mail with postage prepaid, sent
by registered mail, return receipt requested, duly addressed to the person to be
notified as follows:
If to Norman: Great White Shark Enterprises,
281 South U.S. Highway #1, Suite 302,
Tequesta, Florida. 33469
Attention: Mr. Frank Williams
With copy to: Paul B. Erickson, Esq.
P.O. Box 431
Palm Beach, FL 33480
If to Licensee: 7 West 51 St Street, Fourth Floor,
New York. N.Y. 10019
With copy to: Mr. Earl Takefman,
68 Belvedere Road,
Westmount, Quebec. H3Y 1P8
XI.2 All such notices, consents, approvals, requests, communications and other
documentation to be given, made or obtained hereunder by Licensee for itself or
for and on behalf of Norman, including without limitation, all applications,
permissions, registrations and insurance policies required hereunder, shall be
so given, made or obtained at the sole cost and expense of Licensee and Licensee
shall pay all legal and other fees arising in connection therewith.
XI.3 Either party may change its address for purposes of this Article XI by
giving notice to that effect to the other party in the manner provided for
herein.
ARTICLE XII
ASSIGNMENT
XII.1 Norman and Licensee acknowledge and agree that this Agreement is personal
in nature and that neither party may assign all or any part of this Agreement,
or the Rights granted
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hereunder, to any other Person without the prior written consent of the
non-assigning party, which consent may be withheld in such party's sole and
absolute discretion. Notwithstanding the foregoing, Norman hereby consents to
the assignment by Licensee to an Affiliate of Licensee and Licensee agrees that
Norman shall have the right to assign the rights to income and shares under this
Agreement to any other Person or Affiliate of Norman. Norman further
acknowledges and agrees that Licensee shall have the right to distribute the
Concept and the Product through Affiliates and duly designated distributors
provided that any and all such Affiliates and distributors shall only be
permitted to utilize advertising and promotional materials that Licensee shall
have created and that Norman shall have approved, and Licensee shall require
such use of pre-approved advertising and promotional materials in its agreements
with such other persons (copies of which will be made available to Norman or his
designated representative upon request).
XII.2 Any permitted assignment of this Agreement or any portion thereof, or
discretionary assignment if consented to by Norman or the Licensee, shall not
affect or otherwise discharge Norman's or Licensee's obligations hereunder and
Norman or Licensee agrees to provide its written acknowledgment thereof in
connection with any such assignment.
ARTICLE XIII
MISCELLANEOUS
XIII.1 If either Norman or Licensee is prevented from satisfying or fulfilling
any provision of this Agreement as a result of the occurrence of any event or
circumstance over which such party has no reasonable control (including without
limitation, war, civil commotion, riot, earthquake, fire, floods inclement
weather, strikes, work stoppages or slowdowns, power outages or other similar or
dissimilar acts of God) then such party shall not be deemed to be in breach of
this Agreement for the duration of the applicable event or circumstance,
provided that such party satisfied or performs the applicable Provision as soon
after termination or cessation of such event or circumstance as is reasonably
practicable.
XIII.2 This Agreement is solely for the benefit of Licensee, and except as
otherwise specifically provided herein, no Affiliate or other Person shall be
entitled to use, or permit any other Person to use, the Rights, or any part or
portion thereof, including without limitation, the Norman Identification, to
produce and promote the Concept or the Product. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto and their respective
successor, permitted assigns and legal representatives.
XIII.3 Time is, and shall be and remain. of the essence of this Agreement.
XIII.4 The division of this Agreement into Articles and clauses, and the
insertion of headings, are for convenience of reference only and shall not
affect the meaning, construction or interpretation of this Agreement, or any
Provision hereto. The terms "this agreement", "hereof",
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"herein", "hereto". "hereunder" and similar expressions refer to this Agreement
and not to any particular Article, clause or other portion of this Agreement.
Such terms refer similar to any agreement or instrument which amends this
Agreement or is supplemental or ancillary hereto. All Provisions in this
Agreement are to be construed as covenants as though the words importing such
covenants were used in each Article or Paragraph herein.
XIII.5 The parties agree that there are no inducements, implied warranties,
representations or other documents which have been made or relied upon by any
party except as expressly set forth herein or attached hereto. This Agreement,
and all Exhibits attached hereto or schedules, documents and agreements
furnished or to be furnished in connection herewith, constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes any and all discussions and agreements. This
Agreement may not be amended or supplemented. and no provision hereof may be
waived, unless such amendment, supplement or waiver is in writing and signed by
the party sought to be bound thereby.
XIII.6 This Agreement shall be governed by and construed and enforced, in
accordance with the laws of the State of Florida applicable to agreements made
and to be wholly performed within such state.
XIII.7 The relationship between the parties hereto is intended to be, and is to
be construed as, that of independent contracting parties only and not that of a
partnership, joint venture, agency or any other association whatsoever. Nothing
contained herein shall constitute either party as having the right, power or
authority to bind the other in any manner whatsoever and nothing contained
herein shall give, or is intended to give, any rights of any kind to any third
party.
XIII.8 The parties hereto agree that each of them has participated in the
drafting and negotiation of this Agreement and that any rule of construction to
the effect that ambiguities are to be construed against the drafting party shall
not apply in the interpretation of this Agreement.
XIII.9 The parties hereto agree that, except as set forth below, all the
Provisions hereof (including without limitation, all representations and
warranties contained herein), whether requiring performance or fulfillment
before or after the expiry or earlier termination of this Agreement, shall
survive the expiry or earlier termination of this Agreement. Wherever the term
"termination" is used in this Agreement, it shall be deemed, unless otherwise
expressly required by the context, to mean both the expiry of this Agreement
pursuant to Article II hereof and the earlier termination of this Agreement
pursuant to Article X hereof or otherwise.
XIII.1O Wherever the expression "including without limitation" is used herein,
it shall be deemed to mean "including without limiting the generality of the
foregoing".
XIII.11 Where the context so requires, words importing the singular number
shall include the plural and vice versa and words importing the masculine gender
shall include the feminine and neuter genders.
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XIII.12 No waiver of any Provision hereof shall be deemed to be a waiver of any
other Provision, and no waiver in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such Provision unless
expressly agreed to by the party waiving such Provision.
XIII.13 Any condoning, excusing or overlooking by either party of any default,
breach or non-observance by the other party at any time or times in respect of
any Provision hereof shall not operate as a waiver of such party's rights
hereunder with respect to such Provision or of any subsequent default, breach or
non-observance thereof and such party's rights shall not be affected or limited
in any way as a result of any such default, breach or non-observance or any such
subsequent default, breach or non-observance.
XIII.14 If any Provision or Provisions of this Agreement shall be held to be
in whole or in part invalid, illegal or unenforceable in any jurisdiction, or if
any governmental agency or authority shall require the parties to delete any
Provision of this Agreement, such invalidity, illegality, unenforceability or
deletion shall not impair or affect the remaining Provisions of this Agreement
or the validity or enforceability of such Provision in any other jurisdiction.
The parties shall endeavor, in good faith negotiations, to replace the invalid,
illegal, unenforceable or deleted Provision by valid Provisions the affect of
which comes as close as legally possible to that of the invalid, illegal,
unenforceable or deleted Provision.
XIII.l5 Each party agrees to carry out all such actions and to execute and
deliver all such further agreements, instruments, documents and assurances as
may be reasonably required to give full force and effect to the intent hereof
(provided the same shall not be inconsistent with the Provisions hereof).
XIII.16 If either party hereto shall institute any action or proceeding to
enforce or interpret this Agreement, or any Provision hereof, the party
prevailing in such action or proceeding shall be entitled to recover its
reasonable attorneys' fees and court costs from the non-prevailing party.
XIII.17 No right or remedy conferred upon any party by any of the specific
Provisions of this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy whether given to such party hereunder,
or now or hereafter existing at law, in equity, by statute or otherwise. The
election by any party of any one or more rights or remedies shall not constitute
a waiver of such party's right to pursue other available rights or remedies.
XIII.18 This Agreement may be executed by the parties hereto in any number of
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
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XIII.19 All rights not herein specifically granted to Licensee shall remain the
property of Norman to be used in any manner Norman deems appropriate.
THE PARTIES HAVE SIGNED THIS AGREEMENT AS OF THE DATE ABOVE WRTTTEN.
GREAT WHITE SHARK ENTERPRISES, INC.
per ___________________________________
/s/ Greg Norman
---------------------------------------
GREG NORMAN
VISUAL EDGE SYSTEMS INC.
per____________________________________
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EXHIBIT 10.2
To the Lending Officer
Use this Note for fixed or
floating rate time loans
PROMISSORY NOTE
New York, New York
$507,000.00 Date: April 15, 1996
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order
of REPUBLIC NATIONAL BANK OF NEW YORK ("Bank") at its prineipa1 banking office
at 452 Fifth Avenue, New York, New York 10018 or at any of its other banking
office in New York as Bank may designate by written notice to Maker the sum of
Five Hundred and Seven Thousand Dollars on December 31, 1996 together with
interest from the date hereof on the unpaid principal of this Note until paid in
full at the rate set forth below.
Interest on the unpaid principal of this Note will be due and payable when
the principal of this Note is due and payable and indicate whichever is
applicable):
[X] on the last day of each month.
[ ] on the _______________ day of each _______________.
Prior to the date that the principal hereof is due and payable (whether at
stated maturity or by acceleration), this Note shall bear interest at a rate
(the "Contract Rate") equal to (indicate whichever is applicable):
[ ] a fixed rate of ___% per annum.
[X] a fluctuating rate of 0% per annum above the Reference Rate (as defined
below), such rate to change without notice from time to time with each
change in the Reference Rate.
After the principal of this Note becomes due, interest under this Note shall be
payable on demand and shall accrue at a fluctuating rate per annum equal to 2%
per annum above (i) if the Contract Rate is a fixed rare, the Contract Rate, or
(ii) if the Contract Rate is a fluctuating rate, the greater from time to time
of (x) the Contract Rare in effect on the date that the principal became due and
(y) the Contract Rate that would have been in effect from time to time if the
principal had not become due. If Maker is a corporation, interest shall be
calculated on the basis of a 360-day year for actual days elapsed. In no event
shall the interest rate applicable at any time to this Note exceed the maximum
rate permitted by law. As used herein. "Reference Rate" means the rate
established by Bank from time to time at its principal domestic office as its
reference lending rate for domestic commercial loans. Bank may make loans to
customers above, at or below the Reference Rate.
This Note shall be payable in lawful money of the United States of America
in immediately available funds. All payments on this Note shall be applied to
the payment of accrued interest before being applied to the payment of
principal. Any payment which is required to be made on a day which is not a
banking business day in the City of New York shall be payable on the next
succeeding banking business day and such additional time shall be included in
the computation of interest. The principal amount of this Note may not be
prepaid in whole or in part without the consent of the holder of this Note,
which may be withheld in its absolute discretion. In the event that any other
Obligations (as defined below) of Maker to Bank are due at any time that Bank
receives a payment from Maker on account of this Note or any such other
Obligations of Maker, Bank may apply such payment to amounts due under this Note
or any such other Obligations in such manner as Bank, in its discretion, elects,
regardless of any instructions from Maker to the contrary.
Upon the occurrence of any of the following (each, an "Event of Default")
with respect to any Maker, indorser or guarantor of the indebtedness evidenced
by this Note: (i) default in payment of any amount due under this Note or in the
payment or performance of any other Obligation or agreement of any nature or
description to or with Bank; (ii) any of them shall commence any case,
proceeding or other action under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to any of them, or seeking to adjudicate any of them a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to any of
them or any of their debts, or seeking appointment of a receiver, trustee,
custodian or
LD 3030R (5/90)
<PAGE>
by Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. This Note cannot be
changed or terminated orally or by estoppel or waiver or by any alleged oral
modification regardless of any claimed partial performance referable thereto.
