BRIDGE SECURITIES PURCHASE AGREEMENT
DATED AS OF
JUNE 13, 1997
AMONG
VISUAL EDGE SYSTEMS INC.,
AS THE ISSUER,
AND
INFINITY INVESTORS LIMITED,
INFINITY EMERGING OPPORTUNITIES LIMITED,
SANDERA PARTNERS, L.P.,
AND
LION CAPITAL PARTNERS, L.P.
AS THE PURCHASERS
BRIDGE SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of June 13, 1997, among Visual Edge Systems Inc. (the
"Company"), and INFINITY INVESTORS LIMITED, INFINITY EMERGING OPPORTUNITIES
LIMITED, SANDERA PARTNERS, L.P. and LION CAPITAL PARTNERS, L.P. (collectively,
the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Additional Grant Shares" shall mean a number of shares of Common Stock
equal to the quotient obtained by dividing $1,000,000 by the average Closing Bid
Prices of the Common Stock for the fifteen (15) Trading Days prior to December
31, 1997, and subtracting therefrom the number of Grant Shares issued on the
Closing Date.
"Affiliate" means, with respect to any Person (the "Subject Person"), (i)
any other Person (a "Controlling Person") that directly, or indirectly through
one or more intermediaries, Controls the Subject Person or (ii) any other Person
(other than the Subject Person or a Consolidated Subsidiary of the Subject
Person) which is Controlled by or is under common Control with a Controlling
Person.
"Agreement" means this Agreement, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Applicable Percentage" shall mean the following percentages for any
conversion into shares of Common Stock of all or any portion of the Convertible
Instruments effected, by reference to the Conversion Date, between the following
dates:
CONVERSION DATE APPLICABLE PERCENTAGE
--------------- ---------------------
January 1, 1998 - February 28, 1998 85.0%
March 1, 1998 - April 30, 1998 82.5%
May 1, 1998 - June 30, 1998 80.0%
July 1, 1998 and thereafter 77.5%
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"Asset Sale" has the meaning set forth in Section 8.20.
"Balance Sheet" has the meaning set forth in Section 5.5
"Balance Sheet Date" has the meaning set forth in Section 5.5.
"Xxxxxxx Bank Facility " means that certain Credit Agreement dated March
26, 1997 between the Company and Xxxxxxx Bank, N.A..
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any Financing Entity.
"Bridge Period" means the time period commencing on the Closing Date and
ending on December 31, 1997.
"Benefit Plans" has the meaning set forth in Section 5.7(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Expenditures" means any expenditure by the Company or any
Subsidiary for an asset which will be used in a year or years subsequent to the
year in which the expenditure is made and which asset is properly classifiable
in relevant financial statements as property, equipment, improvements or fixed
assets, or a similar type of capitalized asset in accordance with GAAP. The
acquisition of vans in accordance with Schedule VI attached hereto constitutes
Capital Expenditures.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured as to principal and interest by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof),
maturing within one year of the date of acquisition, (ii) time deposits and
certificates of deposit of any domestic commercial bank having combined capital,
surplus and undivided profits of not less than $100,000,000 (including a
domestic branch of a foreign bank) whose outstanding senior long-term debt
securities are rated, or that is a wholly owned Subsidiary of a bank holding
company whose outstanding senior long-term debt securities are rated, either A-
or higher by Standard & Poor's Ratings Service or A3 or higher by Xxxxx'x
Investors Service, Inc., maturing within one year of the date of acquisition,
(iii) repurchase obligations with a term of not more than 7 days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (iv) commercial paper
rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Service or at least P-1 or the equivalent thereof by Xxxxx'x Investors Service,
Inc.,
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maturing within one year after the date of acquisition and (v) investments in
money market funds substantially all of whose assets are comprised of securities
of the types described in clauses (i) through (iv) above.
"Certificate of Designation" means a Certificate of Designation in a form
reasonably acceptable to the Purchasers containing substantially identical terms
to the terms of the Convertible Notes set forth herein and in the Convertible
Notes excepting differences caused by the inherent character of indebtedness and
preferred stock setting forth the rights, privileges and limitations of the
Preferred Stock to be issued by the Company in connection with a
Recapitalization Event.
"Change of Control" means (i) any person or group of persons (within the
meaning of Sections 13 and 14 of the Exchange Act and the rules and regulations
of the Commission relating to such Sections) shall have acquired beneficial
ownership (within the meaning of Rules 13d-3 and 13d-5 promulgated by the
Commission pursuant to the Exchange Act) of 33a% or more of the outstanding
shares of Common Stock of the Company, (ii) any sale or other disposition (other
than by reason of death or disability) of any Common Stock of the Company held
by Xxxx Xxxxxxxx and Xxxx Xxxxxx resulting in such Persons owning, in the
aggregate less than 33-1/3% of the outstanding shares of such Common Stock; or
(iii) individuals constituting the board of directors of the Company (together
with any new directors whose election by such board of directors or whose
nomination for election by the stockholders of the Company was approved by a
vote of at least 50.1% of the directors then still in office who were either
directors as of the date hereof or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of the Company then in office.
"Closing Bid Price" shall mean the closing bid price of the Company's
Common Stock as reported by Bloomberg L.P. on the NASDAQ Stock Market's Small
Cap Market (the "NASDAQ Market") or, if not reported by Bloomberg, L.P. on the
NASDAQ Market, as reported by such other exchange or market where the Common
Stock is then traded.
"Closing Date" means the date on which all of the conditions set forth in
Sections 7.1 and 7.2 shall have been satisfied and the Securities have been
issued by the Company and the Purchase Price paid by the Purchasers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Company" means Visual Edge Systems Inc., a corporation incorporated under
the laws of Delaware, and its successors.
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"Company Corporate Documents" means the certificate of incorporation and
by-laws of the Company.
"Consolidated Net Earnings" means at any date the consolidated net income
(or loss) of the Company determined on a consolidated basis, provided there
shall be excluded therefrom (a) the net income (but not net loss) of any
Subsidiary of the Company which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to the Company to
the extent of such restrictions, (b) the net income of any Person that is not a
Subsidiary of the Company except to the extent of the amount of dividends or
other distributions actually paid in cash to the Company by such other Person
during such period, (c) gains or losses on asset dispositions by the Company or
its Subsidiaries, (d) all extraordinary gains and extraordinary losses and (e)
the net income of any Person accrued prior to the date it becomes a Consolidated
Subsidiary of the Company or is merged into or consolidated with the Company.
"Consolidated Net Worth" means at any date the total shareholder's equity
which would appear on a consolidated balance sheet of the Company prepared as of
such date.
"Consolidated Subsidiary" means at any date with respect to any Person any
Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.
"Control" (including, with correlative meanings, the terms "Controlling,"
"Controlled by" and under "common Control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise .
"Conversion Date" shall mean the date of delivery (including delivery via
telecopy) of a Notice of Conversion for all or a portion of a Convertible
Instrument by the holder thereof to the Company and the Transfer Agent.
"Conversion Price" shall mean the formula F/P where F = the face amount of
the Convertible Instrument being converted, together with accrued and unpaid
interest and/or dividends thereon through the Conversion Date, as applicable,
and P = the lesser of (x) the Maximum Conversion Price and (y) and the product
of the Applicable Percentage multiplied by the Market Price as of the Conversion
Date.
"Convertible Instrument(s)" means, individually and collectively, as the
context requires, the Convertible Notes and the Preferred Shares following their
issuance upon a Recapitalization Event.
"Convertible Notes" means the Company's promissory notes substantially in
the form set forth as Exhibit A hereto.
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"Deadline" has the meaning set forth in Section 10.3.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (x)
are capitalized in accordance with GAAP or (y) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Discounted Equity Offerings" has the meaning set forth in Section 10.2.
"Directors" means the individuals then serving on the board of directors of
the Company.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"Equity Financing" means a financing consummated through the issuance of
equity securities (or securities convertible into or exchangeable for equity
securities) of the Company, other than Permitted Financings.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 5
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"Financing Documents" means this Agreement, the Warrants, the Certificate
of Designation, the Transfer Agent Agreement, the Registration Rights Agreement
and the Convertible Notes.
"Fixed Price" has the meaning set forth in Section 11.1.
"Formula Price" has the meaning set forth in Section 3.4(b).
"GAAP" has the meaning set forth in Section 1.2.
"Grant Shares" means a number of shares of Common Stock to be issued to the
Purchasers on the Closing Date equal to the quotient obtained by dividing
$1,000,000 by the Market Price of the Common Stock as of the date immediately
prior to the Closing Date.
"Grant Share Registration Statement" has the meaning set forth in Section
10.1(b) hereof.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing (whether by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain a minimum net worth,
financial ratio or similar requirements, or otherwise) any Debt of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); PROVIDED that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 5.19.
"Investment" means any investment in any Person, whether by means of share
purchase, partnership interest, capital contribution, loan, time deposit or
otherwise.
"IPO Warrants" means warrants to acquire up to 1,495,000 shares of Common
Stock issued by the Company in connection with the Company's initial public
offering of Common Stock.
"Lien" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell
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or convey, option, claim, title imperfection, encroachment or other survey
defect, pledge, restriction, security interest or other adverse claim, whether
arising by contract or under law or otherwise (including, without limitation,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing).
"Limitation on Conversion" has the meaning set forth in Section 10.5.
"Listing Applications" shall have the meaning set forth in Section 5.3(a).
"Majority Holders" means (i) as of the Closing Date, the Purchasers and
(ii) at any time thereafter, the holders of more than 50% in aggregate principal
amount of the Convertible Instruments outstanding at such time.
"Market Price" shall mean the average of the Closing Bid Prices of the
Common Stock for the five (5) Trading Days preceding but excluding the date of
determination.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $500,000.
"Maturity Date" shall mean June 13, 2000.
"Maximum Conversion Price" shall mean the following prices for any
conversion of the Convertible Instruments effected, by reference to the
Conversion Date, between the following dates:
CONVERSION DATE APPLICABLE PRICE
--------------- ----------------
January 1, 1998 - February 28, 1998 $10.00
March 1, 1998 - April 30, 1998 $12.50
May 1, 1998 - June 30, 1998 $15.00
July 1, 1998 and thereafter $17.50
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, (ii) in the case of dispositions of assets,
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 7
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(A) actual transfer taxes (but not income taxes) payable with respect to such
dispositions, and (B) the amount of Debt. if any, secured by a Lien on the asset
or assets disposed of and required to be, and actually repaid by the Company or
any Subsidiary in connection therewith, and any trade payables specifically
relating to such asset or assets sold by the Company or any Subsidiary that are
not assumed by the purchaser of such asset or assets.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Instrument upon conversion of all or a portion thereof to the
Transfer Agent and the Company substantially in the forms of Exhibit B
(Convertible Notes) and Exhibit C (Preferred Shares) attached hereto.
"Notice of Exercise" means the form to be delivered by a holder of Warrants
upon exercise of all or a portion thereof to the Company substantially in the
form of Exhibit D attached hereto.
"Other Taxes" has the meaning set forth in Section 3.9.
"Par Value Redemption Price" has the meaning set forth in Section 3.4(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, permits and approvals
required for the full operation of the Company and the Subsidiaries, including
state, federal, city and county permits and approvals.
"Permitted Financings" means (i) Revolving Credit Debt and (ii) the
issuance of shares of Common Stock pursuant to or in connection with (a) any
merger or acquisition entered into by the Company, (b) options and warrants
disclosed on Schedule II to this Agreement or in connection with employee and
director stock option plans of the Company and (c) payments to Great White Shark
Enterprises, Inc. under that License Agreement between Xxxx Xxxxxx, Great White
Shark Enterprises, Inc. and the Company dated as of March 1, 1996 (the "Xxxxxx
License Agreement").
"Permitted Transferee" means any Person that acquires Additional Grant
Shares, Grant Shares, the Convertible Instruments or Warrants, or the shares of
Common Stock issuable upon conversion of the Convertible Instruments or exercise
of the Warrants, in compliance with Article IX other than any Person who
acquires such Additional Grant Shares, Grant Shares, Convertible Instruments,
Warrants or shares of Common Stock issuable upon conversion or exercise thereof
(i) in a public offering or (ii) in the open market, pursuant to sales under
Rule 144 of the Securities Act or otherwise.
