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EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VISUAL EDGE SYSTEMS INC.
Visual Edge Systems Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the corporation is Visual Edge Systems Inc. and the name
under which the corporation was originally incorporated is Golf Vision, Inc. The
date of filing of its original Certificate of Incorporation with the Secretary
of State was July 15, 1994 as amended by the Certificates of Amendment dated
March 16, 1995, March 29, 1995, May 2, 1996, and the Certificate of Designation,
Preferences and Rights of Series A-2 Convertible Preferred Stock dated December
31, 1998 (collectively, the "Original Certificate of Incorporation").
2. This Amended and Restated Certificate of Incorporation (the
"Certificate") amends and restates the Corporation's Original Certificate of
Incorporation in its entirety. The Certificate was duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of Sections 228,
242 and 245 of the Delaware General Corporation Law, as amended from time to
time (the "DGCL"), and was duly adopted by the stockholders of the Corporation
in accordance with the applicable provisions of Sections 228, 242 and 245 of the
DGCL.
3. The text of the Original Certificate of Incorporation is hereby further
amended so that as amended and restated, the Corporation's Certificate of
Incorporation shall now read in its entirety as follows:
ARTICLE ONE
Name
The name of the corporation is Edge Technology Group, Inc. (the "Corporation").
ARTICLE TWO
Registered Agent
The address of the Corporation's registered office in the State of Delaware
is 615 DuPont Highway, in the city of Dover, County of Kent. The name of its
registered agent at such address is Capitol Services, Inc.
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ARTICLE THREE
Purpose
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity which corporations may be organized under
the General Corporation Law of Delaware.
ARTICLE FOUR
Capital Stock
A. The Corporation shall have authority to issue a total of ninety five
million (95,000,000) shares, consisting of (a) ninety million (90,000,000)
shares of common stock, par value $.01 per share ("Common Stock"), and five
million (5,000,000) shares of preferred stock, without par value. The preferred
stock may be issued from time to time in one or more series and with such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and
qualifications, or restrictions thereof as shall be stated and expressed in this
Certificate or in any amendment hereto, or in a resolution adopted by the board
of directors.
B. There is hereby established a series of the authorized preferred stock
of the Corporation, $.01 par value per share, which series shall be designated
as "Series A-2 Cumulative Convertible Redeemable Preferred Stock," and which
shall consist of Ten Thousand (10,000) shares (collectively, the "Series A-2
Shares" or singularly, a "Series A-2 Share") and shall have the following
dividend rights, voting rights, conversion rights, terms of redemption,
redemption prices, liquidation preferences and other rights, qualifications,
limitations and restrictions.
1. DIVIDEND RIGHTS
1.1 A. Beginning on January 1, 2000, the holder of record of each Series
A-2 Share (a "Holder") as of the Record Date (as defined below) shall be
entitled to receive, when, as and if declared by the Corporation's Board of
Directors or a duly authorized committee thereof, on March 31, June 30,
September 30 and December 31 of each year (each a "Dividend Payment Date"),
cumulative dividends per Series A-2 Share (the "Dividends") in either (i) cash
equal to the "Cash Rate" (as hereinafter defined) multiplied by the Liquidation
Preference (as defined in Paragraph 2.1 and as adjusted below) out of the funds
of the Corporation legally available therefor or (ii) at the option of the
Corporation or if the Corporation is legally restricted from paying such
Dividends in cash, in shares of Common Stock (as hereinafter defined) equal to
the "Stock Rate" (as hereinafter defined) multiplied by the Liquidation
Preference (as similarly defined and adjusted), for each Quarterly Payment
Period (as hereafter defined) that such Series A-2 Share is outstanding;
PROVIDED, HOWEVER, that dividends shall not be paid in shares of Common Stock
unless the Corporation has previously filed, and the U.S. Securities and
Exchange Commission (the "Commission") has previously declared effective, a
Registration Statement permitting the public resale of such shares from time to
time by the Holders pursuant to Rule 415 promulgated under the Securities Act of
1933, as amended (the "Securities Act"),
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and such Registration Statement remains available for use by the Holders (the
"Share Registration Event") and PROVIDED, FURTHER, that upon liquidation or
redemption, or following an Event of Default (as defined in Paragraph 1.5),
accrued and unpaid Dividends will be paid in cash only. The Cash Rate and the
Stock Rate shall be collectively referred to as the "Dividend Rate." To the
extent permitted by applicable law and not prohibited pursuant to the terms of
applicable credit instruments, senior securities or this Certificate, the Board
of Directors shall declare Dividends on each Dividend Payment Date (or, if such
day is not a business day, on the next business day thereafter). Notwithstanding
any of the foregoing provisions of this Paragraph 1.1.A, the Corporation shall
not pay, and no Holder shall be entitled to receive, any Dividends during the
calendar year of 1999.
B. A "Quarterly Payment Period" shall mean the three-month period
ending on March 31, June 30, September 30 and December 31 of each year.
C. The "Cash Rate" shall mean an annual dividend rate of 8.25% (i.e.,
a quarterly dividend rate of 2.0625%), PROVIDED, HOWEVER, the "Cash Rate"
shall mean an annual dividend rate of 18.00% (i.e., a quarterly dividend
rate of 4.5%) immediately upon the occurrence of an Event of Default
payable in cash.