Any notice from Bank to Maker or any indorser shall be deemed given when
delivered to Maker or such indorser by hand or when deposited in the United
States mail and addressed to Maker or such indorser at the last address of Maker
or such indorser appearing on Bank's records.
This Note shall be governed by and construed in accordance with the laws of
the State of New York applicable to instruments made and to be performed wholly
within that state. If any provision of this Note is held to be illegal or
unenforceable for any reason whatsoever, such illegality or unenforceabilicy
shall not affect the validity of any other provision hereof.
MAKER AND EACH INDORSER AGREES THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM
OR CONTROVERSY BETWEEN MAKER OR SUCH INDORSER AND BANK, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL AT BANK'S ELECTION,
WHICH ELECTION MAY BE MADE AT ANY TIME PRIOR TO THE C0MMENCEMENT OF A JUDICIAL
PROCEEDING BY BANK, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY MAKER
OR SUCH INDORSER AT ANY TIME PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A
SUMMONS AND/OR COMPLAINT MADE BY MAKER OR SUCH INDORSER, BE RESOLVED BY
ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THIS PARAGRAPH AND SHALL, AT
THE ELECTION OF BANK, INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH
(1) THIS NOTE OR ANY RELATED AGREEMENTS OR INSTRUMENTS, (2) ALL PAST, PRESENT
AND FUTURE AGREEMENTS INVOLVING MAKER OR SUCH INDORSER AND BANK, (3) ANY
TRANSACTION RELATED TO THIS NOTE AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS
INVOLVING MAKER OR SUCH INDORSER AND BANK, AND (4) ANY ASPECT OF THE PAST,
PRESENT OR FUTURE RELATIONSHIP OF MAKER OR SUCH INDORSER AND BANK. Bank may
elect to require arbitration of any Dispute with Maker or any indorser without
thereby being required to arbitrate all Disputes between Bank and Maker or such
indorser. Any such dispute shall be resolved by binding arbitration in
accordance with Article 75 of the New York Civil Practice Law and Rules and the
Commercial Arbitration Rules of the American Arbitration Association ("AAA"). In
the event of any inconsistency between such Rules and these arbitration
provisions, these provisions shall supersede such Rules. All statutes of
limitations which would otherwise be applicable shall apply to any arbitration
proceeding under this paragraph. In any arbitration proceeding subject to this
paragraph, the arbitration panel (the "arbitrator") is specifically empowered to
decide (by documents only, or with a hearing, that the arbitrator's sole
discretion) pre-hearing motions which are substantially similar to pre-hearing
motions a dismiss and motions for summary adjudication. In any such arbitration
proceeding, the arbitrator shall not have the power or authority to award
punitive damages to any party. Judgment upon such award rendered may be entered
in any court having jurisdiction. Whenever an arbitration is required, the
parties shall select an arbitrator in the manner provided in this paragraph. No
provision of, nor the exercise of any rights under, this paragraph shall limit
the right of Bank (1) to foreclose against any real or personal property
collateral through judicial foreclosure, by the exercise of the power of sale
under a deed of trust, mortgage or other security agreement or instrument,
pursuant to applicable provisions of the Uniform Commercial Code, or otherwise
herein pursuant to applicable law, (2) to exercise self-help remedies including
but not limited to setoff and repossession, or (3) to request and obtain from a
court having jurisdiction before, during or after the pendency any arbitration,
provisional or ancillary remedies and relief including but not limited to
injunctive or mandatory relief or the appointment of a receiver. The institution
and maintenance of an action or judicial proceeding for, or pursuit of,
provisional or ancillary remedies or exercise of self-help remedies shall not
constitute a waiver of the right of Bank, even if Bank is the plaintiff, to
submit the Dispute to arbitration if Bank would otherwise have such right.
Whenever an arbitration is required under this paragraph, the arbitrator shall
be selected, except as otherwise herein provided, in accordance with the
Commercial Arbitration Rules of the AAA. A single arbitrator shall decide any
claim of $100,000 or less and he or she shall be an attorney with at least five
years' experience. Where the claim of any party exceeds $100,000, the Dispute
shall be decided by a majority of three arbitrators, at least two of whom shall
be attorneys (at least one of whom shall have not less than five years'
experience representing commercial banks). The arbitrator shall have the power
to award recovery of all costs and fees (including attorneys' fees,
administrative fees, arbitrator's fees, and court costs) to the prevailing
party. In the event of any Dispute governed by this paragraph, each of the
parties shall, subject to the award of the arbitrator, pay an equal share of the
arbitrator's fees.
MAKER AND EACH INDORSER AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN
RESPECT OF OR ARISING OUT OF THIS NOTE MAY BE INITIATED AND PROSECUTED IN THE
STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW YORK COUNTY, NEW
YORK AND ANY ARBITRATION PROCEEDING PURSUANT HERETO SHALL BE CONDUCTED IN NEW
YORK, NEW YORK. MAKER AND EACH INDORSER CONSENT TO AND SUBMIT TO THE EXERCISE OF
JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTlON
-3-
<PAGE>
OVER THE SUBJECT MATTER, WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENT THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL
DIRECTED TO MAKER OR SUCH INDORSER AT ITS ADDRESS SET FORTH BELOW OR TO ANY
OTHER ADDRESS AS MAY APPEAR IN BANK'S RECORDS AS THE ADDRESS OF MAKER OR SUCH
INDORSER.
IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
NOTE, BANK, MAKER AND EACH INDORSER WAIVE TRIAL BY JURY, AND MAKER AND EACH
INDORSER ALSO WAIVE (I) THE RIGHT TO INTERPOSE ANY SETOFF OR COUNTERCLAIM OF
ANY NATURE OR DESCRIPTION, (II) ANY 0BJECTION BASED ON FORUM NON CONVENIENS OR
VENUE, AND (III) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.
If this Note is executed by more than one person, then each such person
shall be jointly and severally liable on this Note, and the term "Maker" shall
mean each, any or all of such persons.
Bank is authorized to fill in any blank spaces and to otherwise complete
this Note and correct any patent errors herein.
Visual Edge Systems, Inc.
- ------------------------------- -------------------------------
Signature of Maker Name of Maker (if not a natural person)
By: /s/ Earl Takefman
- ------------------------------- ----------------------------
Print Name Signature of Authorized Signatory
Earl Takefman, CEO
- ------------------------------- -------------------------------
Address for Notices Print Name and Title
7 West 51st St., NY, NY 10019
- ------------------------------- -------------------------------
Signature of Maker Address for Notices
- -------------------------------
Print Name
- -------------------------------
Address for Notices
[If Maker is not a natural person,
indicate the type of entity below]
The Maker signing above is a:
[ ] partnership organized under the
laws of _______________________________.
[ ] limited partnership organized under the
laws of ________________________________.
[ ] corporation organized under the laws of
_______________________________________.
[ ] other (specify): ______________________.
-4-
<PAGE>
EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 1996,
BETWEEN: Visual Edge Systems Inc., a corporation
duly incorporated under the laws of Delaware
having an office and place of business at 7
West 51st Street, New York, New York
10019
(hereinafter referred to as "Company")
AND: Earl Takefman, 68 Belvedere Road,
Montreal, Quebec, Canada H3Y 1P8
(hereinafter referred to as "Employee")
THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and
agreements hereinafter contained and the mutual benefit to be derived therefrom
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by each of the parties hereto, the Parties hereto hereby
covenant and agrees as follows:
Section 1 - Employment
The Company hereby agrees to employ the Employee as Chief Executive Officer
of the Company and the Employee hereby accepts employment with the Company and
its subsidiaries in such positions and agrees to work for the Company and any of
its subsidiaries upon the terms and conditions hereinafter set forth.
Section 2 - Term
3.1 Unless this Agreement is terminated upon Employee's resignation, death
or permanent disability or incapacity, for Cause (as hereinafter defined)
or without Cause, this Agreement shall remain in effect from January 1,
1996 until December 31, 1998.
3.2 This Agreement shall automatically be renewed after December 31, 1998 for
additional twelve (12) month periods commencing on the 1st day of January
and terminating on the 31st day of December of each year, unless one party
shall have given notice to the other party, in writing, not later than
September 30th of any year thereafter, of its election to terminate this
Agreement as of December 31st of that year.
<PAGE>
- 2 -
3.3 In the event that the Company elects to terminate this Agreement, other
than for Cause, the Company agrees to pay to the Employee twelve (12)
months severance pay as liquidated damages for such termination, payable in
full upon termination.
3.4 For purposes of this Agreement, for "Cause" shall mean: (i) the material
breach of any provision of this Agreement by the Employee, (ii) the
conviction of the Employee of a felony or an indictable offense under
United States law, (iii) the misappropriation or embezzlement of funds by
the Employee or (iv) the Employee is materially impaired from performing
his duties hereunder because of alcohol, drug or any substance abuse.
Section 3 - Compensation
4.1 In consideration of the services to be rendered by the Employee to the
Company under this Agreement, the Company shall pay to the Employee an
annual base salary (such annual base salary being hereinafter referred to
as the "Salary") of $150,000 payable monthly.
4.2 The Employee shall be entitled to receive an annual bonus in accordance
with Schedule A.
4.3 Any option granted to the Employee with respect to the Company's shares of
Common Stock in respect of any fiscal year shall be made by the Company's
Stock Option Committee pursuant to the Company's Stock Option Plan (the
"Plan"). In the event that an insufficient number of shares of Common
Stock are available for grant under the Plan, then the Company shall use
its best efforts to amend the Plan (including obtaining stockholder
approval) to increase the number of shares of Common Stock available
thereunder. In the event that the Company is unable to so increase the
number of shares so available, then the Employee shall be granted phantom
units, or another award, that shall entitle him to the same appreciation in
the Company's Common Stock as if he had received options to purchase
shares of Common Stock. The Company shall use its best efforts to cause the
Stock Option Committee to grant options as provided for herein.
4.4. Vesting of any options granted pursuant to Section 4.2 hereof shall be in
accordance with the Plan.
<PAGE>
- 3 -
4.5 The bonus granted to the Employee in respect of any fiscal year in
accordance with the provisions of Section 4.2 hereof shall be payable in
full by the Company to the Employee not later than fifteen (15) days after
the day on which the Company files its Annual Report on Form 10-K with the
SEC containing its audited financial statements for the preceding year.
4.6 If any change is made to the Company's Common Stock (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, combination of shares, or exchange of shares or any other
change in capital structure made without receipt of consideration), then
the Company shall preserve the value of all shares of Common Stock referred
to herein by adjusting the number and class of shares issuable to reflect
the effect of such event or change upon the Company's capital structure and
by making appropriate adjustments to the number and class of shares.
Section 4 - Benefits
5.1 During the term of this Agreement, the Employee shall be entitled to
receive from the Company the following:
(1) benefits and a health care plan that is made available to the
Company's executives:
(2) a monthly car allowance of $500, car insurance and coverage of gas,
maintenance and repair expenses:
(3) reimbursement for all reasonable expenses incurred by the Employee in
the conduct of the Company's busIness;
(4) membership fees, not to exceed six thousand dollars ($6,000) per
annum, for the sports or social clubs of the Employee's choice; and
(5) 4 weeks annual vacation. Such vacation, to the extent not used in any
calendar year, may not be carried over to subsequent calendar years.