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"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Preferred Shares" means shares of the Company's Preferred Stock.
"Preferred Stock" means the Company's Series A Convertible Preferred Stock
which shall be issued in accordance with the terms of the Certificate of
Designation upon the occurrence of a Recapitalization Event.
"Principal Transactions" means (i) the payment of fees and expenses
relating to the issuance and sale of the Securities and (ii) the repayment of
the Xxxxxxx Bank Facility and cancellation of all letters of credit, cash
collateral arrangements or guarantees of the payment thereof.
"Purchase Price" means the purchase price for the Convertible Notes,
Warrants and Grant Shares set forth in Section 2.1 hereof.
"Purchasers" means, collectively, Infinity Investors Limited, Infinity
Emerging Opportunities, Limited and Lion Capital Partners, L.P. and their
successors and assigns, including holders from time to time of the Convertible
Instruments.
"Recapitalization Event" has the meaning set forth in Section 3.8.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the agreement between the Company and
the Purchasers dated the date hereof substantially in the form set forth in
Exhibit E.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on any shares of capital stock of such Person (except
dividends payable solely in shares of capital stock of the same or junior class
of such Person and dividends payable by the Company on the Preferred Stock),
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of such Person's capital stock or (b) any option,
warrant or other right to acquire shares of such Person's capital stock or (iii)
any loan, or advance or capital contribution to any Person (a "Stockholder")
owning any capital stock of such Person
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other than relocation, travel or like advances to officers and employees in the
ordinary course of business.
"Revaluation Trigger Date" shall mean the earliest to occur of (x) the date
on which the Grant Share Registration Statement is declared effective by the
Commission, (y) the date on which the Company publicly announces that it is
redeeming the IPO Warrants or (z) October 1, 1997.
"Revolving Credit Debt" means any borrowing by the Company under a
revolving credit facility, provided the amount of Debt owed thereunder is
required to be or is reduced to zero for at least thirty (30) consecutive days
during the fiscal year in which such facility is established.
"Rights Offering" has the meaning set forth in Section 11.3.
"SEC Reports" shall have the meaning set forth in Section 5.5.
"Second Registration Maintenance Period" means the period (i) with respect
to the Registrable Securities other than the shares of Common Stock issuable
upon exercise of the Warrants, the date commencing on the Closing Date and
ending on the second anniversary thereof and (ii) with respect to the shares of
Common Stock issuable upon exercise of the Warrants, the date commencing on the
Closing Date and ending on the 5th anniversary thereof, in each case subject to
the right of the Company to suspend the effectiveness of the Second Registration
Statement for not more than 30 consecutive days or an aggregate of 90 days
during such applicable period, provided the reference to 30 consecutive days
shall be 60 consecutive days in the event the Company has publicly announced a
transaction and, in connection therewith, the Company's independent certified
public accountants have delivered a certificate to the Purchasers stating that
it is not reasonably practicable to prepare and file with the Commission all
necessary accounting information associated with such transaction to cause the
Second Registration Statement to be reinstated during such 30 day period.
"Second Registration Statement" has the meaning set forth in Section
10.1(b).
"Securities" means the Convertible Notes, the Preferred Shares, the
Warrants, the Grant Shares, the Additional Grant Shares and the shares of Common
Stock issuable upon conversion of the Convertible Notes and Preferred Shares and
the exercise of the Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Reorganization" has the meaning set forth Section 11.2.
"Special Distribution" has the meaning set forth in Section 11.4.
"Status Certificate" has the meaning set forth in Section 7.1(g).
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"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person. Unless specified to the contrary, "Subsidiary"
means a Subsidiary of the Company.
"Subsidiary Corporate Documents" means the certificates of incorporation
and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.9.
"Test Period" shall mean the period from the Revaluation Trigger Date
through and including December 31, 1997.
"Trading Day" shall mean any Business Day in which the NASDAQ Market or
other automated quotation system or exchange on which the Common Stock is then
traded is open for trading for at least four (4) hours.
"Transfer" means any disposition of Securities that would constitute a sale
thereof under the Securities Act.
"Transfer Agent" means the Company's stock transfer agent.
"Transfer Agent Agreement" means the agreement dated the date hereof among
the Company, the Transfer Agent and the Purchasers, dated the date hereof
substantially in the form set forth in Exhibit F.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Warrants" means the Warrants issued to the Purchasers on the Closing Date
in the form of Exhibit G hereto to purchase 100,000 shares of Common Stock in
the aggregate (subject to adjustment as set forth herein).
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"); PROVIDED that if the Company notifies
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each of the Purchasers that it wishes to amend any covenant in Article VIII to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if either of the Purchasers notifies the Company that the Majority Holders wish
to amend Article VIII for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Majority Holders. All references to "dollars," "Dollars" or "$" are to
United States dollars unless otherwise indicated. All references to the
principal amount or balance of a Convertible Instrument shall, with respect to
the Preferred Shares, mean and constitute the liquidation preference thereof as
set forth in the Certificate of Designation. All references to interest payable
with respect to a Convertible Instrument shall, with respect to the Preferred
Shares, mean and constitute a reference to dividends.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. COMMITMENT TO PURCHASE.
(a) Subject to the terms and conditions set forth herein, the Company
agrees to issue and sell and, subject to the terms and conditions set forth
herein and in reliance on the representations and warranties of the Company
contained herein, the Purchasers agree to purchase, the Securities as set forth
below.
(b) Each Purchaser shall acquire a portion of the Convertible Notes
on the Closing Date in an aggregate principal amount of $7,500,000 at an
aggregate purchase price of $7,500,000.
(c) Each Purchaser shall acquire a portion of the Grant Shares on the
Closing Date at a purchase price equal to the product of $.01 multiplied by the
number of Grant Shares acquired.
(d) Each Purchaser shall acquire on the Closing Date a portion of the
Warrants to purchase 100,000 shares of Common Stock at a purchase price of
$1.00.
(e) The portion of the Convertible Notes, Grant Shares and Warrants
to be acquired by each Purchaser is set forth on SCHEDULE I attached hereto.
(f) The aggregate consideration payable pursuant to Section 2.1(b),
(c) and (d) above is collectively referred to as the "Purchase Price."
SECTION 2.2. PURCHASE OF SECURITIES. (a) On the Closing Date, subject to
the satisfaction of all terms and conditions set forth herein, each of the
Purchasers shall deliver by wire transfer to the Transfer Agent immediately
available funds in an amount equal to the portion
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of the aggregate Purchase Price of the Convertible Notes, Warrants and Grant
Shares to be purchased by it on the Closing Date, in the proportions as set
forth on SCHEDULE I attached hereto.
(b) On the Closing Date, against payment as set forth in subsection 2.2
(a) above, the Company shall deliver to the Transfer Agent (i) a single
Convertible Note for each Purchaser representing the principal amount of such
Convertible Note issued to such Purchaser as of the Closing Date, (ii) a single
share of Common Stock for each Purchaser representing the aggregate Grant Shares
issued to such Purchaser as of the Closing Date and (iii) a single Warrant for
each Purchaser representing the aggregate Warrants issued to such Purchaser as
of the Closing Date.
(c) As contemplated by the Transfer Agent Agreement, immediately upon
receipt of the items specified in subsections 2.2 (a) and (b) above, the
Transfer Agent shall (i) disburse the Purchase Price in accordance with Section
1 of the Transfer Agent Agreement, (ii) deliver the Grant Shares and Warrants to
the Purchasers and (iii) retain the Convertible Notes for the benefit of the
Purchasers, as described therein.
(d) As further contemplated by Section 1(d) of the Transfer Agent
Agreement, in lieu of effecting the closing of the purchase and sale of the
Securities through the Transfer Agent, the Company and the Purchasers may
consummate the deliveries described above in the manner described in Section
1(d) of the Transfer Agent Agreement.
ARTICLE III
PAYMENT TERMS OF CONVERTIBLE INSTRUMENTS
SECTION 3.1. PAYMENT OF INTEREST. Interest shall accrue on the principal
amount of the Convertible Notes and shall be payable as provided therein.
SECTION 3.2. PAYMENT OF PRINCIPAL AT MATURITY. The Company shall repay
the unpaid principal balance of the Convertible Notes on the Maturity Date.
SECTION 3.3. PAYMENT OF DIVIDENDS. Dividends shall accrue on the
Preferred Shares as provided in the Certificate of Designation and shall be
payable as provided therein.
SECTION 3.4. VOLUNTARY PREPAYMENTS OF CONVERTIBLE INSTRUMENTS.
(a) Following the expiration of the Bridge Period, the Company may, at its
option, following twenty (20) days prior written notice to the Purchasers (the
expiration of such 20 day period being referred to as the "prepayment date")
prepay all or any portion of the Convertible Instruments remaining unconverted
on the prepayment date at the Formula Price, without any premium or penalty,
specifying the amount of the prepayment. Partial prepayments shall be in an
aggregate principal amount of $250,000 or a multiple thereof.
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(b) The Par Value Redemption Price shall mean the aggregate principal
amount of the applicable Convertible Notes or liquidation preference of the
Preferred Shares, as applicable, being redeemed, plus any accrued and unpaid
interest on the Convertible Notes and dividends on the Preferred Shares, as
applicable, through the applicable date of consummation of the redemption as
specified in Section 3.6 below. The Formula Price shall mean the sum of (A) the
product of (i) the number of shares of Common Stock into which the Convertible
Instruments being redeemed are then convertible at the Conversion Price and (ii)
the 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 Section 3.6 below, and (B) accrued and unpaid interest on the
Convertible Notes and dividends on the Preferred Shares, as applicable.
SECTION 3.5. MANDATORY PREPAYMENTS.
(a) Upon (i) the occurrence of a Change of Control of the Company, (ii) a
transfer of all or substantially all of the assets of the Company to any Person
in a single transaction or series of related transactions or (iii) a
consolidation, merger or amalgamation of the Company with or into another Person
(other than a merger (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock or
(y) which is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of Common Stock), the Company shall
redeem all of the Convertible Instruments in cash for (I) the Par Value
Redemption Price, if such redemption occurs prior to the expiration of the
Bridge Period, and (II) the Formula Price, if such redemption occurs after the
expiration of the Bridge Period.
(b) Upon the consummation of one or more Equity Financings, the Company
shall use 100% of the Net Cash Proceeds therefrom to redeem the Convertible
Instruments. The redemption price payable upon any such redemption shall be (x)
the Par Value Redemption Price, if such redemption occurs prior to the
expiration of the Bridge Period, and (y) the Formula Price, if such redemption
occurs after the expiration of the Bridge Period.
(c) If Taxes are imposed upon the Company, the Company shall have the
right following twenty (20) days prior written notice to the Purchasers (the
expiration of such 20-day period being referred to as the "redemption date") to
prepay all or any portion of Convertible Instruments remaining unconverted on
the redemption date and held by a party subject to Taxes for (x) the Par Value
Redemption Price, if such redemption occurs prior to the expiration of the
Bridge Period, and (y) the Formula Price, if such redemption occurs after the
expiration of the Bridge Period.
(d) Immediately after the voluntary redemption by the Company of the IPO
Warrants pursuant to their terms, the Company shall redeem at least $5,000,000
of the remaining principal balance of the Convertible Instruments for (x) the
Par Value Redemption Price, if such redemption occurs prior to the expiration of
the Bridge Period, and (y) the Formula Price, if such redemption occurs after
the expiration of the Bridge Period.
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(e) Upon any exercise by the holders thereof of the IPO Warrants, the
Company shall use 100% of the Net Cash Proceeds received in connection therewith
to redeem the remaining principal balance of the Convertible Instruments for (x)
the Par Value Redemption Price, if such redemption occurs prior to the
expiration of the Bridge Period, and (y) the Formula Price, if such redemption
occurs after the expiration of the Bridge Period.
(f) Upon the receipt of any proceeds from key-man life insurance policies
on the lives of key executive officers of the Company (including, without
limitation, Xxxx Xxxxxxxx), the Company shall use such proceeds to redeem the
remaining principal balance of the Convertible Instuments for (x) the Par Value
Redemption Price, if such redemption occurs prior to Rthe expiration of the
Bridge Period, and (y) the Formula Price, if such redemption occurs after the
expiration of the Bridge Period.
