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EXHIBIT 10.12
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SHARE AND WARRANT PURCHASE AGREEMENT
dated as of
February 27, 1997
between
VISUAL EDGE SYSTEMS INC.
and
THE INVESTOR NAMED HEREIN
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS .......................................................... 1
SECTION 2. THE CLOSING ............................................................................................. 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................................................... 3
3.1. Corporate Existence, Power and Authority. ............................................................... 3
3.2. Capital Stock ........................................................................................... 4
3.3. No Defaults or Conflicts ................................................................................ 4
3.4. Disclosure Materials; Other Information ................................................................. 5
3.5. Litigation. ............................................................................................. 5
3.6. Legal Compliance. ....................................................................................... 5
3.7. Offering of Shares. ..................................................................................... 6
3.8. SEC Reports. ............................................................................................ 6
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR .......................................................... 6
4.1. Power and Authority ..................................................................................... 6
SECTION 5. RESTRICTIONS ON TRANSFER ................................................................................ 8
SECTION 6. COVENANTS OF THE COMPANY ................................................................................ 8
6.1. Use of Proceeds. ........................................................................................ 8
6.2. Maintenance of Existence, Properties and Franchises; Compliance with Law; Taxes; Insurance .............. 8
6.3. No Dilution or Impairment; No Changes in Capital Stock .................................................. 9
6.4. Reservation of Shares. .................................................................................. 10
6.5. Private Placement Status. ............................................................................... 10
6.6. Application of Funds .................................................................................... 10
6.7. Registration of Shares and Warrants. .................................................................... 10
SECTION 7. CONDITIONS TO INVESTOR'S OBLIGATIONS .................................................................... 10
7.1. Accuracy of Representations and Warranties. ............................................................. 11
7.2. Compliance with Agreements. ............................................................................. 11
7.3. Officers' Certificates. ................................................................................. 11
7.4. Proceedings. ............................................................................................ 11
7.5. No Material Adverse Change. ............................................................................. 11
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SECTION 8. THE LETTER OF CREDIT ..................................................................................... 11
8.1. No Drawing on Letter of Credit ........................................................................... 11
8.2. Drawing on Letter of Credit .............................................................................. 12
8.3. Delivery of Shares ....................................................................................... 12
8.4. Character of Shares ...................................................................................... 12
8.5. Termination .............................................................................................. 12
SECTION 9. REGISTRATION RIGHTS ...................................................................................... 12
9.1. Initial Registration; Potential Registration After the Transaction Date .................................. 12
9.2. Company's Fees and Expenses .............................................................................. 12
SECTION 10 DEFINITIONS .............................................................................................. 13
SECTION 11. BROKERS .................................................................................................. 16
SECTION 12. EXPENSES ................................................................................................. 16
SECTION 13. AMENDMENTS AND WAIVERS ................................................................................... 16
SECTION 14. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT ...................................... 17
SECTION 15. NOTICES .................................................................................................. 18
SECTION 16. MISCELLANEOUS ............................................................................................ 18
EXHIBIT A Warrant Certificate
EXHIBIT B Legend
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SHARE AND WARRANT PURCHASE AGREEMENT
SHARE AND WARRANT PURCHASE AGREEMENT, dated as of February 27,
1997, between Visual Edge Systems Inc., a Delaware corporation (the "Company"),
and the Investor listed on the signature page of this Agreement (the
"Investor").
W I T N E S S E T H :
WHEREAS, the Company needs to obtain additional financing in
order to further its business plan;
WHEREAS, in order to obtain such a line of credit from a
financial institution (the "Line of Credit") or other additional financing, the
Company desires to obtain an irrevocable letter of credit up to an aggregate
amount of up to $3,500,000 expiring on December 31, 1997 (the "Letter of
Credit") from Republic National Bank of New York, or another financial
institution (the "Bank"), to serve as collateral for such additional financing;
WHEREAS, the Investor has indicated that it is willing to
provide the amount of cash, or cash equivalents acceptable to the Bank, set
forth on Schedule 1 hereto for use as collateral (the "Cash Collateral"), in
order to assist the Company in obtaining the Letter of Credit;
WHEREAS, the Company has agreed to issue to the Investor, and
the Investor has agreed to purchase from the Company, units, each consisting of
one share of Common Stock of the Company and one Warrant to purchase an equal
number of shares of Common Stock of the Company, all upon the terms and
provisions hereinafter set forth, in consideration for providing the Cash
Collateral;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS
(a) The Company agrees to sell to the Investor and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Investor agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of units, each consisting of one share of Common
Stock of the Company (the "Shares") and one Warrant to purchase an equal number
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of shares of Common Stock of the Company, set forth opposite the Investor's
name on Schedule 1 hereto. The Warrants to purchase shares of Common Stock of
the Company being acquired under this Agreement and by the other Investors
under the other Share and Warrant Purchase Agreements are collectively referred
to herein as the "Warrants", containing rights and privileges as more fully set
forth in the form of Warrant which shall be substantially in the form attached
hereto as Exhibit A (the "Warrant Certificate"). The units, each consisting of
one Share and one Warrant, being acquired under this Agreement and by the other
Investors under the other Share and Warrant Purchase Agreements are
collectively referred to herein as the "Units."