<PAGE>
- 4 -
Section 5 - Duties of the Employee
The employee is engaged by the Company for the term of this Agreement as an
executive employee of the Company on a full time basis, and of such of its
subsidiaries as it may designate, and hereby covenants and agrees to perform and
discharge well and faithfully the duties which may be assigned to him from time
to time by the Company in connection with the conduct of its business and that
of its subsidiaries. The parties hereto agree that the Employee will be based in
east coast of South Florida and New York geographic area throughout the term of
his employment hereunder and may be required to travel from time to time in
furtherance of the Company's business. The Employee shall carry out such duties
are reasonably assigned to him by the Board of Directors of the Company. The
Employee shall deal at all times in good faith with the Company and its
subsidiaries and shall conduct himself at all times in the best interest of the
Company and of its subsidiaries.
Section 6 - Extent of Services
The Employee shall devote all of his working time, attention and energy to
the business of the Company and of its subsidiaries. The Employee shall not,
during the term of this Agreement, directly or indirectly, be engaged in any
other business activities, whether or not such business activities are pursued
for gain, profit or other pecuniary advantage. The foregoing provision shall not
be construed as preventing the Employee from investing his personal assets in
businesses which do not compete with the Company, provided such investment will
not require any material services on the part of the Employee. Notwithstanding
the foregoing, the Company hereby expressly acknowledges and consents to the
involvement by the Employee with Status-One Investments Inc., Status-One
Consultants Inc. and National Media Corporation.
Section 7 - Disclosure of Information
The Employee acknowledges that in the course of his employment with the
Company and its subsidiaries he has and will acquire access to and knowledge of
many of their trade secrets, financial information and proprietary information
and proprietary processes as they may, from time to time, exist ("Proprietary
Information") and he hereby acknowledges that the Proprietary Information is a
valuable, special and unique asset of the business of the Company and its
subsidiaries. The Employee hereby covenants and agrees
<PAGE>
- 5 -
that he will not, during the term of his employment and thereafter, disclose any
of the Proprietary Information to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever, nor shall he make use of the
Proprietary Information for his own purposes or for the benefit of any other
party under any circumstances whatsoever.
Section 8 - Restrictive Covenant
11.1 The Employee covenants and agrees with the Company that he shall not, so
long as he is an employee of the Company and for a period of two (2) years
from the date (the "Exit Date") on which he ceases to be an employee of the
Company:
(a) directly or indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in
conjunction with any other person or persons, firm, association,
syndicate, company or corporation, as principal, agent, shareholder
(except as shareholder of not more than 5% of the voting shares of a
publicly traded corporation), employee or in any other manner
whatsoever, work for, be employed by or acquire an interest in any
corporation engaged in the production, marketing, distribution or
funding of the production, marketing or distribution of a personalized
instructional sports video hereto (a "Competitive Business") or any
corporation affiliated with a Competitive Business or be concerned
with or interested in or lend money to, guarantee the debts or
obligations of or permit his name or any part thereof to be used or
employed by a Competitive Business or any corporation affiliated with
such business; or
(b) entice away or otherwise attempt to obtain the withdrawal of any
employee of the Company or its subsidiaries.
11.2 If any of the covenants contained in Section 11.1 shall be held
unreasonable by reason of the definition of a Competitive Businesses'
duration or type or scope of service covered by the said covenant, then the
said covenant shall be given effect to in such reduced form as may be
decided by any court of competent jurisdiction. If, notwithstanding the
foregoing, any clause or any portion of any such covenant should be
unenforceable or be declared invalid for any reason whatsoever,
<PAGE>
- 6 -
such unenforceability or invalidity shall not affect the enforceability or
validity of the remaining portions of the convenants and such unenforceable
or invalid portions shall be severable from the remainder of this
Agreement. The Employee hereby acknowledges and agrees that all
restrictions contained in this Agreement are reasonable and valid and all
defenses to the strict enforcement thereof by the Company are hereby
waived by the Employee.
Section 9 - General
12.1 Any notice or other writing required or permitted to be given hereunder or
for the purposes hereof (hereinafter in this subsection called a "notice")
to any party shall be in writing and shall be sufficiently given if
delivered or sent by prepaid registered mail addressed to such party:
(a) in the case of a notice to the Company, at:
Visual Edge Systems Inc.
7 West 51st Street
New York, New York 10019
Attention Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
(b) in the case of a notice to the Employee:
Earl Takefman
68 Belvedere Road
Montreal, Quebec
Canada H3Y 1P8
or at such other address or to such other person's attention as the
party to whom such notice is to be given shall have last notified to
the party giving the same in the Manner provided in this section. Any
notice delivered to the party to whom it is addressed as
<PAGE>
- 7 -
hereinbefore provided shall be deemed to have been given and received
on the day it is so delivered at such address, provided that if such
day is not a business day then the notice shall be deemed to have been
given and received on the business day next following such day. Any
notice mailed as aforesaid shall be deemed to have been given and
received on the third business day of uninterrupted postal service
following the date of its mailing.
12.2 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
12.3 This Agreement contains the whole understanding of the parties hereto with
respect to the subject matter hereof and supersedes all other agreements
and communications, oral or written, with respect thereto. This Agreement
shall not be amended except by instrument in writing executed by each of
the parties hereto.
12.4 The division of this Agreement into sections and sub-sections if for
convenience of reference only and shall not affect the interpretation or
construction of this Agreement. All words and personal pronouns relating
thereto shall be read and construed as the number and gender of the party
or parties referred to in each case require and the verb shall be construed
as agreeing with the required word and pronoun.
12.5 This Agreement may be executed by the Parties hereto in separate
counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument.
12.6 The Parties hereto agree that any legal or other expenses associated with
the preparation of this Agreement shall be for the account of the Company.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above.
VISUAL EDGE SYSTEMS INC.
/s/ Alan Lubell /s/ Earl Takefman
- ------------------------------------- --------------------------------------
Name: Alan Lubell Earl Takefman
Title: Chairman
<PAGE>
Schedule A
The Employee shall receive a bonus equal to 5% of the Company's pre-tax
income (excluding any extraordinary items) at the end of each fiscal year, which
bonus shall be included in the calculation of the Employee's salary if severance
arrangements are to be calculated. the 5% bonus will be applicable only if
pre-tax profits exceed $3,000,000 in fiscal 1997 and $5,000,000 in fiscal 1998.
Additionally, the Employee shall receive a base salary of $200,000 on July
1, 1997 and $250,000 on July 1, 1998 if the Company has had a pre-tax profits of
$2,000,000 and $4,000,000 for the previous 12 month periods respectively.
<PAGE>
EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of January 1, 1996.
BETWEEN: Visual Edge Systems Inc., a corporation
duly incorporated under the laws of Delaware
having an office and place of business at 7
West 51st Street, New York, New York
10019
(hereinafter referred to as "Company")
AND: Alan Lubell, 15 West 51st Street, New York,
New York 10024
(hereinafter referred to as "Employee")
THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and
agreements hereinafter contained and the mutual benefit to be derived therefrom
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by each of the parties hereto, the parties hereto hereby
covenant and agrees as follows;
Section 1 - Employment
The Company hereby agrees to employ the Employee as Chairman of the Board
(if elected by the shareholders) and Vice President Product Development of the
Company and the Employee hereby accepts employment with the Company and its
subsidiaries in such positions and agrees to work for the Company and any of its
subsidiaries upon the terms and conditions hereinafter set forth.
Section 2 - Term
3.1 Unless this Agreement is terminated upon Employee's resignation, death or
permanent disability or incapacity, for Cause (as hereinafter defined) or
without Cause, this Agreement shall remain in effect from January 1, 1998
until December 31, 1998.
3.2 This Agreement shall automatically be renewed after December 31, 1998 for
additional twelve (12) month periods commencing on the 1st day of January
and terminating on the 31st day of December of each year, unless one party
shall have given notice to the other party, in writing, not later than
September 30th of any year thereafter, of its election to terminate this
Agreement as of December 31st of that year.
<PAGE>
- 2 -
3.3 In the event that the Company elects to terminate this Agreement, other
than for Cause, the Company agrees to pay to the Employee six (6) months
severance pay as liquidated damages for such termination, payable in full
upon termination.
3.4 For purposes of this Agreement, for "Cause" shall mean: (i) material breach
of any provision of this Agreement by the Employee, (ii) the conviction of
the Employee of a felony or an indictable offense under United States law,
(iii) the misappropriation or embezzlement of funds by the Employee or (iv)
the Employee is materially impaired from performing his duties hereunder
because of alcohol, drug or any substance abuse.
Section 3 - Compensation
4.1 In consideration of the services to be rendered by the Employee to the
Company under this Agreement, the Company shall pay to the Employee an
annual base salary (such annual base salary being hereinafter referred to
as the "Salary") of $75,000 payable monthly.
4.2 The Employee shall be entitled to receive an annual bonus in accordance
with Schedule A
4.3 Any option granted to the Employee with respect to the Company's shares of
Common Stock in respect of any fiscal year shall be made by the Company's
Stock Option Committee pursuant to the Company's Stock Option Plan (the
"Plan'). In the event that an insufficient number of shares of Common Stock
are available for grant under the Plan, then the Company shall use
its best efforts, to amend the Plan (including obtaining stockholder
approval) to increase the number of shares of Common Stock available
thereunder. In the event that the Company is unable to so increase the
number of shares so available, then the Employee shall be granted phantom
units, or another award, that shall entitle him to the same appreciation in
the Company's Common Stock as if he had received options to purchase shares
of Common Stock. The Company shall use its best effort to cause the Stock
Option Committee to grant options as provided for herein.
4.4 Vesting of any options granted pursuant to Section 4.2 thereof shall be in
accordance with the Plan.
<PAGE>
- 3 -
4.5 The bonus granted to the Employee in respect of any fiscal year in
accordance with the provisions of Section 4.2 hereof shall be payable in
full by the Company to the Employee not later than fifteen (15) days after
the day on which the Company files its Annual Report on Form 10-K with the
SEC containing its audited financial statements for the preceding year.
4.6 If any change is made to the Company's Common Stock (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, combination of shares, or exchange of shares or any other
change in capital structure made without receipt of consideration), then
the Company shall preserve the value of all shares of Common Stock referred
to herein by adjusting the number and class of shares issuable to reflect
the effect of such event or change upon the Company's capital structure and
by making appropriate adjustments to the number and class of shares.
Section 4~ - Benefits
5.1 During the term of this Agreement, the Employee shall be enticed to receive
from the Company the following:
(1) benefits and a health care plan that is made available to the
Company's executives;
(2) a monthly car allowance of $500, car insurance and coverage of gas,
maintenance and repair expenses;
(3) reimbursement for all reasonable expenses made by the Employee in the
conduct of the Company's business;
(4) 4 weeks annual vacation. Such vacation, to the extent not used in any
calendar year, may not be carried over to subsequent calendar years.
Section 5 - Duties of the Employee
The employee is engaged by the Company for the term of this Agreement as an
executive employee of the Company on a full time basis, and of such of its
subsidiaries as it may designate, and hereby covenants and agrees to perform and
discharge well and faithfully the duties which may be assigned to him from time
to time by the Company in connection with the
<PAGE>
- 4 -
conduct of its business and that of its subsidiaries. The parties hereto agree
that the Employee will be based in New York City or the surrounding geographic
area throughout the term of his employment hereunder and may be required to
travel from time to time in furtherance of the Company's business. The Employee
shall carry out such duties are reasonably assigned to him by the Board of
Directors of the Company. The Employee shall deal at all times in good faith
with the Company and its subsidiaries and shall conduct himself at all times in
the best interest of the Company and of its subsidiaries.