SECTION 3.6. PREPAYMENT PROCEDURES.
(a) Any prepayment or redemption pursuant to Section 3.4 or 3.5 above of
the Convertible Instruments shall be deemed to be consummated (for purposes of
determining the Par Value Redemption Price or Formula Price, as applicable, and
the time at which the Purchasers shall thereafter not be entitled to deliver a
Notice of Conversion for the Convertible Instruments) as follows:
(I) A redemption pursuant to Section 3.4(a), the "prepayment
date" specified therein;
(II) A redemption pursuant to Section 3.5(a), the date of
consummation of the applicable merger or asset sale;
(III) A redemption pursuant to Section 3.5(b), the date of
consummation of the applicable Equity Financing;
(IV) A redemption pursuant to Section 3.5(c), the "redemption
date" specified therein;
(V) A redemption pursuant to Section 3.5(d), the date of the
announcement of the redemption specified therein;
(VI) A redemption pursuant to Section 3.5(e), five (5) Business
Days following the receipt by the Company of all of the Net Cash Proceeds
specified therein; and
(VII) A redemption pursuant to Section 3.5(f), five (5) Business
Days following receipt of the insurance proceeds specified therein.
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(b) Within one (1) Business Day after (x) the Maturity Date or (y) the
effective date of a repayment or redemption of the Convertible Instruments as
specified in Section 3.7(a) above, the Company shall deposit the applicable
redemption price with the Transfer Agent for immediate delivery to each
Purchaser of the Convertible Instruments subject to redemption as contemplated
by the Transfer Agent Agreement. Should any Purchaser not receive payment of
any amounts due on redemption of its Convertible Instruments by reason of the
Company's failure to make payment at the times prescribed above for any reason
(other than as a result of an action taken by Purchaser in breach of this
Agreement), the Company shall pay to the applicable holder on demand (x)
interest on the sums not paid when due at an annual rate equal to the lesser of
(I) the maximum lawful rate and (II) the then applicable interest or dividend
rate on the Convertible Instruments being redeemed plus four percent (4%)
compounded at the end of each thirty (30) days, until the applicable holder is
paid in full and (y) all costs of collection, including, but not limited to,
reasonable attorneys' fees and costs, whether or not suit or other formal
proceedings are instituted.
(c) The Company shall redeem all of the Preferred Shares issued and
outstanding prior to redemption of any of the Convertible Notes. In addition,
the Company shall select the Convertible Instruments to be redeemed in any
redemption in which not all of the Convertible Instruments are to be redeemed so
that the ratio of the Convertible Instruments of each holder selected for
redemption to the total Convertible Instruments owned by that holder shall be
the same as the ratio of all such Convertible Instruments selected for
redemption bears to the total of all then outstanding Convertible Instruments.
Should any Convertible Instruments be required to be redeemed under the terms
hereof not be redeemed solely by reason of limitations imposed by law, the
applicable Convertible Instruments shall be redeemed on the earliest possible
dates thereafter that the applicable Convertible Instruments may be redeemed to
the maximum extent permitted by law.
(d) Any Notice of Conversion delivered by the Purchasers (including
delivery via telecopy) to the Company and the Transfer Agent prior to the (x)
Maturity Date or (y) effective date of a redemption specified in Section 3.6(a)
above, shall be honored by the Company and the conversion of the Convertible
Instruments shall be deemed effected on the Conversion Date.
SECTION 3.7. RANKING. The Convertible Notes will rank as senior,
unsecured obligations of the Company.
SECTION 3.8. PREFERRED SHARES EXCHANGE. Effective January 1, 1998, the
aggregate outstanding principal amount of Convertible Notes exceeding $2,500,000
shall be automatically exchanged for an equal amount of Preferred Shares (based
upon the liquidation preference per share as provided in the Certificate of
Designation) (the "Recapitalization Event"). In connection therewith:
(a) The Company shall file with the Secretary of State of
Delaware the Certificate of Designation, providing the Purchasers with evidence
thereof.
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(b) The Company shall issue the appropriate number of Preferred
Shares in the name of each Purchaser (based upon the portion of the Convertible
Notes exchanged therefor) and shall deliver the same to the Transfer Agent to be
held pursuant to the terms of the Transfer Agent Agreement, providing the
Purchasers with evidence thereof.
(c) The Company shall direct the Transfer Agent to record in the
Accounting Ledger (as defined in the Transfer Agent Agreement) the reduction in
the principal balance of the Convertible Notes converted into the Preferred
Shares, providing the applicable Purchaser with evidence thereof.
(d) The Recapitalization Event shall be effective without further action
of the Company or the Purchasers on the earlier of (x) January 1, 1998, if the
Company complies with the delivery requirements specified herein on or before
January 5, 1998, or (y) the date all of such delivery requirements as so
completed.
SECTION 3.9. PAYMENT OF ADDITIONAL AMOUNTS. (a) Any and all payments by
the Company hereunder or under the Convertible Instruments to any Purchaser 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 Company 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 Convertible
Instruments (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 Section 3.9) such
Purchaser receives an amount equal to the sum it would have received if no such
deduction or withholding had been made; (ii) the Company shall make such
deductions or withholdings; and (iii) the Company 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 Purchaser 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 each of the Company that payments of the
Company to such assignee under the laws in existence on the date of this
Agreement would not be subject to any Taxes and (z) from time to time, as and
when requested by the Company, executes and delivers to the Company and the
Internal Revenue Service forms, and provides the Company with any information,
necessary to establish such assignee's continued exemption from Taxes under
applicable law.
(b) The Company 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 any of the Financing Documents
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement.
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(Visual Edge Systems Inc.)
(c) The Company shall indemnify each Purchaser, 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
Section 3.9) paid by each Purchaser, or qualified assignee, and any liability
(including penalties, interest 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 Purchaser or assignee makes written demand therefor. A certificate
as to the amount of such Taxes or Other Taxes submitted to the Company by such
Purchaser or assignee shall be conclusive evidence of the amount due from the
Company to such party.
(d) Within 30 days after the date of any payment of Taxes, the Company
will furnish to each Purchaser the original or a certified copy of a receipt
evidencing payment thereof.
ARTICLE IV
ADDITIONAL GRANT SHARES
SECTION 4.1. ADDITIONAL GRANT SHARES. Upon expiration of the Test
Period, the Company shall issue the Additional Grant Shares to the Purchasers
if, but only if, the Closing Bid Prices of the Common Stock for each Trading Day
during any consecutive 10 Trading Days during the Test Period does not equal at
least $10.675 per share (adjusted for any event specified in Article XI below).
All such Additional Grant Shares shall be delivered no later than January 5,
1998 to the Purchasers pro rata according to the number of Grant Shares issued
on the Closing Date, and in exchange thereof, the Purchasers shall pay to the
Company in cash the product of $.01 multiplied by the number of Additional Grant
Shares so issued.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers as of the Closing
Date as set forth herewith.
SECTION 5.1. CORPORATE EXISTENCE AND POWER. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to conduct business as a foreign
corporation, and has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and as proposed to be conducted, except where such failure would not
have a material adverse effect on the Company or the ability of the Company to
continue its current operations.
SECTION 5.2. AUTHORIZATION AND EXECUTION. The execution, delivery and
performance by the Company of each Financing Document and the issuance by the
Company of
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(Visual Edge Systems Inc.)
the Securities have been duly and validly authorized and are within its
corporate powers. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company. Each of
the Financing Documents constitutes the valid and binding obligation of the
Company, in each case enforceable against the Company in accordance with its
respective terms, subject to (i) applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally and (ii) equitable principles of
general applicability.
SECTION 5.3. GOVERNMENTAL AUTHORIZATION.
(a) The execution and delivery by the Company of the Financing
Documents does not and will not, the issuance and sale by the Company of the
Securities does not and will not, and the consummation of the transactions
contemplated hereby and thereby will not, require any action by or in respect
of, or filing with, any governmental body, agency or governmental official
except (a) such actions or filings that have been undertaken or made prior to
the date hereof and that will be in full force and effect (or as to which all
applicable waiting periods have expired) on and as of the date hereof or which
are not required to be filed on or prior to the Closing Date, (b) such actions
or filings that, if not obtained, would not in the aggregate impose materially
adverse conditions upon the Company and (c) listing applications ("Listing
Applications") to be filed with NASDAQ relating to the Grant Shares, Additional
Grant Shares (if issued) and the shares of Common Stock issuable upon conversion
of the Convertible Instruments and exercise of the Warrants.
(b) When issued and delivered in accordance with the terms of this
Agreement, the Grant Shares, Additional Grant Shares (if issued) and the
Preferred Shares (if issued) will be duly and validly issued and outstanding,
fully paid and nonassessable, free and clear of all claims or pre-emptive
rights. Upon conversion in accordance with the terms of the Convertible
Instruments, or upon exercise in accordance with the terms of the Warrants
(assuming payment of the exercise price set forth in the Warrants), the shares
of Common Stock when issued upon conversion or exercise thereof shall be duly
and validly issued and outstanding, fully paid and nonassessable, free and clear
of any claims or pre-emptive rights. Assuming the representations and
warranties of the Purchasers herein are true and correct in all material
respects, each of the Securities will have been issued in material compliance
with all applicable U.S. federal and state securities laws.
SECTION 5.4. CONTRAVENTION. The execution and delivery by the Company of
the Financing Documents to which it is a party did not and will not, the
issuance and sale by the Company of the Securities did not and will not and the
consummation of the transactions contemplated hereby and thereby will not,
contravene or constitute a default under or violation of (i) any provision of
applicable law or regulation, (ii) the amended and restated articles of
incorporation or by-laws of the Company or any Subsidiary or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or any Subsidiary or any of their respective assets, or result in
the creation or imposition of any Lien on any asset of the Company or any
Subsidiary. The Company and each Subsidiary is in compliance with and conforms
to all statutes, laws, ordinances, rules, regulations, orders, restrictions and
all other
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 19
(Visual Edge Systems Inc.)
legal requirements of any domestic or foreign government or any instrumentality
thereof having jurisdiction over the conduct of its businesses or the ownership
of its properties, except where such failure would not have a material adverse
effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of such corporation.
SECTION 5.5. FINANCIAL INFORMATION AND SEC REPORTS. The Company has
timely filed all forms, reports and documents with the Commission since July 24,
1996, required to be filed by it under the Exchange Act through the date hereof
(collectively, the "SEC Reports"). Such SEC Reports, at the time filed,
complied as to form in all material respects with the requirements of the
Exchange Act. None of the SEC Reports, including without limitation any
financial statements or schedules included therein, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading. there have been no material adverse changes in
the Company=s business, properties, results of operations, condition (financial
or otherwise) or prospects since the date of the Company=s most recent Report on
Form 10-K for the year ended December 31, 1996, which have not been disclosed to
the Purchasers in writing. The audited and unaudited consolidated balance
sheets of the Company and its Subsidiaries contained in the SEC Reports, and the
related consolidated statements of income, changes in stockholders= equity and
changes in cash flows for the periods ended December 31, 1996 (the consolidated
balance sheet of the Company and its subsidiaries as of December 31, 1996 is
hereinafter referred to as the "Balance Sheet"), including the footnotes
thereto, except as indicated therein, have been prepared in accordance with GAAP
consistently followed throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to normal
audit adjustments and normal annual adjustments. The Balance Sheet fairly
presents the financial condition of the Company and its Subsidiaries at the date
thereof and, except as indicated therein, reflects all claims against and all
debts and liabilities of the Company and its Subsidiaries, fixed or contingent,
as at the date thereof and the related statements of income, stockholders=
equity and changes in cash flows fairly present the results of the operations of
the Company and its Subsidiaries and the changes in their financial position for
the period indicated. Since December 31, 1996 (the "Balance Sheet Date"),
except as disclosed in the SEC Reports, there has been (x) no material adverse
change in the assets or liabilities, or in the business or condition, financial
or otherwise, or in the results of operations or prospects, of the Company and
its subsidiaries, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation, act of God,
public force or otherwise and (y) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects, of the Company and its Subsidiaries except
in the ordinary course of business; and no fact or condition exists or is
contemplated or threatened which might cause such a change in the future.
SECTION 5.6. LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, condition
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(Visual Edge Systems Inc.)