(b) The purchase price to be paid to the Company by the
Investor for the Units to be purchased by the Investor pursuant to this
Agreement shall be the use of the Cash Collateral set forth opposite the
Investor's name on Schedule 1 hereto for a period of time terminating on or
before (at the Company's option) December 31, 1997. The Cash Collateral shall
be delivered by the Investor to the Bank, such amount to be transferred to the
Bank in federal or other immediately available funds, immediately prior to the
Closing Date and shall be held by the Bank as collateral for the Letter of
Credit issued to the Company. No further payment shall be required from the
Investor for the Units.
(c) The Shares and the Warrants are being sold to the
purchasers listed on Schedule 1 hereto (the "Investors") pursuant to this
Agreement and other share and warrant purchase agreements (all such agreements
collectively, the "Share and Warrant Purchase Agreements"). The sale of Units
to each Investor under each Share and Warrant Purchase Agreement is to be a
separate sale, is not conditioned upon entering into any other Share and
Warrant Purchase Agreement, and no Investor shall have any liability under any
Share and Warrant Purchase Agreement other than the Share and Warrant Purchase
Agreement to which it is a party. The Company may consummate the transactions
completed under this Agreement without entering into any other Share and
Warrant Purchase Agreements.
(d) The Company will use the proceeds from the sale of the
Units, (i) to purchase vans, trailers and related computer and video equipment,
(ii) for advertising expenditures and (iii) to fund operating costs and for
general corporate purposes.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing
of the purchase and sale of the Units to be purchased by the Investor (the
"Closing") will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on Monday, March 3, 1997, or such other time
and date as shall be mutually agreed to by the Company and the Investor. Such
time and date are herein referred to as the "Closing Date." All documentation
and signature pages must be received by ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP no later
than February 28, 1997 by Federal Express or other courier. Upon the
fulfillment of the closing conditions,
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written instructions releasing such signature pages and instructing the Bank
will be exchanged by the parties on the Closing Date.
(b) Subject to the terms and conditions hereof, on the
Closing Date (i) the Company will deliver to the Investor (x) a certificate
registered in the Investor's name evidencing the number of Shares equal to the
number of Units set forth opposite the Investor's name on Schedule 1 and (y) a
Warrant Certificate registered in the Investor's name evidencing a number of
Warrants equal to the number of Units set forth opposite the Investor's name on
Schedule 1, and (ii) the Investor will deliver to the Bank instructions
confirming that the amount equal to the Cash Collateral previously deposited
with the Bank is to be used for security for bank financing as described herein
and that it has received consideration for the use of such funds in the form of
the Units to be purchased by it as set forth on Schedule 1.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor as follows
as of the date hereof and as of the Closing Date:
3.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company is duly qualified, licensed and authorized to do business and is in
good standing in each jurisdiction in which it owns or leases any property or
in which the conduct of its business requires it to so qualify or be so
licensed, except for such jurisdictions where the failure to so qualify or be
so licensed would not have a material adverse effect on the Company's assets,
properties, liabilities, business, results of operations or condition.
(b) The Company has all requisite power, authority and
legal right to own or to hold under lease and to operate the properties it owns
or holds and to conduct its business as now being conducted.