Section 6 - Extent of Services
The Employee shall devote all of his working time, attention and energy to
the business of the Company and of its subsidiaries. The Employee shall not,
during the term of this Agreement, directly or indirectly, be engaged in any
other business activities, whether or not such business activities are pursued
for gain, profit or other pecuniary advantage. The foregoing provision shall not
be construed as preventing the Employee from investing his personal assets in
businesses which do not compete with the Company, provided such investment will
not require any material services on the part of the Employee.
Section 7 - Disclosure of Information
The Employee acknowledges that in the course of his employment with the
Company and its subsidiaries he has and will acquire access to and knowledge of
many of their trade secrets, financial information and proprietary information
and proprietary processes as they may, from time to time, exist ("Proprietary
Information") and he hereby acknowledges that the Proprietary Information is a
valuable, special and unique asset of the business of the Company and its
subsidiaries. The Employee hereby covenants and agrees that he will not, during
the term of hie employment and thereafter, disclose any of the Proprietary
Information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall he make use of the Proprietary
Information for his own purposes or for the benefit of any other party under any
circumstances whatsoever.
Section 8 - Restrictive Covenant
11.1 The Employee covenants and agrees with the Company that he shall not, so
long as he is an employee of the Company and for a period of two (2) years
from the date (the "Exit Date") on which he ceases to be an employee of the
Company:
<PAGE>
- 5 -
(a) directly or indirectly, in any manner whatsoever, including, without
limitation, either individually or in partnership or jointly, or in
conjunction with any other person or persons, firm, association,
syndicate, company or corporation, as principal, agent, shareholder
(except as shareholder of not more than 5% of the voting shares of a
publicly traded corporation), employee or in any other manner
whatsoever, work for, be employed by or acquire an interest in any
corporation engaged in the production, marketing, distribution or
funding of the production, marketing or distribution of a personalized
instructional sports video hereto (a "Competitive Business") or any
corporation affiliated with a Competitive Business or be concerned
with or interested in or lend money to, guarantee the debts or
obligations of or permit his name or any part thereof to be used or
employed by a Competitive Business or any corporation affiliated with
such business; or
(b) entice away or otherwise attempt to obtain the withdrawal of any
employee of the Company or its subsidiaries.
11.2 If any of the covenants contained in Section 11.1 shall be held
unreasonable by reason of the definition of Competitive Businesses,
duration or type or scope of service covered by the said covenant, then the
said covenant shall be given effect to in such reduced form as may be
decided by any court of competent jurisdiction. If, notwithstanding the
foregoing, any clause or any portion of any such covenant should be
unenforceable or be declared invalid for any reason whatsoever, such
unenforceability or invalidity shall not affect the enforceability or
validity of the remaining portions of the convenants and such unenforceable
or invalid portions shall be severable from the remainder of this
Agreement. The Employee hereby acknowledges and agrees that all
restrictions contained in this Agreement are reasonable and valid and all
defenses to the strict enforcement thereof by the Company are hereby waived
by the Employee.
Section 9 - General
12.1 Any notice or other writing required to be given hereunder or for the
purposes hereof (hereinafter in this subsection called a "notice") to any
party shall be in writing and shall be sufficiently if delivered or sent
by prepaid registered mail addressed to such party:
<PAGE>
- 6 -
(a) in the case of a notice to the Company, at:
Visual Edge Systems Inc.
7 West 51st Street
New York, New York 10019
Attention: Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
(b) in the case of a notice to the Employee:
Alan Lubell
15 West 81st Street
New York, New York 10024
or at such other address or to such other person's attention as the
party to whom such notice is to be given shall have last notified to
the party giving the same in the manner provided in this section. Any
notice delivered to the party to whom it is addressed as hereinbefore
provided shall be deemed to have been given and received on the day it
is so delivered at such address, provided that if such day is not a
business day then the notice shall be deemed to have been given and
received on the business day next following such day. Any notice
mailed as aforesaid shall be deemed to have been given and received on
the third business day of uninterrupted postal service following the
date of its mailing.
12.2 This Agreement shall be governed by and construed in accordance with the
laws of tile State of Hew York
12.3 This Agreement contains the whole understanding of the parties hereto with
respect to the subject matter hereof and supersedes all other agreements
and communications oral or written, with respect thereto. This Agreement
shall not be amended except by instrument in writing executed by each of
the parties hereto.
<PAGE>
- 7 -
12.4 The division of this Agreement into sections and sub-sections is for
convenience of reference only and shall not affect the interpretation or
construction of this Agreement. All words and personal pronouns relating
thereto shall be read and construed as the number and gender of the party
or parties referred to in each case require and the verb shall be construed
as agreeing with the required word and pronoun.
12.5 This Agreement may be executed by the Parties hereto in separate
counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument.
12.6 The Parties hereto agree that any legal or other expenses associated with
the preparation of this Agreement shall be for the account of the Company,
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above.
VISUAL EDGE SYSTEMS INC.
/s/ Earl Takefman /s/ Alan Lubell
- ------------------------------------- --------------------------------------
Name: Earl Takefman Alan Lubell
Title: CEO
<PAGE>
Schedule A
The Board of Directors of the Company shall establish a bonus plan for the
Employee at its discretion based on the performance of the Company and the
Employee. This bonus plan, which may include a cash bonus and/or options under
the Employee Stock Option Plan, will be based on the realization of the
Company's earnings projections.
The Employee's base salary will increase to $100,000 on July 1, 1997 if the
Company has had a pre-tax profit of $2,000,000 for the previous 12 month period
or greater and to $125,000 On July 1, 1998 if the Company has had a pre-tax
profit of $4,000,000 or greater for the previous 12 month period.
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of May lst, 1996.
BETWEEN: Visual Edge Systems Inc., a corporation
duly incorporated under the laws of Delaware
having an office and place of business at 7
West 51st Street, New York, New York
10019
(hereinafter referred to as "Company")
AND: Thomas Peters, 630 S.W. 18th Street, Boca
Raton, Florida 33486
(hereinafter referred to as "Employee")
THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements hereinafter contained and the mutual
benefit to be derived therefrom and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the parties hereto hereby covenant and agrees as follows:
Section 1 - Employment
The Company hereby agrees to employ the Employee as
Director of Software Development of the Company and the Employee hereby
accepts employment with the Company and its subsidiaries in such positions
and agrees to work for the Company and any of its subsidiaries upon the terms
and conditions hereinafter set forth.
Section 2 - Term
2.1 Unless this Agreement is terminated upon Employee's resignation,
death or permanent disability or incapacity, for Cause (as hereinafter
defined) or without Cause, this Agreement shall remain in effect from
May lst, 1996 until April 30th, 1998.
2.2 This Agreement shall automatically be renewed after April 30, 1998
for additional twelve (12) month periods commencing on the lst day of
May and terminating on the 30th day of April of each year, unless
one party shall have given notice to the other party, in writing, not
later than January 31st of any year thereafter, of its election to
terminate this Agreement as of April 30th of that year.
<PAGE>
- 2 -
2.3 In the event that the Company elects to terminate this Agreement,
other than for Cause, the Company agrees to pay to the Employee
three (3) months severance pay from the date of termination as
liquidated damages for such termination, payable in full upon
termination.
2.4 For purposes of this Agreement, for "Cause' shall mean: (i) the
material breach of any provision of this Agreement by the Employee,
(ii) the conviction of the Employee of a felony or an indictable
offense under United States law, (iii) the misappropriation or
embezzlement of funds by the Employee or (iv) the Employee is
materially impaired from performing his duties hereunder because of
alcohol, drug or any substance abuse.
Section 3 - Compensation
3.1 In consideration of the services to be rendered by the Employee to
the Company under this Agreement, the Company shall pay to the
Employee an annual base salary (such annual base salary being
hereinafter referred to as the "Salary") of $65,000 in the first 12
months and $75,000 for the second 12 months payable monthly.
3.2 The Employee shall be entitled to receive an annual bonus in
accordance with Schedule A.
3.3 Any option granted to the Employee with respect to the Company's
shares of Common Stock in respect of any fiscal year shall be made by
the Company's Stock Option Committee pursuant to the Company's
Stock Option Plan (the "Plan"). In the event that an insufficient
number of shares of Common Stock are available for grant under the
Plan, then the Company shall use its best efforts to amend the Plan
(including obtaining stockholder approval) to increase the number of
shares of Common Stock available thereunder. In the event that the
Company is unable to so increase the number of shares so available,
then the Employee shall be granted phantom units, or another award,
that shall entitle him to the same appreciation in the Company's
Common Stock as if he had received options to purchase shares of
Common Stock. The Company shall use its best efforts to cause the
Stock Option Committee to grant options as provided for herein.
3.4 Vesting of any options granted pursuant to Section 4.2 hereof shall
be in accordance with the Plan.
<PAGE>
- 3 -
3.5 The bonus granted to the Employee in respect of any fiscal year in
accordance with the provisions of Section 4.2 hereof shall be payable
in full by the Company to the Employee not later than fifteen (15)
days after the day on which the Company files its Annual Report on
Form 10-K with the SEC containing its audited financial statements
for the preceding year.
3.6 If any change is made to the Company's Common Stock (whether by
reason of merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, combination of shares, or exchange of
shares or any other change in capital structure made without receipt
of consideration), then the Company shall preserve the value of all
shares of Common Stock referred to herein by adjusting the number
and class of shares issuable to reflect the effect of such event or
change upon the Company's capital structure and by making
appropriate adjustments to the number and class of shares.
Section 4 - Benefits
4.1 During the term of this Agreement, the Employee shall be entitled to
receive from the Company the following:
(1) benefits and a health care plan that is made available to the
Company's executives;
(2) reimbursement for all reasonable expenses incurred by the
Employee in the conduct of the Company's business;
(5) 3 weeks annual vacation. Such vacation, to the extent not
used in any calendar year, may not be carried over to
subsequent calendar years.
Section 5 - Duties of the Employee
The employee is engaged by the Company for the term of this
Agreement as an executive employee of the Company on a full time basis, and
of such of its subsidiaries as it may designate, and hereby covenants and
agrees to perform and discharge well and faithfully the duties which may be
assigned to him from time to time by the Company in connection with the
conduct of its business and that of its subsidiaries. The parties hereto
agree that the Employee will be based in the east cost of South Florida
<PAGE>
- 4-
geographic area throughout the term of his employment hereunder and may be
required to travel from time to time in furtherance of the Company's business.
The Employee shall carry out such duties are reasonably assigned to him by
the Board of Directors of the Company. The Employee shall deal at all times
in good faith with the Company and its subsidiaries and shall conduct himself
at all times in the best interest of the Company and of its subsidiaries.
Section 6 - Extent of Services
The Employee shall devote all of his working time, attention and
energy to the business of the Company and of its subsidiaries. The Employee
shall not, during the term of this Agreement, directly or indirectly, be
engaged in any other business activities, whether or not such business
activities are pursued for gain, profit or other pecuniary advantage. The
foregoing provision shall not be construed as preventing the Employee from
investing his personal assets in businesses which do not compete with the
Company, provided such investment will not require any material services on
the part of the Employee.