(financial or otherwise), operations, performance, properties or prospects of
the Company or which challenges the validity of any Financing Document.
SECTION 5.7. COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(a) Each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan, (ii) failed to make any required contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA
(b) The benefit plans not covered under clause (a) above (including profit
sharing, deferred compensation, stock option, employee stock purchase, bonus,
retirement, health or insurance plans, collectively the "Benefit Plans")
relating to the employees of the Company are duly registered where required by,
and are in good standing in all material respects under, all applicable laws.
All required employer and employee contributions and premiums under the Benefit
Plans to the date hereof have been made, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a "going
concern" or "winding up" basis and determined in accordance with all applicable
laws and actuarial practices and using actuarial assumptions and methods that
are reasonable in the circumstances. No event has occurred and no condition
exists with respect to any Benefit Plans that has resulted or could reasonably
be expected to result in any pension plan having its registration revoked or
wound up (in whole or in part) or refused for the purposes of any applicable
laws or being placed under the administration of any relevant pension benefits
regulatory authority or being required to pay any taxes or penalties (in any
material amounts) under any applicable laws.
SECTION 5.8. ENVIRONMENTAL MATTERS. The costs and liabilities associated
with Environmental Laws (including the cost of compliance therewith) are
unlikely to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Company
or any Subsidiary. Each of the Company and the Subsidiaries conducts its
businesses in compliance in all material respects with all applicable
Environmental Laws.
SECTION 5.9. TAXES. All United States federal, state, county,
municipality local or foreign income tax returns and all other material tax
returns (including foreign tax returns)
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(Visual Edge Systems Inc.)
which are required to be filed by or on behalf of the Company and each
Subsidiary have been filed and all material taxes due pursuant to such returns
or pursuant to any assessment received by the Company and each Subsidiary have
been paid except those being disputed in good faith and for which adequate
reserves have been established. The charges, accruals and reserves on the books
of the Company and each Subsidiary in respect of taxes or other governmental
charges have been established in accordance with GAAP.
SECTION 5.10. INVESTMENTS, JOINT VENTURES. The Company has no
Subsidiaries or other direct or indirect Investment in any Person, and the
Company is not a party to any partnership, management, shareholders' or joint
venture or similar agreement.
SECTION 5.11. NOT AN INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 5.12. FULL DISCLOSURE. The information heretofore furnished by
the Company to the Purchasers for purposes of or in connection with this
Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to the
Purchasers will not (in each case taken together and on the date as of which
such information is furnished), contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 5.13. CAPITALIZATION. As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth on Schedule
II hereto; and no other shares of capital stock of the Company will be
outstanding. Other than as set forth on Schedule II hereto, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or commitments of any character pursuant to which
the Company is required to issue any shares of its capital stock.
SECTION 5.14. SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its actual knowledge, any
other Person acting on behalf of the Company in connection with the offer and
sale of the Securities. Neither the Company, nor, to its knowledge, any Person
acting on behalf of the Company, has, either directly or indirectly, sold or
offered for sale to any Person (other than the Purchasers) any of the Securities
or, within the six months prior to the date hereof, any other similar security
of the Company except as contemplated by this Agreement, and the Company
represents that neither itself nor any Person authorized to act on its behalf
(except that the Company makes no representation as to the Purchasers and their
Affiliates) will sell or offer for sale any such security to, or solicit any
offers to buy any such security from, or otherwise approach or negotiate in
respect thereof with, any Person or Persons so as thereby to cause the issuance
or sale of any of the Securities to be in violation of any of the provisions of
Section 5 of the Securities Act.
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(Visual Edge Systems Inc.)
SECTION 5.15. PERMITS. (a) Each of the Company and its Subsidiaries has
all material Permits as are necessary for the conduct of its business as it has
been carried on; (b) all such Permits are in full force and effect, and each of
the Company and its Subsidiaries has fulfilled and performed all material
obligations with respect to such Permits; (c) no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
by the issuer thereof or which results in any other material impairment of the
rights of the holder of any such Permit; and (d) the Company has no reason to
believe that any governmental body or agency is considering limiting, suspending
or revoking any such Permit.
SECTION 5.16. LEASES. Except as disclosed on Schedule III hereto, neither
the Company nor any Subsidiary is a party to any capital lease obligation with a
value greater than $100,000 or to any operating lease with an aggregate annual
rental greater than $100,000 during the life of such lease.
SECTION 5.17. ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS.
There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than (i)
those liabilities provided for in the financial statements delivered pursuant to
Section 5.5 hereof and (ii) other undisclosed liabilities which, individually or
in the aggregate, are not material to the Company.
SECTION 5.18. GOVERNMENTAL REGULATION. Neither the Company nor any
Subsidiary is, or will be upon the issuance and sale of the Securities and the
use of the proceeds described herein, subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to issue and perform its obligations under any Financing
Document.
SECTION 5.19. INTELLECTUAL PROPERTY RIGHTS. Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all material
patents, trademarks, trade names, copyrights, technology, know-how and processes
(collectively, "Intellectual Property") used in, or necessary for the conduct of
its business; no claims have been asserted by any Person to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto. To the best of the
Company's and its Subsidiaries' knowledge, there is no valid basis for any such
claim and the use of such Intellectual Property by the Company and its
Subsidiaries will not infringe upon the rights of any Person.
SECTION 5.20. INSURANCE. The Company and its Subsidiaries maintain, with
financially sound and reputable insurance companies, insurance in at least such
amounts and against such risks such that any uninsured loss would not have a
material adverse effect on the business, conditon (financial or otherwise),
operations, performance, properties or prospects of the Company. All insurance
coverages of the Company and its Subsidiaries are in full force and effect and
there are no past due premiums in respect of any such insurance.
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SECTION 5.21. TITLE TO PROPERTIES. The Company and its Subsidiaries have
good and indefeasible title to all their respective properties reflected on the
financial statements referred to in Section 5.5, and, except for the Liens
permitted by Section 8.11, there is no Lien on any asset of the Company or its
Subsidiaries. Except for financing statements (or their equivalent) filed,
recorded or registered with respect to Liens permitted by Section 8.11, there
are no currently effective financing statements (or their equivalent) of record
in any jurisdiction covering any tangible or intangible assets of the Company of
any Subsidiary.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 6.1. PURCHASE FOR INVESTMENT; AUTHORITY; BINDING AGREEMENT. Each
Purchaser as to itself only hereby represents and warrants to the Company that:
(a) the Purchaser is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and the Securities to be acquired by it pursuant
to this Agreement are being acquired for its own account and not with a view
toward, or for sale in connection with, any distribution thereof except in
compliance with applicable United States federal and state securities law;
provided that the disposition of the Purchaser's property shall at all times be
and remain within its control;
(b) the execution, delivery and performance of this Agreement and the
purchase of the Securities pursuant hereto are within the Purchaser's corporate
or partnership powers, as applicable, and have been duly and validly authorized
by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by the Purchaser.
(d) the execution and delivery by the Purchaser of the Financing Documents
to which it is a party does not, and the consummation of the transactions
contemplated hereby and thereby will not, contravene or constitute a default
under or violation of (i) any provision of applicable law or regulation, or (ii)
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Purchasers;
(e) Purchaser understands that the Securities have not been registered
under the Securities Act and may not be transferred or sold except as specified
in this Agreement;
(f) this Agreement constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting creditors rights generally and
(ii) equitable principles of general applicability;
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 24
(Visual Edge Systems Inc.)
(g) the Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment;
(h) the Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; the Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations on
transfer described under Article IX hereof; the Purchaser has been afforded
access to information about the Company and the financial condition, results of
operations, property, management and prospects of the Company sufficient to
enable it to evaluate its investment in the Securities; the Purchaser has been
afforded the opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities and the merits and the risks of
investing in the Securities; and the Purchaser has been afforded the opportunity
to obtain such additional information which the Company possess or can acquire
that is necessary to verify the accuracy and completeness of the information
given to the Purchaser concerning the Company. The foregoing does not in any
way relieve the Company of its representations and other undertakings hereunder,
and shall not limit the Purchasers' ability to rely thereon;
(i) Infinity Investors Limited and Infinity Emerging Opportunities Limited
are each Nevis West Indies corporations and Lion Capital Partners, L.P. and
Sandera Partners, L.P. are each Texas limited partnerships; and
(j) no part of the source of funds used by the Purchaser to acquire the
Securities constitutes assets allocated to any separate account maintained by
the Purchaser in which any employee benefit plan (or its related trust) has any
interest.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
SECTION 7.1. CLOSING. The closing hereunder shall occur upon the date
upon which each of the following conditions shall be satisfied:
(a) Receipt by each of the Purchasers of a certificate of the chief
financial officer of the Company as to the solvency of the Company, the adequacy
of its capital and its ability to pay its debts, all after giving effect to the
Principal Transactions;
(b) Receipt by each of the Purchasers of evidence satisfactory to it as to
(i) the receipt by the Company of all governmental, board of directors,
shareholders and third party consents and approvals necessary or desirable in
connection with the issuance and sale of the Securities, or the consummation of
the Principal Transactions, (ii) the expiration of all applicable waiting
periods without any action having been taken by any competent authority that
could restrain, prevent or impose any materially adverse conditions thereon or
that could seek or threaten any of
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 25
(Visual Edge Systems Inc.)
the foregoing and (iii) the absence of any law or regulation that, in the
judgment of any Purchaser, could have any such effect;
(c) Receipt by each of the Purchasers of duly executed counterparts of
this Agreement, the Registration Rights Agreement and the Transfer Agent
Agreement signed by the Company and, with respect to the Transfer Agent
Agreement, signed by the Transfer Agent;
(d) Each of the Purchasers shall have received an opinion, dated the
Closing Date, of Xxxxxx, Xxxxx & Xxxxxxx, LLP, counsel to the Company, in form
and substance satisfactory to the Purchasers, and shall have received, in form
and substance satisfactory to the Purchasers, such corporate resolutions,
certificates and other documents as the Purchasers shall reasonably request in
writing prior to the Closing Date;
(e) All fees and expenses due and payable by the Company on or prior to
the Closing Date shall have been paid or duly provided for in full as
contemplated by the Transfer Agent Agreement;
(f) The Warrants shall have been duly executed by the parties thereto and
delivered to the Purchasers;
(g) The Purchasers shall have received a certificate executed by the
President, chief executive officer or chief financial officer of the Company (a
"Status Certificate");
(h) The Company (after giving effect to the application of a portion of
the Purchase Price in repayment of the Xxxxxxxx Bank Facility), shall not have
any Debt outstanding (other than approximately $770,000 of indebtedness owed to
Charter Financial), and the Purchasers shall have received satisfactory evidence
that the (i) Xxxxxxx Bank Facility has been cancelled, (ii) Letters of Credit
issued in connection therewith have been cancelled and (iii) the cash collateral
specified therein has been returned to the Company;
(i) The Company Corporate Documents shall be in full force and effect and
no term or condition thereof shall have been amended, waived or otherwise
modified without the prior written consent of the Purchasers;
(j) There shall have occurred no material adverse change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company or any Subsidiary since March 31, 1997;
(k) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
affect any Financing Document, any Principal Transaction or other transaction
contemplated hereby or thereby or that could reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company and its
Subsidiaries, taken as a whole, the
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 26
(Visual Edge Systems Inc.)
enforceability of the Financing Documents or the Securities or the rights of the
holders of the Securities or the Purchasers hereunder;
(l) The representations and warranties of the Company contained in each
Financing Document shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification) and the Company shall have performed and complied
with all covenants and agreements required by such Financing Documents to be
performed or complied with by it at or prior to the Closing Date;
(m) The Transfer Agent shall have confirmed receipt of the Convertible
Notes, Warrants and Grant Shares to be issued, duly executed by the Company and
in the denominations and registered in the names of the Purchasers specified in
or pursuant to Schedule I;
(n) The Purchasers shall have received written evidence that Whale
Securities Co., L.P. shall have consented to the issuance of the Securities and
waived any and all fees payable as a result thereof other than as set forth in
Section 13.7;
(o) Immediately before and after the Closing Date, no Default shall have
occurred and be continuing; and
(p) The Purchasers shall have received all other opinions, certificates,
instruments, agreements or other documents as they shall reasonably request.