D. The "Stock Rate" shall mean an annual dividend rate of 8.25% (i.e.,
a quarterly dividend rate of 2.0625%) PROVIDED, HOWEVER, the "Stock Rate"
shall mean an annual dividend rate of 18.00% (i.e., a quarterly dividend
rate of 4.5%) immediately upon the occurrence of an Event of Default
(subject to possible adjustment in the event of fractional shares as set
forth in the following sentence) payable in shares of Common Stock of the
Corporation such that the number of shares of Common Stock issued as
Dividends shall be determined by dividing the dollar amount of interest
then owing by the Conversion Price (as defined in Paragraph 4.2 below).
Dividends paid at the Stock Rate shall not be paid in fractional shares
(all such fractional shares being rounded up to the nearest whole number of
shares).
E. Beginning on January 1, 2000, dividends shall accrue (whether or
not paid) during each Quarterly Payment Period from the Dividend Payment
Date immediately preceding such Quarterly Payment Period to the earlier to
occur of a conversion event specified in Paragraph 4 hereof, a redemption
event specified in Paragraph 5 hereof or the last day of such Quarterly
Payment Period. Dividends shall be calculated on the basis of a 90-day
Quarterly Payment Period and the actual number of days elapsed. The Holder
of any Series A-2 Shares which are the subject of a conversion pursuant to
Paragraph 4 shall, on the Conversion Date (as defined in Paragraph 4.5), be
entitled to receive accrued Dividends on such Series A-2 Shares which have
not been declared and paid on or before such Conversion Date. The Holder of
any Series A-2 Shares which are the subject of a redemption pursuant to
Paragraph 5 shall, on the redemption date (as specified in paragraph
5.2.A), be entitled to receive dividends on such Series A Shares which have
not been declared and paid on or before such redemption date. For any
period with respect to which the Dividend is not fully paid as described
herein, such accrued but unpaid Dividends shall be added to the Liquidation
Preference of the Series A-2 Shares effective at the beginning of the
period next succeeding the period as to which such Dividends were not paid,
and shall thereafter
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accrue additional Dividends at the applicable Dividend Rate. Any Dividend
payment made on Series A-2 Shares shall be credited against the earliest
accrued but unpaid Dividend which has been added to the Liquidation
Preference of the Series A-2 Shares pursuant to this Paragraph 1.1.E and
shall reduce the Liquidation Preference by the amount of the Dividend paid.
Notwithstanding any of the foregoing provisions of this Paragraph 1.1.E, no
Dividends shall accrue during the calendar year 1999, and no Dividends
which, absent the provisions of this sentence, would have accrued during
the calendar year 1999 shall be added to the Liquidation Preference of the
Series A-2 Shares.
1.2 Dividends shall to the extent permitted by applicable law be declared
at least twenty (20) business days prior to the next Dividend Payment Date for
payment on the next Dividend Payment Date to the Holders of record on the date
determined in such declaration, which date shall in no event be more than
fifteen (15) business days after the date of declaration (the "Record Date").
Dividends shall be payable on the earlier to occur of a conversion event
specified in Paragraph 4 hereof or a redemption transaction referenced in
Paragraph 5 herein or each Dividend Payment Date (or if any such day is not a
business day, the next succeeding business day).
1.3 So long as any Series A-2 Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend (other than in shares of
Junior Stock (as hereinafter defined)) or other distribution in respect of its
Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for
any consideration (other than shares of its Junior Stock) any shares of its
Junior Stock, any warrants, rights, calls or options exercisable for any shares
of Junior Stock unless all dividends accumulated and unpaid with respect to the
Series A-2 Shares are simultaneously declared and paid. "Junior Stock" means
Common Stock or any other series of preferred stock of the Corporation which
ranks junior to or on a parity with (as determined pursuant to Paragraph 6) the
Series A-2 Shares. "Common Stock" means the common stock, par value $.01 per
share, of the Corporation and any share of successor or replacement stock.
1.4 If one or more of the following events (each, an "Event of Default")
shall have occurred and be continuing:
A. In Event of Default (as defined in Section 12.1 of that Bridge
Securities Purchase Agreement, dated June 13, 1997, by and among the
Corporation and one or more of the Holders, as subsequently amended (the
"Purchase Agreement")) has occurred;
B. Dividend Payment Date has passed for three (3) business days
without declaration and payment (or the setting aside for payment) of the
full Dividend contemplated hereby on all outstanding Series A-2 Shares;
C. The Corporation has failed to timely observe or perform any
covenant contained in this Certificate including, without limitation, any
conversion contemplated by Paragraph 4 hereof or any redemption
contemplated by Paragraph 5 hereof;
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then, the Cash Rate and the Stock Rate shall be increased as specified in
Paragraph 1.1.C and 1.1.D above until the aggregate deficiency shall be
declared and fully paid.
2. RIGHTS ON LIQUIDATION
2.1 In the event of the liquidation, dissolution, winding-up or sale or
other disposition of all or substantially all of the assets of the Corporation,
whether voluntary or involuntary (each a "Liquidation"), the Holder of a Series
A-2 Share shall be entitled to receive with respect to such Series A-2 Share,
after the satisfaction of all distributions to holders of other series of
preferred stock, if any, which are expressly senior in liquidation preference to
the Series A-2 Shares, including any series of preferred stock which is
mandatorily redeemable (collectively, the "Senior Payments") but before any
distribution is made to or set aside for the holders of Common Stock or any
other series of preferred stock of the Corporation, if any, which are junior in
liquidation preference to the Series A-2 Shares, cash or any other assets of the
Corporation in an amount (or having a fair market value) equal to $1,000 per
share (the "Liquidation Preference") plus all accrued but unpaid Dividends, in
cash, up to the date of the final distribution in Liquidation. If, after the
satisfaction of all Senior Payments, the assets of the Corporation available for
distribution to Holders shall be insufficient to permit the payment in full of
the amount due the Holders pursuant to this Paragraph 2.1, then the entire
assets of the Corporation available for distribution to Holders after the
satisfaction of all Senior Payments shall be distributed pari passu among the
Holders and the holders of other series of preferred stock which are not junior
in liquidation preferences to the Series A-2 Shares, if any, in accordance with
their respective liquidation preferences. The fair market value of any assets of
the Corporation and the proportion of cash and other assets distributed by the
Corporation to the Holders of the Series A-2 Shares shall be reasonably
determined in good faith by the Board of Directors. A merger or consolidation of
the Corporation with another corporation (or other business entity) or a
voluntary sale of all or substantially all of the assets of the Corporation
principally in exchange for stock and/or securities of another corporation (all
referred to as a "Merger") shall not be deemed a Liquidation if such Merger does
not occur as part of a proceeding under Title 11 of the United States Code or
any federal or state law for the protection of creditors or relief of debtors.