(c) The Company has all requisite power, authority and
legal right to execute, deliver and consummate the transactions contemplated by
and perform its obligations under (i) the Share and Warrant Purchase
Agreements, including, without limitation, the issuance by the Company of the
Shares, the Warrants and the Conversion Shares as contemplated herein and in
the Warrant Certificates. The execution, delivery and performance of the Share
and Warrant Purchase Agreements by the Company (including, without limitation,
the issuance by the Company of the Shares, the Warrants and the Conversion
Shares as contemplated herein and in the Warrant Certificates) have been duly
authorized by all required corporate actions. The Company has duly executed
and delivered the Share and Warrant Purchase Agreements and the Warrant
Certificates. The Share and Warrant Purchase Agreements and the Warrant
Certificates
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constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally.
3.2. Capital Stock.
(a) The authorized capital stock of the Company consists of
5,000,000 shares of Preferred Stock and 20,000,000 shares of Common Stock, $.01
par value per share. On the date hereof, there are outstanding no shares of
Preferred Stock and 4,615,000 shares of Common Stock. All of such outstanding
shares are duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon the
exercise of the Warrants will, when issued in accordance with the terms of the
Warrants, be duly authorized, validly issued, fully paid and non-assessable.
None of the shares of the Company's capital stock outstanding at the Closing
(i) were subject to preemptive rights when issued or (ii) provide the holders
thereof with any preemptive rights with respect to any issuances of capital
stock.
(b) Except as referred to in Schedule 3.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to
issue, sell or transfer shares of its capital stock or other securities.
3.3. No Defaults or Conflicts.
(a) The Company is not in violation or default in any
material respect under any indenture, agreement or instrument to which it is a
party or by which it or its properties may be bound. The Company is not in
default under any material order, writ, injunction, judgment or decree of any
court or other governmental authority.
(b) The execution, delivery and performance by the Company
of the Share and Warrant Purchase Agreements, and any of the transactions
contemplated hereby (including, without limitation, the issuance of the Shares,
the Warrants and the Conversion Shares as contemplated herein and in the
Warrant Certificates) do not and will not (i) violate or conflict with, with or
without the giving of notice or the passage of time or both, any provision of
(A) the certificates of incorporation or by-laws of the Company or (B) any law,
rule, regulation or order of any federal, state, county, municipal or other
governmental authority, or any judgment, writ, injunction, decree, award or
other action of any court or governmental authority or arbitrator(s), or any
agreement, indenture or other instrument applicable to the Company or any of
its properties, (ii) result in the creation of any Lien upon any of the
Company's properties or assets or (iii) require the consent, waiver, approval,
order or authorization of, or declaration, registration, qualification or
filing with, any Person, other than Whale Securities, Co., L.L.P. ("Whale").
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3.4. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Investor
the following material (the "Disclosure Material"): (i) audited consolidated
financial statements of the Company as of December 31, 1996, consisting of a
consolidated balance sheet as of December 31, 1996 and the related consolidated
statements of operations, changes in equity and cash flows for the year ended
December 31, 1996 and the related notes thereto, all of which statements have
been certified by KPMG Peat Marwick LLP, independent certified public
accountants, (ii) the Company's Prospectus dated July 24, 1996 and (iii) the
SEC Reports. The financial statements referred to or contained in the
materials referred to in the preceding clauses (i) and (ii) fairly present the
financial condition of the Company as of the respective dates thereof and the
results of the operations of the Company for such periods and have been
prepared in accordance with generally accepted accounting principles
consistently applied, except that any such unaudited statements may omit notes
and may be subject to year-end adjustment.
(b) Since December 31, 1996, (i) the business of the
Company has been conducted in the ordinary course and (ii) there has been no
material adverse change in the assets, properties, liabilities, business,
results of operations or condition of the Company. As of the date hereof,
there are no material liabilities of the Company which would be required to be
provided for in a balance sheet of the Company prepared in accordance with
generally accepted accounting principles consistently applied, other than
liabilities provided for in the financial statements referred to in Section
3.5(a).
(c) None of the Disclosure Material contained or contains a
false or misleading statement of a material fact or omits to state any material
fact necessary in order to make the statements made in such Disclosure
Material, in light of the circumstances under which they were made, not
misleading.
3.5. Litigation.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company, threatened in law, equity or
otherwise before any court, administrative agency or arbitrator which (i)
questions the validity of the Share and Warrant Purchase Agreements, the
Warrant Certificates, the Units, the Shares, the Warrants or the Conversion
Shares or any action taken or to be taken pursuant hereto or thereto, (ii)
might adversely affect the right, title or interest of any Investor to the
Units, the Shares, the Warrants, or the Conversion Shares or (iii) might result
in a material adverse change in the assets, properties, liabilities, business,
affairs, results of operations or condition of the Company.