SECTION 7.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to issue and sell to the Purchasers the Securities to be issued and
sold pursuant to this Agreement are subject to the satisfaction, at or prior to
the Closing Date, of the following conditions:
(a) The representations and warranties of the Purchasers contained herein
shall be true and correct in all material respects on the Closing Date and the
Purchasers shall have performed and complied in all material respects with all
agreements required by this Agreement to be performed or complied with by the
Purchasers at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall not be
prohibited by any applicable law, court order or governmental regulation; and
(c) Receipt by the Company of duly executed counterparts of this
Agreement, the Registration Rights Agreement, and the Transfer Agent Agreement
signed by the Purchasers, and, with respect to the Transfer Agent Agreement,
signed by the Transfer Agent.
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(Visual Edge Systems Inc.)
ARTICLE VIII
COVENANTS
The Company hereby agrees that, from and after the date hereof for so long
as any Convertible Instruments (and with respect to Section 8.22, the Warrants)
remain outstanding and for the benefit of the Purchasers and such holders from
time to time of the Convertible Instruments (and with respect to Section 8.22,
the Warrants):
SECTION 8.1. INFORMATION. The Company will deliver to each holder of the
Convertible Instruments:
(a) as soon as available and in any event within 90 days after the end of
each fiscal year of the Company, a consolidated balance sheet of the Company as
of the end of such fiscal year and the related consolidated statements of income
and cash flows and stockholders' equity for such fiscal year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Commission by independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company as of the end of such quarter and the
related consolidated statements of income and cash flows and stockholders'
equity for such quarter and for the portion of the Company's fiscal year ended
at the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
Company's previous fiscal year, all certified (subject to footnote presentation
and normal year-end adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by the chief financial officer or
the chief accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate from the Company stating
that no Default has occurred and is continuing, or, if as of the date of such
delivery a Default shall have occurred and be continuing, a certificate from the
Company setting forth the details of such Default and the action which the
Company is taking or proposes to take with respect thereto;
(d) within two days after any officer of the Company obtains knowledge of
a Default, a certificate of the chief financial officer or the chief accounting
officer of the Company setting forth the details thereof and the action which
the Company is taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed and any other document generally distributed to shareholders;
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 28
(Visual Edge Systems Inc.)
(f) promptly upon the filing hereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Company or any Subsidiary has filed with the Commission;
(g) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any required payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Company setting forth
details as to such occurrence and action, if any, which the Company or
applicable member of the ERISA Group is required or proposes to take;
(h) promptly following the commencement thereof, notice and a description
in reasonable detail of any litigation or proceeding to which the Company or any
Subsidiary is a party in which the amount involved is $250,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(i) promptly following the occurrence thereof, notice and a description in
reasonable detail of any material adverse change, or development involving a
prospective material adverse change, in the business, operations, property,
condition (financial or otherwise) or prospects of the Company, taken as a
whole; and
(j) from time to time such additional information regarding the financial
position or business of any of the Company and its Subsidiaries as the
Purchasers may reasonably request.
SECTION 8.2. PAYMENT OF OBLIGATIONS. The Company and its Subsidiaries
will pay and discharge, at or before maturity, all their respective material
obligations, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings and will
maintain, in accordance with GAAP, appropriate reserves for the accrual of any
of the same.
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 29
(Visual Edge Systems Inc.)
SECTION 8.3. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company and
each Subsidiary will keep, all property useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted.
(b) The Company and each Subsidiary will maintain insurance in at least
such amounts and against such risks as it has insured against as of the Closing
Date.
(c) The Company will maintain key-man life insurance of at least
$5,000,000 on the life of Xxxx Xxxxxxxx naming the Company as the sole
beneficiary thereof.
SECTION 8.4. MAINTENANCE OF EXISTENCE. The Company will continue, and
each Subsidiary will continue, to engage in business of the same general type as
now conducted by the Company and such Subsidiaries, and will preserve, renew and
keep in full force and effect its respective corporate existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 8.5. COMPLIANCE WITH LAWS. The Company and each Subsidiary will
comply, in all material respects, with all federal, state, municipal, local or
foreign applicable laws, ordinances, rules, regulations, municipal by-laws,
codes and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except (i) where compliance therewith is contested in good faith by
appropriate proceedings or (ii) where non-compliance therewith could not
reasonably be expected, in the aggregate, to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or such Subsidiary.
SECTION 8.6. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company and
each Subsidiary will keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to their respective businesses and activities; and will permit during normal
business hours representatives of the Purchasers to visit and inspect any of
their respective properties, upon reasonable prior notice, to examine and make
abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective executive
officers and independent public accountants, all at such reasonable times.
SECTION 8.7. INVESTMENT COMPANY ACT. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
SECTION 8.8. LIMITATION ON DEBT OR OTHER LIABILITIES. Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at any
time after the Closing Date, after giving effect to the application of the
proceeds of the issuance of the Securities) any Debt, except for the following
(such Debt, "Permitted Debt"):
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 30
(Visual Edge Systems Inc.)
(i) Debt incurred or assumed solely to pay all or any part of the
purchase price or cost of construction, of property (or any improvement thereon)
acquired or constructed by the Company or a Subsidiary after the Closing Date
provided: (a) any Lien with respect to such Debt shall extend solely to the
item or items of such property (or improvements thereon) so acquired or
constructed and, if required by the terms of the instrument originally creating
such Lien, other property (or improvement thereon) which is an improvement to or
is acquired for specific use in connection with such acquired or constructed
property (or improvement thereon) or which is real property being improved by
such acquired or constructed property (or improvement thereon); (b) the
principal amount of the Debt for such property shall at no time exceed an amount
equal to the cost of the operation of the property (or improvement thereon) so
acquired or constructed; and (c) any Lien with respect to such Debt shall be
created substantially contemporaneously with the acquisition or construction of
such property;
(ii) Debt incurred in connection with equipment leases to which the
Company or its Subsidiary is a party incurred in the ordinary course of
business;
(iii) Debt incurred in connection with trade accounts payable,
imbalances and refunds arising in the ordinary course of business;
(iv) Revolving Credit Debt;
(v) Debt incurred with respect to the Convertible Notes; and
(vi) Debt outstanding as of Closing Date and listed on Schedule V.
SECTION 8.9. RESTRICTED PAYMENTS. Neither the Company nor any Subsidiary
will declare or make Restricted Payments in excess of $100,000 during any
calendar year.
SECTION 8.10. INVESTMENTS. Neither the Company nor any Subsidiary will
make or acquire any Investment in any Person other than (a) Investments in Cash
Equivalents and (b) Investments in Subsidiaries existing on the Closing Date.
SECTION 8.11. LIENS. Neither the Company nor any Subsidiary will create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except:
(i) (A) inchoate mechanics, workmen's and carriers' liens,
incident to current construction, (B) mechanics, warehousemen's, unpaid
vendors and carriers' liens incident to such construction, (C) statutory
and common law Liens of landlords under equipment leases to which the
Company or any Subsidiary is a party and (D) Liens of carriers,
warehousemen, mechanics and materialmen or other similar statutory Liens;
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 31
(Visual Edge Systems Inc.)
(ii) Liens incurred on deposits made in the ordinary course
of business in connection with workers' compensation, performance bonds,
unemployment insurance and other types of social security, other than any
Lien imposed by or under ERISA;
(iii) Liens for taxes not yet due;
(iv) Easements, rights of way, permits, licenses, zoning
ordinances, covenants, restrictions, defects, minor irregularities of title
and other similar Liens on property which in the case of any particular
parcel of real property do not materially detract from the value or
utilization of such real property;
(v) Liens created by or resulting from any litigation or legal
proceeding which is currently being contested by such Company or Subsidiary
in good faith and by appropriate proceedings; and
(vi) Liens securing Permitted Debt.
SECTION 8.12. TRANSACTIONS WITH AFFILIATES. The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the account
of, make any investment (whether by acquisition of stock or indebtedness, by
loan, advance, transfer of property, guarantee or other agreement to pay,
purchase or service, directly or indirectly, any Debt, or otherwise) in, lease,
sell, transfer or otherwise dispose of any assets, tangible or intangible, to,
or participate in, or effect any transaction in connection with any joint
enterprise or other joint arrangement with, any Affiliate, except, on terms to
the Company or such Subsidiary no less favorable than terms that could be
obtained by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company, as determined in good faith by the Board of Directors
of the Company; PROVIDED that no determination of the Board of Directors shall
be required with respect to any such transactions entered into in the ordinary
course of business.
SECTION 8.13. MERGER OR CONSOLIDATION. The Company and each Subsidiary
will not, in a single transaction or a series of related transactions, (i)
consolidate with or merge with or into any other Person, or (ii) permit any
other Person to consolidate with or merge into it, unless (w) either (A) the
Company shall be the survivor of such merger or consolidation or (B) the
surviving Person shall expressly assume by supplemental agreement all of the
obligations of the Company under the Securities and this Agreement; (x)
immediately before and immediately after giving effect to such transaction
(including any indebtedness incurred or anticipated to be incurred in connection
with the transaction), no Default or Event of Default shall have occurred and be
continuing and, following the transaction, the Company may incur $1.00 of Debt
without violating Section 8.8 hereof; (y) if the Company is not the surviving
entity, such surviving entity's common shares shall be listed on either The New
York Stock Exchange, American Stock Exchange, or NASDAQ National Market or
NASDAQ Small Cap Market and (z) the Company has delivered to the Purchasers an
officers' certificate and opinion of counsel, each stating that such
consolidation, merger or transfer complies with this Agreement, that the
surviving Person agrees to be bound thereby and that all conditions precedent in
this Agreement relating to such
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 32
(Visual Edge Systems Inc.)
transaction have been satisfied; PROVIDED, however, nothing contained in this
Section 8.13 shall alter or diminish the Company's obligations under Section
3.5(a) of this Agreement.
SECTION 8.14. SUPPLEMENTAL INFORMATION. If at any time the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish at its expense, upon request, for the benefit of
the holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
SECTION 8.15. USE OF PROCEEDS. The proceeds from the issuance and sale of
the Securities by the Company shall be used solely to (i) repay the remaining
outstanding balance due and owing on the Xxxxxxx Bank Facility, which shall not
exceed $3,000,000 plus accrued and unpaid interest thereon on the Closing Date
and certain fees and expenses not to exceed $50,000, and (ii) general corporate
purposes. None of the proceeds from the issuance and sale of Securities by the
Company pursuant to this Agreement will be used directly or indirectly for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any "margin stock" within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System.
SECTION 8.16. LIMITATION ON RESTRICTIONS AFFECTING SUBSIDIARIES. The
Company will not enter into, or suffer to exist, any agreement with any Person
which prohibits or limits the ability of any Subsidiary to (a) pay dividends or
make other distributions or pay any Debt owed to the Company or any Subsidiary,
(b) make loans or advances to the Company or any Subsidiary or (c) transfer any
of its properties or assets to the Company or any Subsidiary.
SECTION 8.17. RESTRICTIONS ON CERTAIN AMENDMENTS. Neither the Company nor
any Subsidiary will waive any provision of, amend, or suffer to be amended, any
provision of such entity's existing indebtedness, any material contract or
agreement previously or hereafter filed by the Company with the Commission as
part of its SEC Reports, any Company Corporate Document or Subsidiary Corporate
Document if such amendment would materially adversely affect the Purchasers or
the holders of the Securities without the prior written consent of the Majority
Holders; provided, the Company may amend the Xxxxxx License Agreement to provide
for the payment of royalties thereunder in shares of Common Stock as previously
disclosed to the Purchasers. The Company will not, without the prior written
consent of the Majority of the Holders, form any non-wholly owned Subsidiary
after the Closing Date.
SECTION 8.18. COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS.
The Company will comply, in all material respects, with all terms and conditions
of all material contracts to which it is subject.
SECTION 8.19. CONSOLIDATED NET WORTH. The Company will not permit its
Consolidated Net Worth at the end of any of its fiscal quarters to be less than
the sum of (i) $3,000,000 and (ii) fifty percent (50%) of the aggregate
Consolidated Net Earnings of the Company after December 31, 1996 and through
such fiscal quarter end.
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(Visual Edge Systems Inc.)