2.2 After the payment to the holders of the Series A-2 Shares of the full
preferential amounts provided for in Paragraph 2.1, the holders of Series A-2
Shares shall have no right or claim to any of the remaining Assets of the
Corporation.
3. VOTING RIGHTS
3.1 Except as otherwise provided in Paragraphs 3.2 and 3.3 below, each
Holder shall have no voting rights. To the extent Holders of the Series A-2
Shares have the right to vote, each Holder shall be entitled to that number of
votes for each share of Series A-2 Shares held by such Holder equal to the total
number of shares of Common Stock obtainable upon conversion of such shares of
Series A-2 Shares at the current Conversion Price on the record date for the
vote which is being taken or, if no such record date is established, at the date
such vote is taken or any written consent is solicited.
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3.2 So long as any of the Series A-2 Shares are outstanding the Corporation
will not, without the affirmative vote or consent of the Holders of at least
sixty six and two thirds percent (66-2/3%) of the Series A-2 Shares at the time
outstanding, given in person or by proxy, either in writing or by a resolution
adopted at a meeting called for such purpose, with the Holders of the Series A-2
Shares voting or consenting separately as a class:
A. Amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or Bylaws or the resolution providing for the
issue of the Series A-2 Shares or pass any shareholder resolution,
including such action effected by merger or similar transaction in which
the Corporation is the surviving corporation, if such amendment or
resolution would affect adversely the preferences, special rights or powers
of the Series A-2 Shares except if such action is otherwise permitted under
the other provisions of this Paragraph 3.2;
B. Increase or decrease (other than by redemption or conversion) the
total number of authorized Series A-2 Shares;
C. Issue any capital stock which ranks senior to or on a parity with
the Series A-2 Shares with respect to rights to receive distributions upon
liquidation, dissolution, or winding up of the Corporation or with respect
to dividends; or
D. Enter into a Merger in which the Corporation is not the surviving
corporation; PROVIDED, HOWEVER, that the provisions of this subparagraph D
shall not be applicable to any such Merger if the authorized capital stock
of the surviving corporation immediately after such Merger shall include
only classes or series of stock for which no such consent or vote would
have been required pursuant to this Paragraph 3.2 if such class or series
had been authorized by the Corporation immediately prior to such Merger or
which have the same rights, preferences and limitations and authorized
amount as a class or series of stock of the Corporation authorized prior to
such Merger and continuing as an authorized class or series at the time
thereof.
A Merger of the Corporation, or similar transaction in which the
holders of its capital stock receive all cash, shall not be deemed to
adversely affect the preferences, special rights or powers of the Series
A-2 Shares. The authorization or issuance of any other series of preferred
stock, if such other series ranks junior to the Series A-2 Shares with
respect to rights to receive distributions upon liquidation, dissolution or
winding up of the Corporation or with respect to dividends, shall not be
deemed to adversely affect the preferences, special rights or powers of the
Series A-2 Shares.
3.3 The Holders of a majority of the outstanding Series A-2 Shares (the
"Majority Holders") voting separately as a class shall be entitled to appoint
one (1) designee to serve on the Board of Directors of the Corporation (the
"Designee"). The Majority Holders may, in their discretion, by written notice to
the Corporation appoint, remove and replace the Designee, with or without cause
at any time and from time to time. Further, without the affirmative vote or
approval of the Designee then serving on the Board of Directors of the
Corporation following the appointment of such Designee by the Majority Holders,
the Corporation may not (i) commence a
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voluntary case or other proceeding seeking liquidation, winding-up,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter in
affect, (ii) seek the appointment of a trustee, receiver, liquidator, custodian
or other similar official of the Corporation (or for any substantial part of its
property), (iii) consent to any such relief or to such appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against the Corporation, or (iv) take any corporate or other action to
authorize any of the foregoing.
3.4 Copies of all notices sent to the holders of any other class or series
of capital stock of the Corporation (including the Common Stock) shall be
simultaneously sent to each Holder.
4. CONVERSION RIGHTS
4.1 NUMBER OF SERIES A-2 SHARES. Each Series A-2 Share shall be
convertible, at the option of the Holder thereof, at any time and from time to
time, into that number of shares of Common Stock obtained by dividing the
Liquidation Preference (including any Dividends added to the Liquidation
Preference pursuant to Paragraph 1.1.E) of such Series A-2 Share by the
Conversion Price determined in accordance with Paragraph 4.2. The Holder is not
entitled to any rights of a holder of Common Stock (except to the extent
expressly set forth herein) until such Holder has converted all or a portion of
his Series A-2 Shares pursuant to the provisions of this Paragraph 4.