Section 7 - Disclosure of Information
The Employee acknowledges that in the course of his employment
with the Company and its subsidiaries he has and will acquire access to and
knowledge of many of their trade secrets, financial information and propriet-
ary information and proprietary processes as they may, from time to time,
exists ("Proprietary Information") and he hereby acknowledges that the
Proprietary Information is a valuable, special and unique asset of the
business of the Company and its subsidiaries. The Employee hereby covenants
and agrees that he will not, during the term of his employment and thereafter,
disclose any of the Proprietary Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever, nor shall
he make use of the Proprietary Information for his own purposes or for the
benefit of any other party under any circumstances whatsoever.
Section 8 - Restrictive Covenant
8.1 The Employee covenants and agrees with the Company that he shall
not, so long as he is an employee of the Company and for a period of
two (2) years from the date (the "Exit Date") on which he ceases to
be an employee of the Company;
<PAGE>
- 5 -
(a) directly or indirectly, in any manner whatsoever, including,
without limitation, either individually or in partnership or
jointly, or in conjunction with any other person or persons,
firm, association, syndicate, company or corporation, as
principal, agent, shareholder (except as shareholder of not more
than 5% of the voting shares of a publicly traded corporation),
employee or in any other manner whatsoever, work for, be employ-
ed by or acquire an interest in any corporation engaged in the
production, marketing, distribution or funding of the
production, marketing or distribution of a personalized
instructional sports video hereto (a "Competitive Business")
or any corporation affiliated with a Competitive Business or be
concerned with or interested in or lend money to, guarantee the
debts or obligations of or permit his name or any part thereof
to be used or employed by a Competitive Business or any
corporation affiliated with such business; or
(b) entice away or otherwise attempt to obtain the withdrawal of
any employee of the Company or its subsidiaries.
8.2 If any of the covenants contained in Section 11.1 shall be held
unreasonable by reason of the definition of a Competitive Businesses,
duration or type or scope of service covered by the said covenant,
then the said covenant shall be given effect to in such reduced form
as may be decided by any court of competent jurisdiction. If,
notwithstanding the foregoing, any clause or any portion of any such
covenant should be unenforceable or be declared invalid for any
reason whatsoever, such unenforceability or invalidity shall not
affect the enforceability or validity of the remaining portions of
the convenants and such unenforceable or invalid portions shall be
severable from the remainder of this Agreement. The Employee hereby
acknowledges and agrees that all restrictions contained in this
Agreement are reasonable and valid and all defenses to the strict
enforcement thereof by the Company are hereby waived by the Employee.
Section 9 - General
9.1 Any notice or other writing required or permitted to be given
hereunder or for the purposes hereof (hereinafter in this subsection
called a "notice") to any party shall be in writing and shall be
sufficiently given if delivered or sent by prepaid registered mail
addressed to such party:
<PAGE>
- 6 -
(a) in the case of a notice to the Company, at:
Visual Edge Systems Inc.
7 West 51st Street
New York, New York 10019
Attention: Chief Executive Officer
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
(b) in the case of a notice to the Employee:
Thomas Peters
630 S.W. 18th Street
Boca Raton, Florida 33486
or at such other address or to such other person's attention as
the party to whom such notice is to be given shall have last
notified to the party giving the same in the manner provided in
this section. Any notice delivered to the party to whom it is
addressed as hereinbefore provided shall be deemed to have been
given and received on the day it is so delivered at such
address, provided that if such day is not a business day then
the notice shall be deemed to have been given and received on
the business day next following such day. Any notice mailed as
aforesaid shall be deemed to have been given and received on
the third business day of uninterrupted postal service
following the date of its mailing.
9.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of the State of Florida.
9.3 This Agreement contains the whole understanding of the parties
hereto with respect to the subject matter hereof and supersedes all
other agreements and communications, oral or written, with respect
thereto. This Agreement shall not be amended except by instrument
in writing executed by each of the parties hereto.
<PAGE>
- 7 -
9.4 The division of this Agreement into sections and sub-sections is for
convenience of reference only and shall not affect the interpretation
or construction of this Agreement. All words and personal pronouns
relating thereto shall be read and construed as the number and gender
of the party or parties referred to in each case require and the verb
shall be construed as agreeing with the required word and pronoun.
9.5 This Agreement may be executed by the Parties hereto in separate
counterparts each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and
the same instrument.
9.6 The Parties hereto agree that any legal or other expenses associated
with the preparation of this Agreement shall be for the account of the
Company.
IN WITNESS WHEREOF the parties hereto have caused
this Agreement to be executed as of the date set forth above.
VISUAL EDGE SYSTEMS INC.
/s/ /s/ Thomas Peters
--------------------------- -------------------------------
Name:
Title: Thomas Peters
<PAGE>
Schedule A
The Board of Directors of the Company shall establish a bonus
plan for the Employee at its discretion based on the performance of the
Company and the Employee. This bonus plan, which may include a cash
bonus and/or options under the Employee Stock Option Plan, will be based on
the realization of the Company's earnings projections.
<PAGE>
EXHIBIT 10.6
JD\LICENCE\VISED5
THIS LICENSE AGREEMENT iS made as of the 1st day of November, 1995.
BY AND BETWEEN: VISUAL EDGE SYSTEMS, INC., a corporation duly
organized and existing under the laws of
Delaware
(hereinafter referred to as the "Company")
AND: Visual Edge Systems (Australia) Pty Ltd A.C.N. 071
834 127, a corporation duly organized and
existing under the laws of Australia with
offices at 93 Palmerston Rd, South Melbourne,
Victoria, Australia
(hereinafter referred to as "Newco").
WHEREAS, the COMPANY is the owner of various patents and patent
applications as well as all intellectual property rights relating to the One On
One with Greg Norman Concept (as hereinafter defined);
WHEREAS, the Company is the exclusive licensee of Great White Shark
Enterprises Inc. and Greg Norman with respect to the sale and promotion of the
Concept throughout the World and has the exclusive right to the Greg Norman
endorsement rights which may be exploited in connection with the promotion of
the Concept;
WHEREAS, the COMPANY has developed and continues to develop methods of
operation, processes, techniques and technical knowledge, skills and operating
experience with respect to the sale and marketing of the Concept;
WHEREAS, the COMPANY wishes to enter into a contractual arrangement with
Newco so as to provide Newco with the exclusive right to distribute the Concept
and sell the Products throughout the Territory;
AGREEMENT
In consideration of the above recitals and mutual promises and agreements
set forth herein, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I - DEFINITIONS
1.1 In this Agreement, unless otherwise specified or expressly required by the
context, all defined terms appearing in this Agreement shall have the meanings
ascribed thereto elsewhere herein or in this Article I, as applicable:
1.1.1 "Affiliate" shall mean any corporation which is owned by or
controlled to the extent of at least twenty five percent (25%) of the
issued and voting stock of such corporation by Newco.
1.1.2 "Agreement" means this Agreement as may be amended or supplemented;
1.1.3 "Concept" shall mean the technology developed by the Company relating
to a videotaping system that produces the Product as well as any future
modifications or improvements thereto developed or acquired by the COMPANY
pursuant to Article XII hereof.
1.1.4 "Contract Quarter" means the period of three (3) consecutive months
following the commencement date of the Contract Year;
1.1.5 "Contract Year" means the period commencing on the Effective Date and
terminating twelve months later;
1.1.6 "Customer" means any individual, partnership, corporation or other
entity other than the parties hereto to whom or which a Sale is made
1.1.7 "Effective Date" of this Agreement shall be the forty-fifth (45th)
day following the date on which NEWCO has received all of the software,
master tapes and artwork needed to operate the regular, female, and "NO
lesson" lessons for both right & lefthanded golfers.
<PAGE>
3
1.1.8 "Design Rights" shall mean statutory design rights (whether
registered or unregistered) which are owned or which may hereafter be owned
by the COMPANY and which relate to the Concept.
1.1.9 "GWSE Royalty" means an amount equal to 8% of all Net Revenues
derived from Sales of the Product:
1.1.10 "Guaranteed Fees" means the guaranteed non refundable fees payable
by Newco pursuant to Paragraphs 3.1, 3.2 and 3.3 hereof;
1.1.11 "Know-How" shall mean all unpatented technology, inventions, methods
or processes including plans and drawings developed by the Company relating
to the installation of the Concept in the United States which may now or
which may hereafter be in the possession, custody or control of the COMPANY
including without limitation all software developed by the Company as it
relates to the Concept.
1.1.12 "Net Revenues" means total revenues, derived by Newco and its
Affiliates from the sale of the Products at retail to Customers which may
exclude customary discounts, allowances, payments to golf club or range
owners or golf professionals, sales taxes and returns of Products actually
credited to Customers, provided that the total of these exclusions from the
total Sales revenues of Newco shall not be greater than 20` of the total
retail Sales of the Product.
1.1.13 "Newco Profit" shall mean Newco's net operating profit before taxes
for each Contract Year as determined by Newco's auditors in accordance with
generally accepted accounting principles under Australian accounting
standards applied as if the Company were a reporting entity after adjusting
such profit in the manner set forth in Schedule 1.1.13 attached hereto.
1.1.14 "Patents" shall mean those patents and patent applications already
filed by the Company and such other future applications as may be filed and
the patents which may issue from such applications insofar as they relate
to the Concept and any
<PAGE>
4
continuations, divisionals, continuation-in-part applications or any
extension, reissues, reexaminations, patents of addition and the like
thereof.
1.1.15 "Person" or "Persons" means severally or collectively, as
applicable, an individual, partnership, corporation, association, trust or
other entity, other than the Parties hereto.
1.1.16 "Product" or "Products" shall mean severally a videotape delivered
to a consumer upon use of the Concept which has Greg Norman's golf swing
compared to the user's golf swing as is more fully described in Schedule
1.1.16 attached hereto.
1.1.17 "Provision" or "Provisions" means severally or collectively as
applicable, all terms, conditions, covenants, obligations, undertaking,
warranties and representations contained in this Agreement.
1.1.18 "Royalty" or "Royalties" means severally or collectively, as
applicable, the royalty payments required to be made pursuant to Paragraph
3.4 hereof;
1.1.19 "Sale" or "Sales" mean severally or collectively, as applicable, a
sale or sales of the Product made to any person within the Territory;
1.1.20 "Second Royalty Period" means the period commencing on the first day
of the first month following the end of the First Royalty Period, and
expiring two years later.
1.1.21 "Territory" shall mean collectively, Australia, New Zealand and
Indonesia.
ARTICLE II - LICENSE
2.1 The COMPANY hereby grants to Newco subject to the provisions hereof:
<PAGE>
5
2.1.1 the exclusive right to use, sell and distribute the Products in the
Territory using the Concept.
2.1.2 the exclusive right to use the Know-How and the Design Rights to sell
and distribute the Products in the Territory using the Concept.
2.1.3 the right to use the name likeness and endorsement of Greg Norman as
it relates to the Concept in accordance with the Company's license
agreement with Great White Shark Enterprises, Inc. and Greg Norman.
2.2 The License granted in Article 2.1 shall specifically include the right,
subject to compliance with the terms of the following sentence, to sub-license
Affiliates or to an unaffiliated third party only in the Territory. Newco shall
obtain the prior written approval of the COMPANY before granting any such
sub-license, such approval not to be unreasonably withheld except in the case of
a sub-license to an Affiliate which shall not require the consent of the
COMPANY.
2.3 Newco shall not solicit or accept any orders for Products outside of the
Territory. If Newco shall receive any such orders, they shall forward them
promptly to the COMPANY with all relevant details. Furthermore, Newco represents
and warrants that it will not sell any Products to any person, corporation,
partnership, joint venture or other entity unless Newco has satisfied itself
that the intended distribution use of such Products is only within the
Territory.
2.4 In addition to the foregoing, the COMPANY does hereby agree to provide to
NEWCO all software and technical drawings with respect to the Concept, the whole
at no charge to Newco.