SECTION 8.20. LIMITATION ON ASSET SALES. Neither the Company nor any
Subsidiary will consummate an Asset Sale unless (i) it receives consideration in
cash at the time of such Asset Sale at least equal to the fair market value of
the assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors) and (ii) the Net Cash Proceeds of such sale are
used to either (a) purchase similar assets in the same line of business of
equivalent value within 12 months of the date of the Asset Sale or (b)
immediately redeem or prepay the Convertible Instruments or (c) a combination of
purchases and prepayment permitted by the foregoing clauses (a) and (b). As
used herein, "Asset Sale" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
capital stock of a Subsidiary (other than directors' qualifying shares),
property or other assets (each referred to for the purposes of this definition
as a "disposition"), including any disposition by means of a merger,
consolidation or similar transaction (other than as permitted under Section
8.13), other than a disposition of property or assets at fair market value in
the ordinary course of business.
SECTION 8.21. LIMITATION ON CAPITAL EXPENDITURES. Permit the sum of all
Capital Expenditures of the Company and its Subsidiaries to exceed in the
aggregate the following amounts for the following fiscal time periods:
FISCAL PERIOD AGGREGATE CAPITAL EXPENDITURES
------------- ------------------------------
Closing date through
December 31, 1997 $2,000,000
January 1, 1998 through
December 31, 1998 $3,000,000
January 1, 1999 through
December 31, 1999 $3,000,000
January 1, 2000 through
Maturity Date $2,000,000
Provided, however, if the remaining outstanding principal balance of the
Convertible Notes on December 31, 1997 is equal to or less than $2,500,000, then
the foregoing limitation shall terminate as of December 31, 1998.
SECTION 8.22. RESERVED SHARES AND LISTINGS.
(a) The Company will reserve from its authorized but unissued shares
of Common Stock a sufficient number of shares of Common Stock to permit
issuance of the Additional Grant Shares, the conversion in full of the then
outstanding Convertible Instruments and the exercise in full of the then
outstanding Warrants;
(b) The Company will maintain the listing of its Common Stock on the
NASDAQ Small Cap Market;
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(Visual Edge Systems Inc.)
(c) The Company will not repurchase or otherwise enter into any other
transaction (including stock split, recapitalization or other transaction)
which would cause a decrease in the number of its shares of Common Stock
issued and outstanding (other than transactions that similarly decrease the
number of shares of Common Stock into which the Convertible Instruments and
Warrants are convertible or exercisable, as the case may be);
(d) The Company will (i) retain the Transfer Agent as the stock
transfer agent of the Company, and (ii) if the Transfer Agent voluntarily
or involuntarily fails to so serve, select an independent, unaffiliated
replacement stock transfer agent willing to perform the duties of the
Transfer Agent under the Transfer Agent Agreement; and
(e) On or prior to each of the dates that the Commission declares
effective the Grant Share Registration Statement and the Second
Registration Statement, the Company shall properly filed all Listing
Applications with NASDAQ associated with the shares of Common Stock covered
by such registration statements.
SECTION 8.23 ISSUANCE OF SHARES OF COMMON STOCK. Upon conversion of any
Convertible Instruments in accordance with its terms, and/or exercise of any
Warrant in accordance with its terms, the Company will, and will use its best
lawful efforts to cause the Transfer Agent to, issue one or more certificates
representing shares of Common Stock in such name or names and in such
denominations specified by a Purchaser in a Notice of Conversion or Notice of
Exercise, as the case may be. As long as the Grant Share Registration Statement
or Second Registration Statement, as applicable, contemplated by the
Registration Rights Agreement shall remain effective the (x) Grant Shares and
Additional Grant Shares and (y) the shares of Common Stock issuable upon
conversion of Convertible Instruments or exercise of the Warrants shall be
issued to any transferee of such shares from a Purchaser without restrictive
legend. The Company further warrants that no instructions other than these
instructions have been or will be given to the Transfer Agent. Nothing in this
Section shall affect in any way a Purchaser's obligations to comply with all
securities laws applicable to such Purchaser upon resale of such shares of
Common Stock, including any prospectus delivery requirements.
ARTICLE IX
LIMITATION ON TRANSFERS
SECTION 9.1 RESTRICTIONS ON TRANSFER. From and after their respective
dates of issuance, none of the Securities shall be transferable except upon the
conditions specified in this Section 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act in respect of the Transfer
of any of such Securities or any interest therein. Each Purchaser will use its
best efforts to cause any proposed transferee of any Securities held by it to
agree to take and hold such Securities subject to the provisions and upon the
conditions specified in this Section 9.
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(Visual Edge Systems Inc.)
SECTION 9.2. RESTRICTIVE LEGENDS.
(a) Each certificate for Securities issued to a Purchaser or to a
subsequent transferee shall (except as contemplated by Section 8.23 and Section
10.3 hereof) include a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF
REGISTERED UNDER THE SECURITIES ACT.
SECTION 9.3. NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities OTHER THAN a transfer (i) registered under the
Securities Act, (ii) to an affiliate of a Purchaser which is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act, provided
that any such transferee shall agree to be bound by the terms of this Agreement,
and (iii) to be made in reliance on Rule 144 under the Securities Act, the
holder thereof shall give written notice to the Company of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, which shall be accompanied by (A) an opinion of counsel
to the Company, confirming that such transfer does not give rise to a violation
of the Securities Act, (B) representation letters in form and substance
reasonably satisfactory to the Company to ensure compliance with the provisions
of the Securities Act and (C) letters in form and substance reasonably
satisfactory to the Company from each such transferee stating such transferee's
agreement to be bound by the terms of this Agreement and the Registration Rights
Agreement. Such proposed Transfer may be effected only if the Company shall have
received such notice of transfer, opinion of counsel, representation letters and
other letters referred to in the immediately preceding sentence, whereupon the
holder of such Securities shall be entitled to Transfer such Securities in
accordance with the terms of the notice delivered by the holder to the Company.
ARTICLE X
ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 10.1. REGISTRATION RIGHTS.
(a) The Company shall grant the Purchasers registration rights covering
the Grant Shares, Additional Grant Shares and all of the shares of Common Stock
issuable on conversion of the Convertible Instruments or upon exercise of the
Warrants on the terms set forth in the Registration Rights Agreement.
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(Visual Edge Systems Inc.)
(b) The Company shall file a registration statement on Form S-3 (or such
other form as is then available for registration) covering the sale of the Grant
Shares (the "Grant Share Registration Statement") as soon as practicable after
July 24, 1997 (but not later than July 28, 1997). In the event the Grant Share
Registration Statement is not declared effective by the Commission within the
earlier to occur of five (5) Business Days of the receipt of a "no review"
letter from the Commission (the "No Review Letter") and the earlier to occur of
fifty (50) days of filing thereof or September 15, 1997, and such effectiveness
is not maintained until the first anniversary of the Closing Date (subject to
the right of the Company to suspend the effectiveness thereof for not more than
30 consecutive days or an aggregate of 90 days during such three (3) year
period), the Company shall pay to the Purchasers, as liquidated damages and not
as a penalty, an amount equal to $1,000 per day for each day that the Grant
Share Registration Statement is not declared effective or maintained within such
period. In addition, the Company shall also prepare and file on or before
November 15, 1997, a registration statement on Form S-3 (or such other form as
is then available for registration) covering the sale of Additional Grant Shares
and the sale of shares of Common Stock issuable upon conversion of the
Convertible Instruments and upon exercise of the Warrants (the "Second
Registration Statement"). The Company shall further use its best efforts to
cause the Second Registration Statement to be declared effective by the
Commission no later than January 12, 1998. If the Second Registration Statement
is (x) not declared effective by the Commission by January 12, 1998, or (y) such
effectiveness is not maintained for the Second Registration Maintenance Period,
the interest rate on the Convertible Notes and the dividend rate on the
Preferred Shares, as applicable, will both automatically be increased without
further action by the Company or the Purchasers to 18% per annum until such time
as the Second Registration Statement is declared effective (and for such time
during the Second Registration Maintenance Period that such effectiveness is not
maintained).
(c) Any such liquidated damages, or increased interest or dividend rate
shall be paid in cash by the Company to the Purchasers by wire transfer in
immediately available funds on the last day of each calendar week following the
event requiring its payment.
SECTION 10.2. PROHIBITION ON DISCOUNTED EQUITY OFFERINGS. Until such time
as the Convertible Instruments have been repaid in full, the Company agrees it
will not issue (or, unless such issuance would, upon the closing thereof, result
in the repayment in full of the Convertible Instruments, agree to issue) any of
its equity securities (or securities convertible into or exchangeable or
exercisable for equity securities), unless any shares of Common Stock issued or
issuable in connection therewith are "restricted securities". As used herein
"restricted securities" shall mean securities which may not be sold either
pursuant to an exemption from registration under the Securities Act or pursuant
to a registration statement filed by the Company with the Commission, in each
case prior to the latter to occur of September 30, 1998 or nine months following
the date of issuance of such securities. The restrictions contained in this
Section 10.2 shall not apply to the issue by the Company (or the agreement to
issue) Convertible Securities or Common Stock in connection with (x) the
acquisition of a business or of assets otherwise permitted under this Agreement,
(y) stock option or other compensatory plans and (3) the Xxxxxx License
Agreement.
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(Visual Edge Systems Inc.)
SECTION 10.3. LIQUIDATED DAMAGES.
(a) The Company shall, and shall use its best efforts to cause the
Transfer Agent to, issue and deliver (x) shares of Common Stock within three (3)
New York Stock Exchange Trading Days of receipt of a written Notice of
Conversion or Notice of Exercise, as applicable, or (y) shares of Common Stock
without restrictive legends within seven (7) New York Stock Exchange Trading
Days of delivery of a Notice of Conversion or Notice of Exercise, as applicable
(or, at any time after the Grant Shares or Additional Grant Shares have been
registered for resale under the Securities Act or are eligible for resale
pursuant to Rule 144 of the Securities Act, delivery of confirmations,
certificates or opinions certifying that such shares have been resold in
compliance with applicable law) (the "Deadline"). Notwithstanding the
foregoing, the delivery obligations of the Company under clause (y) above shall
be conditioned on (i) the existence and effectiveness of a Grant Share
Registration Statement or Second Registration Statement, as applicable, and (ii)
receipt of materials reasonably requested by the Company from the Purchasers
(which shall not include an opinion of counsel to be delivered by the Company's
counsel to the Transfer Agent regarding the effectiveness of such registration
statements as contemplated by the Transfer Agent Agreement) to permit the
issuance of certificates of Common Stock without restrictive legend. The
Company understands that a delay in the issuance of such certificates after the
Deadline could result in economic loss to the Purchaser. If for any reason the
Company fails to issue by the Deadline such certificates of Common Stock by the
Deadline, as compensation, and not as a penalty, the Company agrees to pay
liquidated damages to the Purchasers for such late issuance of such certificates
an amount equal to $1,000 per day for each day such certificates are not
delivered for the first ten (10) days after the Deadline and $2,000 per day for
each day thereafter.
(b) The Company shall promptly pay the Purchasers any liquidated damages
incurred under this Section by wire transfer in immediately available funds to
an account designated by the Purchasers. Nothing herein shall waive the
Company's obligations to deliver shares of Common Stock upon a conversion of the
Convertible Instruments or exercise of the Warrants or limit any Purchaser's
right to pursue actual damages (less the amount of any liquidated damages
received pursuant to the foregoing) for the Company's failure to issue and
deliver shares of Common Stock to such Purchaser consistent with the terms of
this Agreement.
SECTION 10.4. CONVERSION NOTICE. The Company agrees that, in addition to
any other remedies which may be available to the Purchasers, including, but not
limited to, the remedies available under Section 10.3, in the event the Company
fails for any reason (other than as a result of actions taken by a Purchaser in
breach of this Agreement) to effect delivery to a Purchaser of certificates as
contemplated by Section 10.3 representing the Minimum Number of shares of Common
Stock on or prior to the Deadline after conversion of any Convertible
Instrument, or certificates contemplated by Section 10.3 after exercise of any
Warrant, such Purchaser will be entitled, if prior to the delivery of such
certificates, to revoke the Notice of Conversion or Notice of Exercise, as
applicable, by delivering a notice to such effect to the Company and the
Transfer Agent whereupon the Company and the Purchaser shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion or Notice of Exercise.