4.2 CONVERSION PRICE. The Conversion Price shall be equal to: (i) $1.25 as
to the Series A-2 Shares with an aggregate the Liquidation Preference of which
shares aggregates to no more than $2,000,000; (ii) if Series A-2 Shares with an
aggregate Liquidation Preference of $2,000,000 or more have been converted into
shares of Common Stock, then the Conversion Price for the first $2,000,000 of
aggregate Liquidation Preference of the Series A-2 Shares shall be governed by
clause (i) of this Paragraph 4.2, and the Conversion Price for the excess over
$2,000,000, up to a maximum of $1,000,000, of aggregate Liquidation Preference
of the Series A-2 Shares shall be $2.00 from the date hereof until June 30,
1999, inclusive, $1.375 from July 1, 1999 until January 1, 2000, inclusive, and
$1.25 after January 1, 2000; and (iii) if Series A-2 Shares with an aggregate
Liquidation Preference of $3,000,000 or more have been converted into shares of
Common Stock, then the Conversion Price for the first $2,000,000 of aggregate
Liquidation Preference of the Series A-2 Shares shall be governed by clause (i)
of this Paragraph 4.2, the Conversion Price for the next $1,000,000 of aggregate
Liquidation Preference of the Series A-2 Shares shall be governed by clause (ii)
of this Paragraph 4.2 and the Conversion Price for the excess over $3,000,000 of
aggregate Liquidation Preference of the Series A-2 Shares shall be $2.50 from
the date hereof until June 30, 1999, inclusive, $2.00 from July 1, 1999 until
January 1, 2000, inclusive, and $1.25 thereafter; PROVIDED, HOWEVER, that upon
the occurrence of an Event of Default, Conversion Price shall mean the formula
F/P where F = the Liquidation Preference of the Series A-2 Shares being
converted, together with accrued and unpaid dividends thereon through the
Conversion Date, and P = the lesser of (x) $6.00 and (y) the product of 77.5%
multiplied by the Market Price (as defined in Paragraph 4.9) as of the
Conversion Date (as defined in Paragraph 4.5).
"Closing Bid Price" shall mean the closing bid price of the Corporation's
Common Stock as reported by Bloomberg L.P. ("Bloomberg") on the principal
securities exchange or trading
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market where such security is listed or traded or, if the foregoing does not
apply, the closing bid price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no trading price is reported for such security by Bloomberg, then the average of
the bid prices of any market-makers for such securities as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the closing bid price cannot
be calculated for such security on such date on any of the foregoing bases, the
closing bid price of such security on such date shall be the fair market value
as mutually determined by the holders of the Series A-2 Shares and the
Corporation for which the calculation of the closing bid price requires, and in
the absence of such mutual determination, as determined by the Board of
Directors of the Corporation in good faith.
Notwithstanding the foregoing provisions of Paragraph 4.2, if the Closing
occurs under the Agreement and Fourth Amendment to Bridge Securities Purchase
Agreement and Related Documents among the Holders and the Corporation, each
Series A-2 Share will convert into Common Stock in such a manner that each $1.00
in value of each Series A-2 Share, based upon the Liquidation Preference of such
share, together with each $1.00 in value of all accrued and unpaid dividends
thereon, shall be convertible into four (4) shares of Common Stock.
4.3 LIMITATION ON CONVERSION. Notwithstanding the conversion rights under
this Paragraph 4, in no event shall any Holder be entitled at any one time to
convert any Series A-2 Share if the sum of (i) the number of shares of Common
Stock beneficially owned by such Holder and any person or entity controlling,
controlled by or under common control with such Holder (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of
unconverted Series A-2 Shares, or other derivative securities convertible into
or exchangeable for shares of Common Stock which contain a limitation similar to
that set forth herein), and (ii) the number of shares of Common Stock issuable
upon the conversion of the Series A-2 Shares with respect to which this
determination is being made, would result in beneficial ownership by such Holder
and any person or entity controlling, controlled by or under common control with
such Holder of more than 9.99% of the outstanding shares of Common Stock after
giving effect to such conversion. For purposes hereof, beneficial ownership
shall be determined in accordance with Rule 13d-3 of the Exchange Act and
Regulations 13D-G thereunder, except as otherwise provided herein. The foregoing
limitation shall not apply and shall be of no further force or effect (i)
immediately preceding and upon any consummation of any Sale Event (as
hereinafter defined), or (ii) following the occurrence of any Event of Default
which is not cured within the greater of the time period specified in either (A)
a written notice delivered from any Holder to the Corporation or (B) any
applicable grace period. "Sale Event" means the occurrence of any of the
following:
(i) After December 20, 1998 any Person or group of Persons
(within the meanings of Sections 13 and 14 of the Exchange Act and the
rules and regulations of the Commission relating to such sections)
other than the Purchasers shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act and Regulations
13D-G thereunder) of 50.1% or more of the outstanding shares of Common
Stock of the Corporation;
(ii) Individuals constituting the Board of Directors of the
Corporation on December 20, 1998 (together with any new directors
whose election by such
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Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by vote of at least 50.1%
of the directors still in office who are either directors as of the
date hereof or whose election or nomination for reelection was
previously so approved), cease for any reason to constitute at least
66% of the Board of Directors of the Corporation then in office;
(iii) Any transfer of all or substantially all of the assets of
the Corporation to any Person in a single transaction or a series of
related transactions; or
(iv) Any consolidation or merger of the Corporation with or into
another Person in which the Corporation is (x) not the surviving
entity or (y) survives such merger as a wholly owned subsidiary of
another Person (other than a merger which is effected solely to change
the jurisdiction of incorporation in the Corporation and results in a
reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock of the surviving
entity).