2.5 Newco shall have the right to test market up to two (2) installations of the
Concept in any other country not included in the Territory to determine if it
would be interested in submitted a proposal to licence the Concept for that
country provided that Newco first obtains
<PAGE>
6
written authorization from the COMPANY and provided further that the COMPANY is
not already operating the Concept in that country or is not, at that time,
negotiating with any other Person with respect to the licensing of the Concept
in that country.
ARTICLE III - CONSIDERATION
3.1 In consideration of the right granted to Newco to use the Concept and
Know-How during the Term of this Agreement, Newco agrees to pay the Company, a
once only fee of One Thousand Dollars ($1,000), which sum shall be paid on or
prior to the execution of this Agreement.
In consideration of consultancy services provided to Newco under this Agreement,
Newco agrees to pay to the COMPANY, a once only fee of Twelve Thousand Five
Hundred Dollars ($12,500), which sum shall be paid on or prior to the execution
of this agreement.
In consideration of the rights granted to Newco under this Agreement for the
right to sell the Products, Newco agrees to pay to the COMPANY, during the First
Royalty Period, without deduction or setoff, a Guaranteed Fee of One Hundred
and Eleven Thousand Five Hundred Dollars ($111,500.00) for the right to sell
27,500 tapes, which sum shall be paid on or prior to the execution of this
agreement.
3.2 In consideration of the rights granted to Newco under this Agreement for the
right to sell the Products, during the Second Royalty Period, Newco shall pay
the COMPANY without deduction or setoff, except for any statutory withholding
tax, a Guaranteed Fee of Seven Hundred Thousand Dollars ($700,000.00) which sum
shall be paid as follows:
a) During the first year of the Second Royalty Period the sum of
$300,000.00 by way of four equal consecutive quarterly instalments of
$75,000.00 payable on the first day of each Contract Quarter; and
b) During the second year of the Second Royalty Period the
<PAGE>
7
sum of $400,000.00 by way of four equal consecutive quarterly instalments
of $100,000.00 payable on the first day of each Contract Quarter;
3.3 In consideration of the rights granted to Newco under this Agreement for the
right to sell the Products, during each year of each Option Period, Newco shall
pay the COMPANY without deduction or setoff, except for any statutory
withholding tax, a Guaranteed Fee of Five Hundred Thousand Dollars ($500,000.00)
which sum shall be paid by way of equal consecutive quarterly instalments of
$125,000.00 commencing on the first day of each Contract Quarter.
3.4 In consideration of the rights granted to Newco under this Agreement for the
right to sell the Products, during the Term of this Agreement Newco shall pay
the Company a Royalty payment equal to $5.00 for each Product sold in the
Territory.
3.5 The Guaranteed Fees paid pursuant to Paragraphs 3.1, 3.2 and 3.3 hereof
shall be credited against the Royalties payable pursuant to paragraph 3.4 hereof
and the Royalties paid pursuant to paragraph 3.4 hereof shall be credited
against the balance of the Guaranteed Fees payable pursuant to paragraph 3.1,
3.2 and 3.3 hereof.
3.6 All amounts due and payable under this Agreement shall be paid in United
States Dollars converted at the prevailing exchange rate on the due date as
published by the Republic Bank of New York. The Company may elect to have
payments made by check, wire transfer or bank transfer. Unless such election has
been made in writing, all payments shall be made by wire transfer to the order
of the Company and wired to the address set forth on Schedule 3.6 attached
hereto. Past due payments hereunder shall bear interest at the rate of one
percent per month or 2% above the prime rate of interest charged by the Republic
Bank of New York to its most creditworthy commercial customers, whichever is the
greater.
3.7 In addition to the Royalty payment due to the Company pursuant to the
provisions of paragraph 3.4 hereof, Newco shall pay directly to Great White
Shark Enterprises, an Australian corporation ("GWSE") an amount
<PAGE>
8
equal to the GWSE Royalty, which sum shall be paid quarterly to GWSE, or its
designated nominee, in the manner set forth hereinbelow.
3.8 As further consideration Newco shall pay the Company as an additional fee an
amount equal to one half of the difference between the Newco Profit and the
amount of Royalties to be paid to the Company pursuant to the provisions of
paragraph 3.4 hereof which amount shall be paid by Newco to the Company within
forty five (45) days following the end of each Contract Year.
ARTICLE IV - RECORDS AND REPORTS
4.1 Newco agrees to keep accurate and complete records in sufficient detail to
record the number of units of Product sold by or for Newco or by or for a
permitted sub-licensee or assignee of Newco during each Contract Quarter so that
the amount of royalty payments due to the Company may be ascertained.
4.2 Throughout the Term, Newco shall furnish Royalty statements to the Company
on the last day of the month immediately following the end of each Contract
Quarter, stating the Net Revenue and the number of units of Product sold by the
Company during the applicable preceding Contract Quarter. Newco shall furnish
the Company with a final Royalty statement sixty (60) days following the
expiration of each Contract Year of the Term. Royalties shall be payable in
accordance with and concurrently with the delivery of the relevant Royalty
statement after deducting any Guaranteed Fee previously paid, as provided in
paragraph 3.5.
Throughout the Term, Newco shall furnish Royalty statements to GWSE on the
last day of the month immediately following the end of each Contract Quarter,
stating the Net Revenue during the applicable preceding Contract Quarter. Newco
shall furnish GWSE with a final Royalty statement sixty (60) days following the
expiration of each Contract Year of the Term. Royalties shall be payable in
accordance with and concurrently with the delivery of the relevant Royalty
statement.
4.3 Newco shall deliver to the COMPANY not later than forty-five
<PAGE>
9
(45) days after the close of each Contract Quarter and after the termination of
this Agreement, a statement specifying the information referred to in 4.2 above
and in such form and containing such details as the Company reasonably requires.
Newco shall, at the same time as providing the said statement, also remit the
amount of royalties due in accordance with the statement. The receipt or
acceptance by the Company of any statements furnished pursuant to this Agreement
or any royalty payments paid hereunder (or the cashing of any cheques paid
hereunder) shall not preclude the Company from questioning the correctness
thereof at any time and in the event that inconsistencies or mistakes are
discovered in such statements or payments, they shall be rectified and
appropriate payments shall immediately be made by Newco or credit given to Newco
by the Company as may be appropriate.
4.4 If Newco fails to deliver such a statement to the Company within the said
period of forty-five (45) days, the Company, in addition to any other rights and
on not less than ten (10) days prior notice to Newco, may employ an independent
chartered accountant, qualified to practice and practicing in Australia, to
examine the books and records of Newco necessary to enable him to report upon
and certify the Net Revenues, the Newco Profits and the amount of units of the
Product sold by or for Newco or by or for a permitted sub-licensee or assignee
of Newco for the preceding Contract Quarter, and Newco will promptly pay to the
Company the cost thereof as additional royalty.
4.5 Newco agrees, upon request by the Company, to permit a firm of chartered
accountants qualified to practice in Australia, to have access during normal
business hours at least once annually on ten (10) business days notice, to audit
such books and records as may be necessary to determine the correctness of any
report or payment made under this Agreement. On request, with reasonable notice,
Newco will make available at its offices, all relevant books of accounts and
records. If any audit reveals a discrepancy between the amount payable to the
Company and the amounts actually paid to the Company and if that discrepancy
exceeds five percent (5%) of the amounts payable as determined in the audit,
Newco shall pay all of the Company's reasonable costs associated with such
audit. Otherwise, all costs associated with any audit shall be the
responsibility
<PAGE>
10
of the Company.
5.1 Newco acknowledges that the Trademarks are entirely the property of the
Company and that it will not claim any title or right to use the same at any
time. The use of the Trademarks pursuant to this Agreement shall not vest in
Newco any right or presumptive right to continue such use. In case of
termination of this Agreement for any reason, Newco agrees that it will promptly
discontinue the sale of the Products and the use of the Trademarks and change
its corporate name or trade name to a name dissimilar to Visual Edge Systems.
5.2 The Company reserves the right to decide at its discretion whether and when
to apply for the registration(s) of the trademark(s) of the Product if any, in
any part or all of the Territory. Notwithstanding the foregoing, Newco shall
have the right to apply for the registration(s) of the Trade Mark(s) of the
Product in the Territory any time during the Term of this Agreement at its sole
cost and expense provided that Newco first advises the COMPANY of its intention
to do so and forwards copies of all Trade Mark applications to the COMPANY and
provided furthermore that upon the termination of this Agreement Newco will
transfer and assign all right, title and interest in and to any such registered
Trade Mark(s) to the COMPANY for the sum of $1.00.
5.3 The Company shall defray all the costs of the registration of the trademarks
of the Products, if any, in the Territory. All registrations shall be issued in
the name of the Company and the Company shall grant Newco the right of usage of
the trademark for the sole purpose of properly identifying the Products in the
Territory. During the Term Newco shall at all times recognize, respect, and
protect the Company's right of ownership of any and all trademarks of Products
in the Territory and shall not in any way derogate, or weaken the Company's
rights in the registrations.
5.4 When using the Company's trademarks, Newco undertakes to comply with all
laws pertaining to service marks and trademarks in force at any time in the
Territory and shall promptly notify the Company of any and all
<PAGE>
11
infringements of the Company's trademarks of the Product in the Territory that
may come to Newco's attention, and shall assist the Company in taking such
action against the infringements as the Company in its discretion may decide,
with will expenses and costs incident thereto being defrayed by the Company.
5.5 Upon the termination of this Agreement Newco's right to use the trademarks
shall cease and Newco shall promptly take such steps as may be required to
terminate all registrations as licensed users.
ARTICLE VI - TERM AND TERMINATION
6.1 This Agreement shall commence on the Effective Date and, subject to the
right of prior termination as hereinafter set out, shall continue in force for
twelve months following the Effective Date (the "First Royalty Period").
6.2 Newco shall have the option to extend this agreement for a period of two
years beyond the First Royalty Period and shall thereafter have the option to
renew this agreement for additional periods of three years each. Any such
renewal shall be subject to the same terms and conditions as are contained
herein save and except that the Guaranteed Fees for each renewal period shall be
set forth in Article III. Any such renewal shall be exercised by Newco
forwarding written notice to the Company at least 60 days prior to the
expiration of the First Royalty Period, the Second Royalty Period or any Option
Period thereafter as the case may be.
ARTICLE VII - DEFAULT AND TERMINATION
7.1 The Company may, at his option, terminate this Agreement if:
7.1.1 Newco fails to make any payment to the Company when due and such
default has not been cured within five (5) business days of receipt of
written notice of such default;
7.1.2 Newco breaches or fails to observe, perform or keep any material
Provision on its part to be observed, performed or
<PAGE>
12
kept pursuant to this Agreement, including without limitation, any
representation, warranty or covenant of Newco hereunder and such default
has not been cured within fifteen (15) business days of receipt of written
notice of such default;
7.1.3 Newco (a) files, or has filed against it, and does not take immediate
steps to quash, any petition for bankruptcy, reorganization, arrangement or
other protection under any state, federal or other applicable
jurisdiction's bankruptcy, insolvency or similar laws; (b) is declared
bankrupt or becomes insolvent; (c) consents to the appointment of a
receiver, trustee or assignee for the benefit of its creditors or makes any
such assignment for the benefit of creditors; or (d) winds-up or ceases to
carry on the business and affairs of Newco
7.2 If The Company shall exercise its option to terminate this Agreement upon
the occurrence of any one or more of the events stipulated in Paragraph 7.1
hereof, then this Agreement shall terminate ninety (90) days after notice
thereof to Newco. Neither the termination of this Agreement by The Company nor
The Company's right to so terminate this Agreement shall be its exclusive remedy
and neither shall in any way affect.