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(Visual Edge Systems Inc.)
SECTION 10.5. LIMITATION ON CONVERSION PRIOR TO DEFAULT.
(a) In addition to and not in lieu of the limitations on conversion set
forth in the Convertible Notes, Certificate of Designation and Warrants, the
conversion and exercise rights of the Purchasers set forth in the Convertible
Notes, Certificate of Designation and Warrants, as applicable, shall be limited,
solely to the extent required, from time to time, such that in no instance shall
the maximum number of shares of Common Stock which the Purchasers (singularly,
together with any Persons who in the determination of such Purchasers, together
with such Purchasers, constitute a group as defined in Rule 13d-5 of the
Exchange Act) may receive in respect of any conversion of the Convertible Notes
or Preferred Shares, or exercise of the Warrants, exceed, at any one time, an
amount equal to the remainder of (i) 4.99% of the then issued and outstanding
shares of Common Stock of the Company following such conversion or exercise
MINUS (ii) the number of shares of Common Stock of the Company then owned by the
Purchasers (but exclusive of any shares of Common Stock deemed beneficially
owned due to ownership of the Convertible Instruments and Warrants) (the
foregoing being herein referred to as the "Limitation on Conversion"). At the
request of the Company, the applicable Purchasers shall certify in each Notice
of Conversion and Notice of Exercise that it is in compliance with the
Limitation on Conversion.
(b) The Limitation on Conversion shall not apply, and shall be of no
further force and effect, (i) upon the occurrence of any redemption transaction
described in Section 3.5 or 3.6 hereof, (ii) on the Maturity Date or (iii) the
occurrence of any Event of Default described in Section 12.1 hereof and for
which the Purchaser has provided written notice thereof and which is not cured
within the greater of the applicable time period specified in either (A) such
written notice of the Purchaser or (B) Section 12.1 hereof.
(d) In addition to and not in lieu of the Limitation on Conversion,
notwithstanding the conversion rights set forth in the Convertible Notes and
Certificate of Designation and subject to subsection (e) below, the maximum
principal amount of the Convertible Instruments as originally issued by the
Company (and without reduction for any redemption thereof) which the Purchasers
in the aggregate shall be entitled to convert by delivery of a Notice of
Conversion shall be as follows:
DATES OF CONVERSION APPLICABLE PERCENTAGE
------------------- ---------------------
January 1, 1998 - February 28, 1998 25%
March 1, 1998 - April 30, 1998 50%
May 1, 1998 - June 30, 1998 75%
July 1, 1998 and thereafter 100%
(e) The foregoing limitation shall not apply, and the Convertible
Instruments shall be convertible in full, after January 1, 1998 upon the
occurrence of any event causing the Limitation on Conversion to not apply as
specified in subsection (b) above.
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(Visual Edge Systems Inc.)
(f) Subject to the foregoing limitations, each Purchaser shall, at its
option, have the sole right to determine whether to exercise the right of
conversion or exercise for the Convertible Notes, Preferred Shares and Warrants.
The Company shall honor each Notice of Conversion and Notice of Exercise in the
order received.
ARTICLE XI
ADJUSTMENT OF FIXED PRICE
SECTION 11.1. REORGANIZATION. The exercise price of the Warrants set
forth therein and the Maximum Conversion Price (collectively, the "Fixed
Prices") shall be adjusted as hereafter provided.
SECTION 11.2. SHARE REORGANIZATION. If and whenever the Company shall:
(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; or
(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;
any of such events being herein called a "Share Reorganization", then in each
such case the applicable Fixed 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 applicable Fixed
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
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 40
(Visual Edge Systems Inc.)
securities had been converted into or exchanged for Common Stock on such
record or effective date.
SECTION 11.3. RIGHTS OFFERING. If and whenever the Company 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 applicable Fixed 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
applicable Fixed 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
exchangeable for Common
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(Visual Edge Systems Inc.)
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).
In addition to the foregoing, the number of Additional Grant Shares issuable as
provided herein shall be adjusted upon the occurrence of any Rights Offering in
the same manner as the applicable Fixed Price is so adjusted, to ensure issuance
of the appropriate number of Additional Grant Shares. To the extent that such
rights, options or warrants are not exercised prior to the expiry time thereof,
the applicable Fixed Price shall be readjusted effective immediately after such
expiry time to the applicable Fixed 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.
SECTION 11.4. SPECIAL DISTRIBUTION. If and whenever the Company shall
issue or distribute to all or substantially all the holders of Common Stock:
(i) shares of the Company 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 applicable Fixed 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 applicable Fixed 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.
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(Visual Edge Systems Inc.)
SECTION 11.5. CAPITAL REORGANIZATION. If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of Common
Stock or any change of the shares of Common Stock into other shares, other
than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company with,
or into another body corporate; or
(iii) the transfer of all or substantially all of the assets of
the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder who exercises the right to convert Convertible Instruments
or exercise the Warrants after the effective date of such Capital Reorganization
shall be entitled to receive and shall accept, upon the exercise of such right,
in lieu of the number of shares of Common Stock to which such holder was
theretofore entitled upon the exercise of the conversion privilege, the
aggregate number of shares or other securities or property of the Company or of
the body corporate resulting from such Capital Reorganization that such holder
would have been entitled to receive as a result of such Capital Reorganization
if, on the effective date thereof, such holders had been the holder of the
number of shares of Common Stock to which such holder was theretofore entitled
upon conversion; provided, however, that no such Capital Reorganization shall be
consummated in effect unless all necessary steps shall have been taken so that
such holders shall thereafter be entitled to receive such number of shares or
other securities of the Company or of the body corporate resulting from such
Capital Reorganization, subject to adjustment thereafter in accordance with
provisions the same, as nearly as may be possible, as those contained above.
SECTION 11.6. ADJUSTMENT RULES. The following rules and procedures shall
be applicable to adjustments made in this Article XI:
(A) no adjustment in the applicable Fixed Price shall be required
unless such adjustment would result in a change of at least 1% in the
applicable Fixed 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;
(b) no adjustment in the applicable Fixed Price shall be made
pursuant to this Article XI 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
(c) if a dispute shall at any time arise with respect to any
adjustment of the applicable Fixed Price, such dispute shall be
conclusively determined by the auditors of the Company or, if they are
unable or unwilling to act, by a firm of independent chartered
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accountants selected by the Directors and any such determination shall be
binding upon the Company and Purchasers.
SECTION 11.7. CERTIFICATE AS TO ADJUSTMENT. The Company shall from time
to time promptly the occurrence of any event which requires an adjustment in the
applicable Fixed Price deliver to the Purchasers a certificate specifying the
nature of the event requiring the adjustment, the amount of the adjustment
necessitated thereby, the applicable Fixed 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.
SECTION 11.8. NOTICE TO NOTEHOLDERS. If the Company 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 Preferred
Shares,
the Company shall, not less than 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
Purchasers notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
ARTICLE XII
EVENTS OF DEFAULT
SECTION 12.1. EVENTS OF DEFAULT. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or prepay when due, all or any part
of the principal on any of the Convertible Instruments;
(b) failure by the Company to pay (i) within 3 Business Days of the
due date thereof any interest on any Convertible Notes or dividends on the
Preferred Shares or (ii) within 5 Business Days following the delivery of
notice to the Company of any fees or
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(Visual Edge Systems Inc.)
any other amount payable (not otherwise referred to in (a) above or this
clause (b)) by the Company under this Agreement;
(c) failure by the Company to timely comply with the requirements of
Section 10.3(a) or (b) hereof, which failure is not cured within seven (7)
days of such failure;
(d) an event of default shall have occurred and is continuing under
any Financing Document;
(e) failure on the part of the Company to observe or perform any
covenant contained in Sections 8.8-8.10, 8.13, 8.15, 8.20 and 8.21 of this
Agreement;
(f) failure on the part of the Company to observe or perform any
covenant contained in any Financing Document (other than those covered by
clauses (a), (b), (c), (d) or (e) above) for the lesser of (A) 30 days
after written notice from any holder of a Convertible Instrument and (B)
60 days from the date the Company became aware of such occurrence;
(g) the trading in the Common Stock shall have been suspended by the
Commission or by NASDAQ (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding
the Company and except if, at the time there is any suspension on the
NASDAQ Market, the Common Stock is then listed and approved for trading on
either the New York Stock Exchange, the American Stock Exchange, the NASDAQ
Small Cap Market, or the NASDAQ National Market within two (2) Trading Days
thereof);
(h) failure of the Company to file the Listing Applications, which
failure is not cured within five (5) Business Days of such failure;
(i) the Company shall have its Common Stock delisted from the NASDAQ
Market for at least ten (10) consecutive Trading Days and is unable to
obtain a listing on either the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Small Cap Market or the NASDAQ National Market within
such ten (10) Trading Days;
(j) the Grant Share Registration Statement or the Second Registration
Statement, as applicable, shall not have been declared effective by the
Commission, with such effectiveness maintained for the periods specified in
Section 10.1, which results in the Company incurring the obligations set
forth therein for a period in excess of 90 consecutive days;
(k) the Company or any Subsidiary has commenced a 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 effect or
seeking the appointment of a trustee, receiver, liquidator,
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custodian or other similar official of it or any substantial part of its
property, or has consented to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or has made a general assignment for the
benefit of creditors, or has failed generally to pay its debts as they
become due, or has taken any corporate action to authorize any of the
foregoing;
(l) an involuntary case or other proceeding has been commenced
against the Company or any Subsidiary, seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days, or an order for relief
has been entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(m) default in respect of any Debt in excess of $250,000 of the
Company or any Subsidiary, or the Company or any Subsidiary has failed to
pay at maturity or within any applicable period of grace any such Debt;
(n) judgments or orders for the payment of money which in the
aggregate at any one time exceed $375,000 and are not covered by insurance
have been rendered against the Company or any Subsidiary by a court of
competent jurisdiction and such judgments or orders shall continue
unsatisfied and unstayed for a period of 60 days;
(o) any representation, warranty, certification or statement made by
the Company in any Financing Document or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with any Financing Document shall prove to have
been untrue in any material respect when made; or
(p) any member of the ERISA Group has failed to pay when due an
amount or amounts aggregating in excess of $250,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan has been filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC has instituted proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition has existed by reason of which
the PBGC is entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there has occurred a complete or partial withdrawal
from, or a default, within the meaning of Section 4219(c) (5) of ERISA,
with respect to, one or more Multiemployer Plans which could cause one or
more members of the ERISA Group to incur a current payment obligation in
excess of $250,000,
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then, and in every such occurrence, any Purchaser may, with respect to an
Event of Default specified in paragraphs (a) or (b), and the Majority
Holders may, with respect to any Event of Default, by notice to the
Company, declare the Convertible Instruments to be, and the Convertible
Instruments shall thereon become immediately due and payable; PROVIDED that
in the case of any of the Events of Default specified in paragraph (k) or
(l) above with respect the Company or any Subsidiary, then, without any
notice to the Company or any other act by any Purchaser, the entire amount
of the Convertible Instruments shall become immediately due and payable,
PROVIDED FURTHER, if any Event of Default has occurred and is continuing,
and irrespective of whether any Convertible Instrument has been declared
immediately due and payable hereunder, any Purchaser of Convertible
Instruments may proceed to protect and enforce the rights of such Purchaser
by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or
in any Convertible Instrument, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise, and PROVIDED FURTHER, in
the case of an Event of Default, the amount declared due and payable on the
Convertible Instruments shall be (x) prior to the expiration of the Bridge
Period, the Par Value Redemption Price thereof and (y) after expiration of
the Bridge Period, the Formula Price thereof.
SECTION 12.2. POWERS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reversed to the Purchasers is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Every power and remedy given by the Convertible Instruments or
by law may be exercised from time to time, and as often as shall be deemed
expedient, by the Purchasers.
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 47
(Visual Edge Systems Inc.)
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties; provided, any notice to a
Subsidiary of the Company (other than the Company) shall be given to the
Company. Each such notice, demand or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified on the signature page hereof, (ii) if given by mail, four days after
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in or pursuant to this Section.