4.4 CONVERSION UPON REORGANIZATION. In case at any time and from time to
time the Corporation shall (i) effect a Share Reorganization (as defined in
Paragraph 4.12), (ii) effect a Merger, (iii) transfer all or substantially all
of its assets or (iv) reclassify its Common Stock (other than as contemplated by
Paragraph 4.2) and pursuant to any such event (each, a "Capital
Reorganization"), any assets or securities of the Corporation, any successor or
transferee corporation or any affiliate thereof or cash is received by or
distributed to the holders of Common Stock, then each Holder of Series A-2
Shares shall have the right thereafter to convert each Series A-2 Share into the
kind and amount of securities, cash or property that such Holder would have
received upon consummation of such transaction if such Holder had converted the
Holder's Series A-2 Shares into Common Stock immediately prior to the
consummation of such transaction, and the Holder shall have no other conversion
rights nor shall there be any adjustment to the Conversion Price. In any such
event, effective provision shall be made in the Certificate of Incorporation of
the successor or transferee corporation or otherwise, so that the provisions set
forth herein for the protection of the conversion rights of the Series A-2
Shares shall thereafter be applicable, as nearly as reasonably may be, to any
such other securities, cash and property deliverable upon conversion of the
Series A-2 Shares or other convertible stock or securities received by the
Holders in place thereof, and any such successor or transferee corporation shall
expressly assume the obligation to deliver, upon the exercise of the conversion
privilege, such other securities, cash or property as the Holders of the Series
A-2 Shares, or other convertible stock or securities received by the Holders in
place thereof, shall be entitled to receive pursuant to the provisions hereof,
and to make provision for the protection of the conversion right as provided
herein. In case securities other than Common Stock, cash or property shall be
issuable, payable or deliverable by the Corporation upon conversion as
aforesaid, then all references in this Paragraph 4.4 shall be deemed to apply,
so far as appropriate and as nearly as may be, to such other securities, cash or
property.
4.5 CONVERSION METHOD. Any Holder of Series A-2 Shares may, at any time
prior to the close of business on the date which is two (2) business days prior
to the Redemption Date (as defined in Paragraph 5.2) for such Series A-2 Shares,
exercise the conversion rights as
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to such Series A-2 Shares by delivering to the Corporation during regular
business hours, care of the then transfer agent (the "Transfer Agent") for the
Corporation, a notice requesting conversion on a specified date and the number
of Series A-2 Shares that the Holder elects to convert (a "Notice of
Conversion"). The Notice of Conversion shall also state the names and addresses
of the persons to whom certificates for shares of Common Stock shall be issued,
the denominations of such certificates and reasonable delivery instructions with
respect thereto. Each conversion shall be deemed to have been effected on the
date such Notice of Conversion (the "Conversion Date") is delivered to the
Transfer Agent (including delivery via facsimile). The person in whose name any
certificate for shares of Common Stock is issuable upon the conversion shall be
deemed to have become the holder of record of the Common Stock at such time. If
the stock transfer books of the Corporation are closed on the Conversion Date,
the Conversion Date for purposes of determining record ownership shall be the
next succeeding day on which the stock transfer books are open (and the
conversion shall be deemed to have been effected immediately prior to the close
of business on that day), but in all cases the conversion shall be at the
Conversion Price in effect on the Conversion Date specified in the Notice of
Conversion. As promptly as practicable after the Conversion Date but in any
event within three (3) trading days of the receipt of the Notice of Conversion,
the Corporation shall, and shall use its best lawful efforts to cause the
Transfer Agent to, issue and deliver to such Holder, at the expense of the
Corporation and in accordance with such Holder's delivery instructions, a
certificate or certificates for the number of full shares of Common Stock to
which such Holder is entitled and cash with respect to any fractional interest
in a share of Common Stock as provided in Paragraph 4.6 below (which shall be
promptly deposited by the Corporation with the Transfer Agent for delivery to
the Holder).
4.6 FRACTIONAL SHARES OF COMMON STOCK. No fractional shares of Common Stock
or scrip shall be issued upon conversion of Series A-2 Shares. If more than one
Series A-2 Share shall be surrendered for conversion at any one time by the same
Holder, the number of full shares of Common Stock issuable upon conversion of
such Series A-2 Shares shall be computed on the basis of the aggregate number of
Series A-2 Shares so surrendered. Instead of any fractional shares of Common
Stock which otherwise would be issuable upon conversion of any Series A-2
Shares, the Corporation shall pay a cash adjustment in respect of such
fractional interest based upon the Conversion Price in effect at the close of
business on the last business day prior to the Conversion Date.
4.7 TAXES. All shares of Common Stock issued upon conversion of Series A-2
Shares will be validly issued, fully paid and nonassessable. The Corporation
shall pay any and all documentary stamp or similar issue or transfer taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of Series A-2 Shares pursuant hereto. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that in which the Series A-2 Shares so converted were registered, and
no such issue or delivery shall be made unless and until the person requesting
such transfer has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid
or that no such tax is payable.
4.8 SURRENDERED SERIES A-2 SHARES. All certificates representing Series A-2
Shares converted or redeemed shall be appropriately canceled on the books of the
Corporation
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and the Series A-2 Shares so converted or redeemed represented by such
certificates shall be restored to the status of authorized but unissued Series
A-2 Shares.