7.2.1 the obligation of Newco to pay the Guaranteed Fees or anY other
amounts hereunder:
7.2.2 the right of The Company to enforce the receipt and collection of the
Guaranteed Fees or other amounts payable by the Newco hereunder.
7.2.3 the right of The Company to enforce any of the Provisions of this
Agreement against Newco:
7.2.4 the right of The Company to sue for damages or to seek and obtain
equitable relief (including without limitation, injunctive relief or an
order for specific performance); or
<PAGE>
13
7.2.5 the right of The Company to pursue any other legal or equitable
remedies, whether for a breach of this Agreement by Newco or otherwise.
7.3 With particular reference to Paragraph 7.2.4 hereof, the parties acknowledge
and agree that the failure of Newco to observe, perform or keep all of the
Provisions on its part to be so observed, performed or kept, would result in
irreparable harm and injury to The Company which could not be adequately
compensated for in damages and that, in such event, The Company shall be
entitled to equitable relief (including without limitation, specific
performance, temporary restraining orders and/or preliminary or permanent
injunctions), in addition to all other remedies to which The Company may be
entitled hereunder or at law.
7.4 Anything herein to the contrary notwithstanding and regardless of whether
The Company exercises its option to terminate this Agreement as herein provided,
the total amount of the Guaranteed Fees and all other amounts payable by Newco
hereunder, shall become due and payable by Newco to The Company forthwith upon
the breach by Newco of any Provision hereof and without limitation, upon the
occurrence of any one or more of the events set forth in Paragraph 7.1 hereof.
7.6 Upon the termination of this Agreement, all rights granted hereunder to
Newco shall forthwith cease, terminate and revert to the Company and Newco shall
have no other or further right to utilize or exploit the Concept thereafter.
Upon such expiration or termination, Newco shall: -
7.6.1 forthwith cease use of the Concept in any manner whatsoever;
7.6.2 not make use of or otherwise distribute any further copies of the
Product or any advertising or promotional materials approved hereunder in
any manner whatsoever; and
7.6.3 forthwith destroy or transfer to any Person designated by The Company
any such advertising or promotional
<PAGE>
14
materials which it then or thereafter has in its possession or under its
control and use its best efforts to remove or cause the removal of, all
existing copies of such materials from public display;
Notwithstanding the foregoing, during the three (3) consecutive months following
the termination of this Agreement, Newco shall be permitted to distribute and
sell its then existing inventory of the Product and the Provisions of this
Agreement shall continue to apply during such period, including without
limitation, all Provisions relating to the Royalties payable with respect to
Sales of the Product during such three (3) month period and Newco's obligation
to provide Royalty Statements pursuant to Article IV hereof.
Within thirty (30) days following such termination, Newco shall furnish to the
Company a certificate of an officer of Newco certifying it compliance with the
Provisions of this Paragraph 7.6.
ARTICLE VIII - ADDITIONAL OBLIGATIONS OF NEWCO
8.1 Newco shall use its best efforts to promote the sale of the Products
throughout the Territory, including, but not limited to, the advertising of the
Products in appropriate media and the informing and counselling of customers and
potential customers regarding the Product. Newco shall be obliged to consult
with the Company prior to the public dissemination of any information or
instructions regarding the use or manipulation of the Products.
8.2 The Company shall provide Newco with reasonable quantities of promotional
aids and materials that the Company may have available, if any, at Newco's cost.
Newco recognizes that some promotional aids and materials may be prepared by
other distributors or licensees of the Company, and, in such event, Newco
undertakes to pay directly to such distributor or licensee the costs of any such
material or aids so ordered.
8.3 Newco shall immediately advise the Company of any legal notices served on
Newco which might affect the Company, handle promptly all correspondence from
the Company, and assist and co-operate with the
<PAGE>
15
Company's officers research and sales personnel during their trips to the
facilities of Newco.
ARTICLE IX - ADDITIONAL OBLIGATIONS OF THE Company
9.1 The Company shall not solicit or accept any orders for Products in the
Territory. If the Company shall receive any such orders, it shall forward them
promptly to Newco with all relevant details. Furthermore, the Company represents
and warrants that it will not licence the Concept to any Person unless the
Company has satisfied itself that the intended sale of Products by such Person
does not take place within the Territory.
9.2 The Company shall immediately advise Newco of any legal notices served on
the Company which might affect Newco, handle promptly all correspondence from
Newco and assist and co-operate with Newco's officers, and sales personnel
during their trips to the facilities of the Company.
9.3 The Company shall promptly refer to Newco any inquiries which it receives
from potential distributors or retailers of the Product in the Territory.
ARTICLE X
REPRESENTATIONS LIMITATIONS OF LIABILITY AND HOLD HARMLESS
10.1 The Company represents:
10.1.1 that it is the exclusive owner and/or licensee of all rights to the
Concept and the Know-How.
10.1.2 that it has not granted any right, license or privilege to any other
person or corporate entity to use the Concept or the Know-How in the
Territory.
10.2 Each party expressly saves and holds the other party, and any Affiliates,
harmless from any and all liability of any kind or
<PAGE>
16
nature whatsoever to customers and to other third parties which may arise from
its negligent acts or omissions.
10.3 Except as herein expressly stated, there are no warranties, expressed or
implied, by operation of law or otherwise, for any item furnished hereunder. The
Company disclaims any implied warranty or merchantability or fitness for a
particular purpose. In no event shall either party, or its Affiliates, be liable
for any incidental, indirect or consequential damages in connection with or
arising out of this Agreement or the existence, furnishing, functions or use of
any items.
10.4 At all times after the Effective Date hereof, the Company covenants and
agrees to indemnify and hold harmless, Newco and each subsidiary, affiliate or
authorized sublicensee of Newco and their respective successors and assigns,
against all damages and reasonable attorneys fees incident thereto, arising out
of, resulting from or incurred in connection with any liabilities, claims,
obligations, suits, judgments and expenses whatsoever ("Claims"), that Newco's
use of the Products, Concept, Know-How, Design Rights or Patents in accordance
with the terms of this Agreement, infringed on the rights of any third party.
The Company shall have the right to defend any such Claims with attorneys of its
own selection. The Company further agrees to indemnify, defend and hold harmless
Newco and its directors, officers, agents and employees, from any and all
Claims, including court costs and attorneys fees, which Newco may incur or which
may be asserted against Newco and which arise or occur with respect to the
breach by the Company of any representation, warranty, covenant or any other
obligation contained in this Agreement. Newco agrees to take all reasonable
steps necessary to mitigate any damages for which it seeks indemnification
hereunder.
10.5 Except for the indemnification obligation of the Company set forth in
Article 10.4 hereinabove, Newco agrees to indemnify, defend and hold the Company
and its directors, officers, agents and employees harmless from any and all
Claims, including court costs and attorneys fees, which the Company may incur or
which may be asserted against the Company and which arise or occur with respect
to the breach by Newco of any representation, warranty, covenant or any other
obligation contained in
<PAGE>
17
this Agreement. The Company agrees to take all reasonable steps necessary to
mitigate any damages for which it seeks indemnification hereunder.
ARTICLE XI - CONFIDENTIALITY
11.1 Newco shall keep secret and confidential the Know-How made available by the
Company prior to and after the Effective Date and shall not disclose the same
other than to those Directors and employees of Newco or any Affiliate of Newco
who are engaged in the sale of the Products and who may be deemed to have a
legitimate reason to be party to the Know-How. Newco shall also be at liberty to
disclose the Know-How to third parties which may be involved in the sale of the
Products provided that Newco ensures that such third parties are bound by
obligations of secrecy no less onerous than those obligations imposed upon Newco
pursuant to this Agreement.
11.2 The obligations of secrecy undertaken by Newco pursuant to this Article XI
shall not apply to information which:
11.2.1 is already, or which subsequently becomes generally known to the
public through no fault of Newco.
11.2.2 the recipient can demonstrate was known to the recipient prior to
the date of disclosure. For the purposes hereof, that which the recipient
can demonstrate will be that which the recipient can establish by written
evidence was known to it at the date of disclosure.
11.2.3 is received from a third party, provided that such third PartY is
lawfully entitled to disclose the same.
11.3 The provisions of this Article XI contain the entire understanding and
agreement between the parties with respect to matters dealing with
confidentiality and cannot be amended, modified or supplanted in any respect
except by a subsequent written agreement entered into by both parties. In
particular, it is intended that this Article XI supersedes any existing
non-disclosure agreement between Newco and the
<PAGE>
18
Company, save and except for any agreement that Newco may have signed with third
parties as a result of a previously executed non-disclosure agreement
between Newco and the Company, which agreements with third parties shall be
deemed valid and subsisting notwithstanding the provisions hereof.
ARTICLE XII - NEWCO IMPROVEMENTS
12.1 During the Term of this Agreement Newco shall disclose to the Company any
improvements to the Concept which Newco may discover or which comes into its
possession. Any such improvements shall, from the time of Newco's knowledge,
conception or development, be the property of the Company. Upon request by the
Company, Newco shall execute and deliver to the Company any instrument the
Company may reasonably request in order to achieve such industrial or
intellectual property status that the Company shall deem appropriate and to
perfect the assignment of the rights so granted by Newco to the Company.
12.2 During the term of this Agreement the Company shall disclose to Newco any
improvements to the Concept (whether patented or not), which the Company or any
licensees of the Company may discover. The Company agrees that upon request,
Newco shall have the right to use any such improvements to the Concept without
further obligation of payment during the Term of this Agreement.
ARTICLE XIII - ARBITRATION
13.1 Subject to the qualification set forth below in the event of any dispute,
difference or question arising between the parties in connection with this
Agreement, or any clause or the construction thereof, or the rights, duties or
liabilities of either party, which cannot be amicably resolved by the parties,
then and in every such case, unless the parties concur in the appointment of a
single arbitrator, the matter in dispute shall be referred to three (3)
arbitrators, one to be appointed by each party, and the third to be nominated by
the two, so selected by the parties, or if they cannot agree on a third, by a
Judge of the State of New York. Notwithstanding the foregoing no dispute,
difference or question arising between the parties in connection with this
Agreement shall be
<PAGE>
19
submitted to Arbitration where the question(s) to be arbitrated upon have a
value in excess of $100,000.00.
13.2 In the event that either party, within thirty (30) days of any notification
made to it of the demand for arbitration by the other party, shall not have
appointed its arbitrator, such arbitrator shall be appointed by a Judge of the
State of New York. Arbitration shall take place at New York. The arbitrators
must base their decision on this Agreement and their decision shall be binding
on both parties.
13.3 In the event of any dispute, difference or question arising between the
parties in connection with the calculation of Newco Profits, which cannot be
amicably resolved by the parties, then in such a case auditors for the company
and auditors for Newco shall appoint a third Australian auditor to arbitrate the
dispute in accordance with the definition of Newco profits. If the parties
cannot agree on an auditor then the auditor shall be appointed by a Judge of the
State of New York. The decision of the auditor shall be binding on both parties
as it relates to the payment of additional fees to the company. Newco may
present its financial statements in any manner it deems appropriate after the
payment of the fees as decided bY the arbitrator.