SECTION 13.2. NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
(b) Any provision of this Agreement may be amended, supplemented or waived
if, but only if, such amendment, supplement or waiver is in writing and is
signed by each Financing Entity party hereto and the Majority Holders; PROVIDED,
that without the consent of each holder of any Convertible Instrument affected
thereby, an amendment or waiver may not (a) reduce the aggregate principal
amount of Convertible Instruments whose holders must consent to an amendment or
waiver, (b) reduce the rate or extend the time for payment of interest on any
Convertible Instrument, (c) reduce the principal amount of or extend the stated
maturity of any Convertible Instrument or (d) make any Convertible Instrument
payable in money or property other than as stated in such Convertible
Instrument. In determining whether the holders of the requisite principal amount
of Convertible Instruments have concurred in any direction, consent, or waiver
as provided in any Financing Document, Convertible Instruments which are owned
by the Company or any other obligor on or guarantor of the Convertible
Instruments, or by any Person Controlling, Controlled by, or under Common
Control with any of the foregoing, shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; and PROVIDED FURTHER that
no such amendment, supplement or waiver which affects the rights of the
Purchasers and their affiliates otherwise than solely in their capacities as
holders of Convertible Instruments shall be effective with respect to them
without their prior written consent.
SECTION 13.3. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Purchaser, its affiliates, and each Person, if any, who controls
such Purchaser, or any of its affiliates, within the meaning of the Securities
Act or the Exchange Act (a Controlling Person"), and the respective partners,
agents, employees, officers and directors of the Purchasers,
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 48
(Visual Edge Systems Inc.)
their affiliates and any such Controlling Person (each an Indemnified Party" and
collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto,
provided that the Company shall not be obligated to advance such costs to any
Indemnified Party other than the Purchasers unless it has received from such
Indemnified Party an undertaking to repay to the Company the costs so advanced
if it should be determined by final judgment of a court of competent
jurisdiction that such Indemnified Party was not entitled to indemnification
hereunder with respect to such costs) which may be incurred by such Indemnified
Party in connection with any investigative, administrative or judicial
proceeding brought or threatened that relates to or arises out of, or is in
connection with any activities contemplated by any Financing Document or any
other services rendered in connection herewith; PROVIDED that the Company will
not be responsible for any claims, liabilities losses, damages or expenses that
are determined by final judgment of a court of competent jurisdiction to result
from such Indemnified Party's gross negligence, willful misconduct or bad faith.
If any action shall be brought against an Indemnified Party with respect to
which indemnity may be sought against the Company under this Agreement, such
Indemnified Party shall promptly notify the Company in writing and the Company,
at its option, may, assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Company shall not
affect any obligations the Company may have to such Indemnified Party under this
Agreement or otherwise unless the Company is materially adversely affected by
such failure. Such Indemnified Party shall have the right to employ separate
counsel in such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party,
unless: (i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party and the Company, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company, in which case, if such Indemnified Party notifies the Company in
writing that it elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, PROVIDED, HOWEVER, that the
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
responsible hereunder for the reasonable fees and expenses of more than one such
firm of separate counsel, in addition to any local counsel, which counsel shall
be designated by the Purchasers. The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company (which shall not be unreasonably withheld) and the Company agrees to
indemnify and hold harmless each Indemnified Party from and against any loss or
liability by reason of settlement of any action effected with the consent of the
Company. In addition, the Company will not, without the prior written consent of
the Purchasers, settle or compromise or consent to the entry of any judgment in
or otherwise seek to terminate any pending or threatened action, claim, suit or
proceeding in
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 49
(Visual Edge Systems Inc.)
respect to which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express unconditional
release of the Purchasers and the other Indemnified Parties, satisfactory in
form and substance to the Purchasers, from all liability arising out of such
action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable (otherwise than
pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Company shall contribute to the amount paid or
payable by such Indemnified Party as a result of such claims, liabilities,
losses, damages, or expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and by the
Purchasers on the other from the transactions contemplated by this Agreement or
(ii) if the allocation provided by clause (i) is not permitted under applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and the Purchasers on the
other, but also the relative fault of the Company and the Purchasers as well as
any other relevant equitable considerations. Notwithstanding the provisions of
this Section 13.3, the aggregate contribution of all Indemnified Parties shall
not exceed the amount of fees actually received by the Purchasers pursuant to
this Agreement. It is hereby further agreed that the relative benefits to the
Company on the one hand and the Purchasers on the other with respect to the
transactions contemplated hereby shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of material fact or
the omission or alleged omission to state a material fact related to information
supplied by the Company or by the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation
The indemnification, contribution and expense reimbursement obligations set
forth in this Section 13.3 (i) shall be in addition to any liability the Company
may have to any Indemnified Party at common law or otherwise, (ii) shall survive
the termination of this Agreement and the other Financing Documents and the
payment in full of the Convertible Instruments and (iii) shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Purchasers or any other Indemnified Party.
SECTION 13.4. EXPENSES: DOCUMENTARY TAXES. The Company agrees to pay (i)
the out-of-pocket costs, expenses and other payments in connection with the
purchase and sale of the Securities as contemplated by this Agreement, including
the fees and disbursements of special counsel for the Purchasers incurred in
connection with the preparation of the Financing Documents, in the amount of
$26,500 as contemplated by Section 1 of the Transfer Agent Agreement, (ii) all
reasonable out-of-pocket expenses of the Purchasers, including fees and
disbursements of counsel, in connection with any waiver or consent hereunder or
under any other Financing Document or any amendment hereof or thereof and (iii)
all reasonable out-of-pocket expenses of the Purchasers and each holder of
Securities, including fees and disbursements of
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 50
(Visual Edge Systems Inc.)
counsel, in connection with any collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. In addition, the Company agrees to
pay any and all stamp, transfer and other similar taxes, assessments or charges
payable in connection with the execution and delivery of any Financing Document
or the issuance of the Securities to the Purchasers.
SECTION 13.5. PAYMENT. The Company agrees that, so long as the Purchasers
shall own any Convertible Instruments purchased by it from the Company
hereunder, the Company will make payments to such Purchaser of all amounts due
thereon by wire transfer by 1:00 P.M. (New York City time) on the date of
payment to the Transfer Agent Agreement for disbursement to the Purchasers as
required by the Transfer Agent Agreement.
SECTION 13.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon each Financing Entity and upon the Purchasers and their respective
successors and assigns; PROVIDED that no Financing Entity shall assign or
otherwise transfer its rights or obligations under this Agreement to any other
Person without the prior written consent of the Majority Holders. All provisions
hereunder purporting to give rights to Purchasers and their affiliates or to
holders of Securities are for the express benefit of such Persons and their
successors and assigns.
SECTION 13.7. BROKERS. The Company represents and warrants that, except
for (i) Alpine Capital Partners, Inc. (which shall receive on the Closing Date
the Alpine Fee set forth in the Transfer Agent Agreement), and (ii) Whale
Securities Co., L.P. (which shall receive on the Closing Date shares of Common
Stock equal to $150,000 calculated in the same manner as the Grant Shares),it
has not employed any broker, finder, financial advisor or investment banker who
would be entitled to any brokerage, finder's or other fee or commission payable
by the Company in connection with the sale of the Securities. Each Purchaser
hereby warrants that it has not employed any broker, finder, financial advisor
or investment banker who would be entitled to any brokerage, finder's or other
fee or commission payable by the Company in connection with the sale of the
Securities.
SECTION 13.8. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 51
(Visual Edge Systems Inc.)
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
The Company and each Purchaser hereby irrevocably designates, appoints and
empowers Xxxxxx, Xxxxx & Xxxxxxx LLP with offices at 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 as its designees, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served in
any such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, the Company and Purchasers
agree to designate a similarly qualified entity as their new designee, appointee
and agent in New York.
SECTION 13.9. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated unless a failure
of consideration would result thereby.
SECTION 13.10 SURVIVAL. In addition to the survival of the
indemnification, contribution and expense reimburse obligations set forth in
Section 3.9 and Section 13.3 hereof, the provisions contained herein which are
incorporated by reference into the Warrants and the provisions set forth in
Sections 10.1 and 10.3 hereof shall survive the termination of this Agreement
and the payment in full of the Convertible Instruments and shall remain
operative and in full force and effect.
SECTION 13.11. COUNTERPARTS. This Agreement may be executed by telecopy
signature and in any number of counterparts each of which shall be an original
with the same effect as if the signatures there to and hereto were upon the same
instrument.
[SIGNATURE PAGES FOLLOW]
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 52
(Visual Edge Systems Inc.)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
VISUAL EDGE SYSTEMS INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
-------------------------------
Title: Chairman of the Board
------------------------------
Address: 0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxx Xxxxxxxx
With a copy to: Xxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxxx & Bockius, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxx Xxxxxxxx
INFINITY INVESTORS LIMITED
By: /s/ X. X. Xxxxxxxx
---------------------------------
Name: X. X. Xxxxxxxx
-------------------------------
Title: Director
------------------------------
Address: 00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Telephone: 000-00-000-000
Fax: 000-00-000-000
Attn: X. X. Xxxxxxxx
With a copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 53
(Visual Edge Systems Inc.)
INFINITY EMERGING
OPPORTUNITIES LIMITED
By: /s/ X. X. Xxxxxxxx
---------------------------------
Name: X. X. Xxxxxxxx
-------------------------------
Title: Director
------------------------------
Address: 00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxx
Telephone: 000-00-000-000
Fax: 000-00-000-000
Attn: X. X. Xxxxxxxx
With a copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
XXXXXXX PARTNERS, L.P.
By: Sandera Capital Management, L.P.,
its General Partner
By: Sandera Capital, L.L.C.,
its General Partner
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
-----------------------------
Title: Managing Director
----------------------------
Address: 0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 54
(Visual Edge Systems Inc.)
With a copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
LION CAPITAL PARTNERS, L.P.
By: Mountain Capital Management,
L.L.C., its General Partner
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
-----------------------------
Title: Managing Director
----------------------------
Address: 0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
With a copy to: HW Partners, L.P.
0000 Xxx Xxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn.: Xxxxxxx Xxxxxxx
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 55
(Visual Edge Systems Inc.)
Schedule I - Pro Rata Portion of Securities
Schedule II - Capitalization of the Company
Schedule III - Leases
Schedule IV - Subsidiaries
Exhibit A - Form of Convertible Note
Exhibit B - Form of Notice of Conversion - Notes
Exhibit C - Notice of Conversion - Preferred
Exhibit D - Form of Notice of Exercise
Exhibit E - Form of Registration Rights Agreement
Exhibit F - Form of Transfer Agent Agreement
Exhibit G - Form of Warrant
BRIDGE SECURITIES PURCHASE AGREEMENT - Page 56
(Visual Edge Systems Inc.)
SCHEDULE 1
CONVERTIBLE NOTES
================================================================================
Name Purchase Price Aggregate Principal
Amount of Notes
--------------------------------------------------------------------------------
Infinity Investors Limited $4,500,000 $4,500,000
--------------------------------------------------------------------------------
Infinity Emerging
Opportunities Limited $1,000,000 $1,000,000
--------------------------------------------------------------------------------
Sandera Partners, L.P. $1,000,000 $1,000,000
--------------------------------------------------------------------------------
Lion Capital Partners, L.P. $1,000,000 $1,000,000
--------------------------------------------------------------------------------
TOTAL $7,500,000 $7,500,000
========== ==========
================================================================================
GRANT SHARES
================================================================================
Name Number of Shares Purchase Price
($.01 per share)
--------------------------------------------------------------------------------
Infinity Investors Limited 56,207 $562
--------------------------------------------------------------------------------
Infinity Emerging
Opportunities Limited 12,490 $125
--------------------------------------------------------------------------------
Sandera Partners, L.P. 12,490 $125
--------------------------------------------------------------------------------
Lion Capital Partners, L.P. 12,490 $125
--------------------------------------------------------------------------------
TOTAL 93,677 $937
====== ====
================================================================================
WARRANTS
================================================================================
Name Number of Shares
--------------------------------------------------------------------------------
Infinity Investors Limited 60,000
--------------------------------------------------------------------------------
Infinity Emerging
Opportunities Limited 13,334
--------------------------------------------------------------------------------
Sandera Partners, L.P. 13,334
--------------------------------------------------------------------------------
Lion Capital Partners, L.P. 13,334
--------------------------------------------------------------------------------
TOTAL 100,000
=======
================================================================================