4.9 MARKET PRICE. The term "Market Price" on any day shall mean the average
of the closing bid prices per share of the Common Stock as reported by Bloomberg
on the NASDAQ Stock Market's SmallCap Market, or on such other exchange or
automated quotation system as the Common Stock is then traded, or, if the
foregoing does not apply, the average of the closing bid prices of any market
makers for such securities as reported in the "pink sheets" by the National
Quotation Bureau, Inc., in each case for the five (5) consecutive trading days
immediately preceding the date of determination. When referred to herein, a
"trading day" shall mean a business day in which the principal market on which
the Common Stock is traded is open for trading for at least four (4) hours. If
at the time of any computation pursuant to this Paragraph 4.9 the Common Stock
is not then traded on any trading market, the "Market Price" for the purposes
hereof shall be the fair value as reasonably determined in good faith by the
Board of Directors of the Corporation.
4.10 AVAILABLE COMMON STOCK. The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of Series A-2 Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect a
conversion of all outstanding Series A-2 Shares under Paragraph 4.1, as such
number may from time to time be adjusted, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding Series A-2 Shares, the Corporation shall
promptly take such corporate action as may, in the opinion of its counsel and
subject to any necessary approval of its stockholders, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
4.11 NOTICE TO HOLDERS. In the event (i) the Corporation shall declare a
dividend or other distribution on the Common Stock other than regular cash
dividends declared in the ordinary course or dividends or other distributions
payable in Common Stock, (ii) the Common Stock is subdivided, combined or
reclassified, (iii) of a Merger, (iv) of a Liquidation, (v) the Corporation
offers for subscription pro rata to holders of Common Stock any additional
shares of stock of any class or series or other rights, or (vi) an Event of
Default shall occur then, in each such event, the Corporation shall mail to each
Holder at the Holder's address as it appears in the stock records of the
Corporation, promptly and in any event at least fifteen (15) days prior to the
date described in clause (a) below, a notice stating (a) if applicable, the date
for the determination of holders of Common Stock entitled to receive the
distribution, subscription rights or the consideration in the Merger or
Liquidation, or the date of determination as to which shares of Common Stock
will be affected by a subdivision, combination, reclassification, (b) a brief
statement of the facts requiring such notice, and (c) if applicable, that the
Conversion Price shall be adjusted.
4.12 ADJUSTMENT OF CONVERSION PRICE.
A. If and whenever the Corporation shall:
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(i) subdivide the outstanding shares of Common Stock into a
greater number of shares;
(ii) consolidate the outstanding shares of Common Stock into a
smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as a stock dividend to all or
substantially all the holders of Common Stock;
(iv) make a distribution on the outstanding Common Stock to all
or substantially all the holders of Common Stock payable in Common
Stock or securities convertible into or exchangeable for Common Stock;
(v) (a) issue shares of Common Stock, or securities convertible
into or exchangeable for shares of Common Stock, in exchange for an
amount of cash exceeding $3,000,000 or (b) during any calendar year,
issue to any Person or Persons, other than Greg Norman, Great White
Shark Enterprises or David Feherty, an aggregate of more than 100,000
shares of Common Stock, or securities convertible into or exchangeable
for an aggregate of more than 100,000 shares of Common Stock; any of
such events being herein called a "Share Reorganization," then in each
such case, the Conversion Price shall be adjusted, effective
immediately after the record date at which the holders of Common Stock
are determined for the purposes of the Share Reorganization or, if no
record date is fixed, the effective date of the Share Reorganization,
by multiplying the Conversion Price in effect on such record or
effective date, as the case may be, by a fraction of which:
(I) the numerator shall be the number of shares of Common
Stock outstanding on such record or effective date (without
giving effect to the transaction); and
(II) the denominator shall be the number of shares of Common
Stock outstanding after giving effect to such Share
Reorganization, including, in the case of a distribution of
securities convertible into or exchangeable for shares of Common
Stock, the number of shares of Common Stock that would have been
outstanding if such securities had been converted into or
exchanged for Common Stock on such record or effective date;
PROVIDED, HOWEVER, that no adjustment to the Conversion Price will be made with
respect to (y) any portion of an issuance pursuant to clause (v)(a) of this
section, the proceeds of which are used to pay all or any part of the Company's
obligations to the Purchasers, and such proceeds shall not be considered in
determining whether the issuance exceeds the $3,000,000 threshold set forth in
clause (v)(a) of this section, or (z) any issuance, the price per share at which
such issuance is made (or, in the case of securities convertible into or
exchangeable for shares of
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Common Stock, at an exchange or conversion price per share as of the date of
issue of such securities) is equal to or greater than 85% of the Market Price as
of the date of such issuance.
B. If and whenever the Corporation shall issue to all or substantially
all the holders of Common Stock, rights, options or warrants under which
such holders are entitled, during a period expiring not more than 45 days
after the record date of such issue, to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock), at
a price per share (or, in the case of securities convertible into or
exchangeable for Common Stock, at an exchange or conversion price per share
at the date of issue of such securities) of less than 95% of the Market
Price of the Common Stock on such record date (any such event being herein
called a "Rights Offering"), then, in each such case, the Conversion Price
shall be adjusted, effective immediately after the record date at which
holders of Common Stock are determined for the purposes of the Rights
Offering, by multiplying the Conversion Price in effect on such record date
by a fraction of which:
(i) the numerator shall be the sum of:
(I) the number of shares of Common Stock outstanding on such
record date;
and
(II) a number obtained by dividing:
(A) either, (x) the product of the total number of
shares of Common Stock so offered for subscription or
purchase and the price at which such shares are so offered,
or (y) the product of the maximum number of shares of Common
Stock into or for which the convertible or exchangeable
securities so offered for subscription or purchase may be
converted or exchanged and the conversion or exchange price
of such securities,
or, as the case may be, by
(B) the Market Price of the Common Stock on such record
date;
and
(ii) the denominator shall be the sum of:
(I) the number of shares of Common Stock outstanding on such
record date; and
(II) the number of shares of Common Stock so offered for
subscription or purchase (or, in the case of securities
convertible into or
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exchangeable for Common Stock, the maximum number of shares of
Common Stock for or into which the securities so offered for
subscription or purchase may be converted or exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the Maximum Price shall be readjusted effective
immediately after such expiry time to the maximum price which would then have
been in effect upon the number of shares of Common Stock (or securities
exchangeable into Common Stock) actually delivered upon the exercise of such
rights, options or warrants.