ARTICLE XIV - MISCELLANEOUS
14.1 Neither Newco nor the COMPANY shall be in default under this Agreement nor
liable for any failure to perform or for delay in performance resulting from any
cause beyond its/their reasonable control or due to compliance with any
regulations, orders or act, of any federal, provincial, state or municipal
government, or any department or agency thereof, civil or military authority,
acts of God, acts or omissions of the other party, fires, floods or weather,
strikes or lockouts, factory shutdowns, embargoes, wars, hostilities or riots,
delays or shortages in transportation or inability to obtain labour,
manufacturing facilities or material.
14.2 All expenses incurred by Newco relating to the sale of the Products shall
be borne by Newco except as otherwise expressly provided
<PAGE>
20
herein or by written instrument signed by the Company.
14.3 Each of the parties shall bear all taxes imposed on each of them as a
result of the existence or operation of this Agreement including, but not
restricted to, any tax on or measured by any royalty or other payment required
to be made by it hereunder, any registration tax, any tax imposed with respect
to the granting of or transfer of licenses or other rights hereunder or the
payment or receipt of royalties hereunder.
14.4 This Agreement may be varied or amended only by the written agreement of
the parties hereto through their duly authorized officers or representatives.
14.5 In any case where any notice or other communication is required or
permitted to be given hereunder, such notice or communication shall be in
writing and (i) personally delivered (ii) sent by postage prepaid registered
mail, or (iii) transmitted by telex or facsimile (with postage prepaid mail
confirmation) to the parties at the address first hereinbefore listed or to such
other addresses as the parties may notify each other
14.6 The relationship between the parties shall be governed by the terms of this
Agreement and shall not extend to other activities, transactions or contracts.
Neither party is in any way the legal representative or agent of, nor has any
authority to assume or create any obligation on behalf of, the other party.
Newco shall make no guarantees, warranty or representation with respect to the
Products on behalf of the Company.
14.7 If any provision of this Agreement is held illegal in a judicial
proceeding, such provision shall be severed from this Agreement and shall be
inoperative. The parties shall use their best endeavours to replace the severed
provision with a new provision which is not illegal and which follows the
principles of the severed provision as closely as is legally possible. The
remainder of this Agreement shall remain binding on the parties hereto.
<PAGE>
21
14.8 No waiver of breach of any of the provisions of this Agreement shall be
construed to be a waiver of any succeeding breach of the same or any other
provision.
14.9 This Agreement may be executed in any number of counterparts. Any single
counterpart or set of counterparts signed, in either case, by the parties
hereto, shall constitute a full and original Agreement for all purposes.
14.10 The descriptive headings of the several articles of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
14.11 As used herein, the singular shall include the plural and vice versa.
14.12 The parties intend that the Schedules which are attached hereto are herein
incorporated by reference and made part of this Agreement.
ARTICLE XV - GOVERNING LAW
15.1 This Agreement shall be governed by the laws of the State of California.
Any action to enforce any provision of this License Agreement shall be brought
in an appropriate court in the State of New York and all parties hereby consent
to the jurisdiction of the State of New York.
ARTICLE XVI - BINDING EFFECT ASSIGNMENT
16.1 This Agreement may not be assigned by Newco without the written consent of
the Company such approval not to be unreasonably withheld. No assignment of this
Agreement shall be valid unless and until all of the obligations of the
assigning party have been assumed, in writing, by the assignee. When duly
assigned in accordance with the foregoing, this Agreement shall be binding upon
and shall enure to the benefit of the assignee.
<PAGE>
Schedule 1.1.13
"Newco Profits" shall be calculated as follow:
1. According to generally accepted accounting principles under Australian
Accounting standards; and
2. When management's judgement as to a method of accounting for an expense
that serves to reduce profits (e.g. amortization of equipment) is required,
the method of accounting shall be similar to the method used by VES in the
United States provided the method used in the United States is not in
violation of #1 above; and
3. When there is a non-arm's length transaction of any kind that reduces
profits, then the transaction shall be recalculated based upon the fair
value of the transaction on an arm's length basis; and
4. Any salaries and compensation of any kind to the shareholders, other than
for reimbursement of valid corporate expenses, shall be added to the net
income before taxes calculation in #1 except for compensation of the lesser
of Aus$5 per tape or actual remuneration which may be paid in total to
Christopher Ride and Don MacKenzie, which will not be added to #1.
If there is any disagreement as to the presentation or method of accounting used
by Licensee, then the matter shall be submitted to "Accounting Arbitration" (as
defined in Clause 13) which will determine an appropriate presentation of the
sound state of Newco as defined herein which the parties agree to be bound to.
The arbitration will not determine if the method used is in accordance with #l,
but moreso what appropriate method should be used to properly present the
profits of the company.
<PAGE>
VISUAL EDGE SYSTEMS INC. Visual Edge Systems (Australia) Pry Ltd.
Per: /s/ Earl Takefman Per: /s/ Donald MacKenzie
------------------------------ ------------------------------------
Title: CEO Title: DIRECTOR
---------------------------- -----------------------------------
<PAGE>
CONSULTING AGREEMENT
____________, 1996
Visual Edge Systems, Inc.
7 West 51st Street
New York, New York 10019
Attention: Earl T. Takefman
Chief Executive Officer
Dear Mr. Takefman:
This will confirm the arrangements, terms and conditions
pursuant to which Whale Securities Co., L.P. (the "Consultant"), has been
retained to serve as a financial consultant and advisor to Visual Edge Systems,
Inc., a Delaware corporation (the "Company"), on a non-exclusive basis for a
period of two (2) years commencing on ________________, 1996. The undersigned
hereby agrees to the following terms and conditions:
1. Duties of Consultant. Consultant shall, at the request of
the Company, upon reasonable notice, render the following services to the
Company from time to time:
(a) Consulting Services. Consultant will provide
such financial consulting services and advice pertaining to the Company's
business affairs as the Company may from time to time reasonably request.
Without limiting the generality of the foregoing, Consultant will assist the
Company in developing, studying and evaluating financing and merger and
acquisition proposals based upon documentary information provided to the
Consultant by the Company.
(b) Financing. Consultant will assist and represent
the Company in obtaining both short and long-term financing. The Consultant will
be entitled to additional compensation under certain circumstances in accordance
with the terms set forth in Section 3 hereof.
(c) Wall Street Liaison. Consultant will, when
appropriate, arrange meetings between representatives of the Company and
individuals and financial institutions in the investment community, such as
security analysts, portfolio managers and market makers.
The services described in this Section 1 shall be rendered by
Consultant without any direct supervision by the Company and at such time and
place and in such manner (whether by conference, telephone, letter or
otherwise) as Consultant may determine.
<PAGE>
2. Compensation. As compensation for Consultant's services
hereunder, the Company shall pay to Consultant a non- refundable annual fee of
Thirty Thousand Dollars ($30,000) payable in full, in advance, on ______, 1996.
3. Additional Compensation in Certain Circumstances. In
addition to the financial consulting services described in Section 1 above,
Consultant may bring the Company in contact with persons, whether individuals or
entities, that may be suitable candidates for providing the Company with, or may
lead the Company to other individuals or entities that may provide the Company
with, debt or equity financing or that may be suitable candidates, or may lead
the Company to such suitable candidates, to purchase substantially all of the
stock or assets of the Company, merge with the Company, or enter into a joint
venture or other transaction with the Company. If, at any time up until the
second anniversary of the date hereof, the Company enters into an agreement with
any such persons or their affiliates, or with any persons introduced to the
Company by any such persons or their affiliates, pursuant to which the Company
obtains debt or equity financing or pursuant to which substantially all of the
Company's stock or assets is purchased or the Company is merged with or into
another entity, or pursuant to which the Company enters into a joint venture or
other transaction, the Company will pay to Consultant, in accordance with the
formula set forth below, additional compensation based on the aggregate of all
proceeds received by the Company (the "Consideration") in such transaction (the
"Transaction").
The additional compensation to be paid will be paid upon the
closing of the Transaction, by certified check, in the following amounts:
5% of the first $5,000,000 of the consideration
paid in the Transaction;
4% of the consideration in excess of $5,000,000
and up to $6,000,000;
3% of the consideration in excess of $6,000,000
and up to $7,000,000;
2% of the consideration in excess of $7,000,000
and up to $8,000,000; and
1% of any consideration in excess of $8,000,000.
4. Available Time. Consultant shall make available such time
as it, in its sole discretion, shall deem appropriate for the performance of its
obligations under this agreement and may in certain circumstances be entitled to
additional compensation in connection therewith.
<PAGE>
5. Relationship. Nothing herein shall constitute Consultant as
an employee or agent of the Company, except to such extent as might hereinafter
be agreed upon for a particular purpose. Except as might hereinafter be
expressly agreed, Consultant shall not have the authority to obligate or commit
the Company in any manner whatsoever.
6. Confidentiality. Except in the course of the performance of
its duties hereunder, Consultant agrees that it shall not disclose any trade
secrets, know-how, or other proprietary information not in the public domain
learned as a result of this Agreement unless and until such information becomes
generally known.
7. Assignment and Termination. This Agreement shall not be
assignable by any party except to successors to all or substantially all of the
business of either party for any reason whatsoever without the prior written
consent of the other party, which consent may be arbitrarily withheld by the
party whose consent is required.
8. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said State.
Very truly yours,
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
------------------------------
General Partner
By:
------------------------------
Name:
Title:
AGREED AND ACCEPTED:
VISUAL EDGE SYSTEMS, INC.
By:
------------------------------
Name:
Title:
<PAGE>
I hereby authorize the Commissioner of Patents and Trademarks of the
United States and the empowered officials of all other governments to issue or
transfer all said Letters Patent to the Assignee as assignee of all right,
title and interest therein or otherwise as the Assignee may direct, in
accordance with this instrument of assignment.
I hereby represent and warrant that there are no rights or interests
outstanding inconsistent with the rights and interests granted herein, and that
I will not execute any instrument or grant or transfer any rights or interests
inconsistent with the rights and interests granted herein, and I hereby bind
myself and my heirs, executors, administrators and legal representatives, as
the case may be, to execute and deliver to the Assignee any further documents
or instruments and do any and all further acts that may be deemed necessary
by the Assignee to file applications for said invention(s) in any country where
the Assignee may elect to file such applications, and that may be necessary to
vest in the Assignee the title herein conveyed or intended so to be, and to
enable such title to be recorded in the United States and foreign countries
where such application or applications may be filed.
And I further covenant and agree, in consideration of the premises, that I,
my heirs, executors, administrators and legal representatives, will at any time
upon request of the Assignee communicate to the Assignee any facts relating to
said invention(s), and the history thereof, known to me or my heirs, executors,
administrators and legal representatives, and that I will testify upon the
request of the Assignee at the Assignee's expense as the case may be, as to the
same in any interference or other litigation.
IN TESTIMONY WHEREOF, I have executed this document on the date indicated
below.
DATE: 4/19/96 /s/ Thomas S. Peters
-------------------- -------------------------
(Signature)
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Visual Edge Systems Inc. (a development state company):
We consent to the use of our report included herein in form SB-2 and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report dated Aprile 30, 1996, except as to notes 1(e), 2 and 10, which
are as of May 31, 1996, contained an explanatory paragraph that states that the
Company is in its development state and its losses and working capital and net
capital deficiences raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty.
KPMG PEAT MARWICK LLP
New York, New York
June 4, 1996
<PAGE>
CONSENT TO BE NAMED AS A DIRECTOR
OF
VISUAL EDGE SYSTEMS INC.
The undersigned hereby consents to be named in the Registration Statement
on Form SB-2 to be filed by Visual Edge Systems Inc. (the "Company") with the
Securities and Exchange Commission, as a director of the Company.
/s/ Mark Hershhorn
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Mark Hershhorn