C. If and whenever the Corporation shall issue or distribute to all or
substantially all the holders of Common Stock:
(i) shares of the Corporation of any class, other than Common
Stock;
(ii) rights, options or warrants; or
(iii) any other assets (excluding cash dividends and equivalent
dividends in shares paid in lieu of cash dividends in the ordinary
course); and if such issuance or distribution does not constitute a
Share Reorganization or a Rights Offering (any such event being herein
called a "Special Distribution"), then, in each such case, the
Conversion Price shall be adjusted, effective immediately after the
record date at which the holders of Common Stock are determined for
purposes of the Special Distribution, by multiplying the Conversion
Price in effect on such record date by a fraction of which:
(i) the numerator shall be the difference between:
(A) the product of the number of shares of Common Stock
outstanding on such record date and the Market Price of the
Common Stock on such date; and
(B) the fair market value, as determined by the Directors
(whose determination shall be conclusive), to the holders of
Common Stock of the shares, rights, options, warrants, evidences
of indebtedness or other assets issued or distributed in the
Special Distribution (net of any consideration paid therefor by
the holders of Common Stock), and
(ii) the denominator shall be the product of the number of shares
of Common Stock outstanding on such record date and the Market Price
of the Common Stock on such date.
D. The following rules and procedures shall be applicable to
adjustments made in this Certificate:
(i) no adjustment in the Conversion Price shall be required
unless such adjustment would result in a change of at least 1% in
the
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Conversion Price then in effect, PROVIDED, HOWEVER, that any
adjustments which, but for the provisions of this clause would
otherwise have been required to be made, shall be carried forward
and taken into account in any subsequent adjustment;
(ii) no adjustment in the Conversion Price shall be made
pursuant to this Paragraph 4.12 in respect of the issue from time
to time of Common Stock to holders of Common Stock who exercise
an option to receive substantially equivalent dividends in Common
Stock in lieu of receiving cash dividends in the ordinary course;
and
(iii) if a dispute shall at any time arise with respect to
any adjustment of the Conversion Price, such dispute shall be
conclusively determined by the auditors of the Corporation or, if
they are unable or unwilling to act, by a firm of independent
chartered accountants selected by the Directors and any such
determination shall be binding upon the Corporation and the
Holders.
E. The Corporation shall from time to time promptly after the
occurrence of any event which requires an adjustment in the Conversion
Price deliver to the Holders and the Transfer Agent a certificate
specifying the nature of the event requiring the adjustment, the amount of
the adjustment necessitated thereby, the Conversion Price after giving
effect to such adjustment and setting forth, in reasonable detail, the
method of calculation and the facts upon which such calculation is based.
F. If the Corporation shall fix a record date for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Stock into a greater number of shares or the
consolidation of outstanding Common Stock into a smaller number of
shares),
(b) any Rights Offering,
(c) any Special Distribution,
(d) any Capital Reorganization (other than a reclassification or
redesignation of the Common Stock into other shares), or
(e) any cash dividend other than a cash dividend on the Series
A-2 Shares,
the Corporation shall, not less than ten (10) days prior to such
record date or, if no record date is fixed, prior to the effective
date of such event, give to the Holders notice of the particulars of
the proposed event or the extent that such particulars have been
determined at the time of giving the notice.
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5. REDEMPTION OBLIGATIONS
5.1 OPTIONAL REDEMPTION.
A. The Corporation may, at its option, redeem all or any portion of
the Series A-2 Shares remaining unconverted, by notice to the Holder of
such shares specifying the amount of the redemption. In the event that the
foregoing notice is provided to a Holder, such Holder shall have no right
to convert any of such Holder's Series A-2 Shares into shares of Common
Stock pursuant to the provisions of Paragraph 4 hereof. Partial redemption
shall be in an aggregate principal amount of not less than $300,000.
B. The price to be paid by the Corporation to redeem all or any
portion of the Series A-2 Shares remaining unconverted shall be the sum of
(i) the aggregate Liquidation Preference of the Series A-2 Shares plus (ii)
any accrued and unpaid dividends on the Series A-2 Shares being redeemed,
through the date of consummation of the redemption (as specified in
Paragraph 5.2.A); PROVIDED, HOWEVER, that upon the occurrence of an Event
of Default, the price to be paid by the Corporation to redeem all or any
portion of the Series A-2 Shares remaining unconverted shall be the greater
of (y) the aggregate Liquidation Preference of the Series A-2 Shares and
(z) the Formula Price. The "Formula Price" shall mean the greater of (I)
the Liquidation Preference of the Series A-2 Shares, as applicable, plus
any accrued and unpaid dividends thereon, being redeemed through the date
of consummation of the redemption (as specified in Paragraph 5.2 below) and
(II) the sum of (x) the product of (i) the number of shares of Common Stock
into which the Series A-2 Shares being redeemed are then convertible at the
then current Conversion Price and (ii) the average Closing Bid Price for
the five (5) Trading Days ending two (2) Business Days immediately
preceding the applicable date of consummation of the redemption as
specified in Paragraph 5.2 below, and (y) the applicable amount of accrued
but unpaid dividends on the Series A-2 Shares, as applicable, being
redeemed through the date of consummation of the redemption (as specified
in Paragraph 5.2 below).
C. The Corporation shall be required to redeem all of the issued and
outstanding Series A-2 Shares in the manner provided by the Purchase
Agreement.
5.2 REDEMPTION PROCEDURES
A. Any redemption pursuant to Paragraph 5.1 above shall be deemed to
be consummated and effective on the date notice is provided to the holder
of the Series A-2 Shares being redeemed (the "Redemption Date").
B. Within one (1) business day after the effective date of a
redemption of the Series A-2 Shares as specified above, the Corporation
shall deposit the applicable redemption price with the Transfer Agent for
immediate delivery to each Holder of the Series A-2 Shares subject to
redemption as contemplated by any applicable Transfer Agent Agreement and,
simultaneously therewith, shall provide notice to the Holders (the
"Redemption Notice") advising them of (i) the fact of redemption, (ii) the
applicable
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redemption date, (iii) the applicable redemption price and (iv) all other
material facts relating to the redemption referenced therein.
C. The Corporation shall select the Series A-2 Shares to be redeemed
in any redemption in which not all of the Series A-2 Shares are to be
redeemed (to the extent permitted) so that the ratio of the number of
Series A-2 Shares of each holder selected for redemption to the total
number of Series A-2 Shares owned by that holder shall be the same as the
ratio of all such Series A-2 Shares selected for redemption bears to the
total of all then outstanding Series A-2 Shares. Should any Series A-2
Shares be required to be redeemed under the terms hereof not be redeemed
solely by reason of limitations imposed by law, the Series A-2 Shares shall
then be redeemed to the maximum extent permitted by law and shall be
redeemed thereafter on the earliest possible dates.
5.3 PAYMENT OF ADDITIONAL AMOUNTS
A. Any and all payments by the Corporation hereunder to any Holder and
each "qualified assignee" thereof shall be made free and clear of and
without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes")
unless such Taxes are required by law or the administration thereof to be
deducted or withheld. If the Corporation shall be required by law or the
administration thereof to deduct or withhold any Taxes from or in respect
of any sum payable under the Series A-2 Shares (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
or withholdings (including deductions or withholdings applicable to
additional amounts paid under this Paragraph 5.3) such Holder receives an
amount equal to the sum it would have received if no such deduction or
withholding had been made; (ii) the Corporation shall make such deductions
or withholdings; and (iii) the Corporation shall forthwith pay the full
amount deducted or withheld to the relevant taxation or other authority in
accordance with applicable law. A "qualified assignee" of a Holder is a
person that is organized under the laws of (I) the United States or (II)
any jurisdiction other than the United States or any political subdivision
thereof and that (y) represents and warrants to the Corporation that
payments of the Corporation to such assignee under applicable law would not
be subject to any Taxes and (z) from time to time, as and when requested by
the Corporation, executes and delivers to the Corporation and the Internal
Revenue Service forms, and provides the Corporation with any information,
necessary to establish such assignee's continued exemption from Taxes under
applicable law.
B. The Corporation shall forthwith pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (all such taxes, charges and levies hereinafter referred to as
"Other Taxes") which arise from any payment made under this Certificate or
the transactions contemplated hereby.
C. The Corporation shall indemnify each Holder, or qualified assignee,
for the full amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Paragraph 5.3) paid by each Holder, or qualified assignee, and
any liability (including penalties, interest
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and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Payment under
this indemnification shall be made within 30 days from the date such Holder
or assignee makes written demand therefor. A certificate as to the amount
of such Taxes or Other Taxes submitted to the Corporation by such Holder or
assignee shall be conclusive evidence of the amount due from the
Corporation to such party.
D. Within 30 days after the date of any payment of Taxes, the
Corporation will furnish to each Holder the original or a certified copy of
a receipt evidencing payment thereof.
6. RANKING OF STOCK OF THE CORPORATION
Any stock of any class or classes of the Corporation shall be deemed to
rank:
A. Prior to the Series A-2 Shares, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the Holders;
B. On a parity with the Series A-2 Shares, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share or sinking and fund
provisions, if any, are different from those of the Series A-2 Shares, if
the holders of such stock shall be entitled to the receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in proportion to their respective dividend
rates or liquidation prices without preference or priority, one over the
other, as between the holders of such stock and the Holders; and
C. Junior to the Series A-2 Shares, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the Holders of the
Series A-2 Shares shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation, winding up of the Corporation,
or upon redemption as the case may be, in preference or priority to the
holders of shares of such class or classes.
ARTICLE FIVE
Existence
The corporation is to have perpetual existence.
ARTICLE SIX
Election of Directors
Elections of directors need not be by written ballot unless the by-laws of
the corporation shall so provide.
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ARTICLE SEVEN
Right to Amend Bylaws
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE NINE
Director Liability
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit.
ARTICLE TEN
Bylaws
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of the Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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IN WITNESS WHEREOF, Visual Edge Systems Inc. has signed this Amended and
Restated Certificate of Incorporation to be effective upon filing.
VISUAL EDGE SYSTEMS INC.,
a Delaware corporation
By: /s/ Thomas S. Peters
---------------------------
Name: Thomas S. Peters
-------------------------
Title: President
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