3.6. Legal Compliance.
(a) The Company has complied in all material respects with
all applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands.
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(b) There are no adverse orders, judgments, writs,
injunctions, decrees or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company.
3.7. Offering of Shares.
None of the Company, any agent or any other person acting on
its behalf, directly or indirectly, (i) offered any of the Units, the Shares,
the Warrants or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than the Investors and not more than 30 other persons, each of
which the Company reasonably believed was an "accredited investor" within the
meaning of Regulation D under the Securities Act, or (ii) has done or caused to
be done (or has omitted to do or to cause to be done) any act which act (or
which omission) would result in bringing the issuance or sale of the Units, the
Shares or the Warrants within the provisions of Section 5 of the Securities Act
or the filing, notification or reporting provisions of any state securities
laws.
3.8. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Exchange Act. The Company has
furnished the Investor with copies of (i) its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996 and (ii) its Quarterly Reports on Form
10-QSB for the fiscal quarter ended September 30, 1996 (collectively, the "SEC
Reports"). Each SEC Report complied in all material respects with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company as follows:
4.1. Power and Authority.
The Investor has all requisite power, authority and legal right
to execute, deliver and consummate the transactions contemplated by and perform
its obligations under this Agreement. The execution, delivery and performance
of this Agreement by the Investor have been duly authorized by all required
corporate and other actions. The Investor has duly executed and delivered this
Agreement and it constitutes the legal, valid and binding obligation of the
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Investor, enforceable against the Investor in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to the rights of creditors generally.
4.2. Investment Intent.
(i) The Investor has received and reviewed the SEC Reports
and except for the SEC Reports, the Investor has not been furnished with any
other materials or literature relating to the offer and sale of the Units, the
Shares, the Warrants or the Conversion Shares;
(ii) The Investor has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company and
the offering, and all such questions, if any, have been answered to the full
satisfaction of the Investor;
(iii) The Investor has such knowledge and expertise in
financial and business matters that the Investor is capable of evaluating the
merits and risks involved in an investment in the Units, the Shares, the
Warrants or the Conversion Shares;
(iv) The Confidential Purchaser Questionnaire to be
delivered by the Investor to the Company will be true, complete and correct in
all material respects; and the Investor understands that the Company has
determined that the exemption from the registration provisions of the
Securities Act, which is based upon non-public offerings, are applicable to the
offer and sale of the Units, the Shares, the Warrants or the Conversion Shares
based, in part, upon the representations, warranties and agreements made by the
Investor herein and in the Confidential Purchaser Questionnaire referred to
above;
(v) No representations or warranties have been made to the
Investor by the Company or any agent, employee or affiliate of the Company and
in entering into this transaction the Investor is not relying upon any
information, other than that contained in the SEC Reports and the results of
independent investigation by the Investor;
(vi) The Investor understands that (A) the Units, the
Warrants, the Shares and the Conversion Shares have not been registered under
the Securities Act or the securities laws of any state, based upon an
exemption from such registration requirements for non-public offerings pursuant
to regulation D under the Securities Act; (B) the Units, the Warrants, the
Shares and the Conversion Shares are and will be "restricted securities", as
said term is defined in Rule 144 of the Rules and Regulations promulgated under
the Securities Act; and (C) the Units, Warrants, Shares and the Conversion
Shares may not be sold or otherwise transferred unless they have been first
registered under the Securities Act and all applicable state securities laws,
or unless exemptions from such registration provisions are available with
respect to said resale or transfer;
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(vii) The Investor is acquiring the Units, the Shares, the
Warrants and the Conversion Shares solely for the account of the undersigned,
for investment purposes only, and not with a view towards the resale or
distribution thereof; and
(viii) The Investor is an "accredited investor," as such term
is defined in Regulation D of the Rules and Regulations promulgated under the
Securities Act.
SECTION 5. RESTRICTIONS ON TRANSFER
The Investor agrees that it will not sell or otherwise dispose
of any Units, Shares, Warrants or Conversion Shares unless such Units, Shares,
Warrants or Conversion Shares have been registered under the Securities Act
and, to the extent required, under any applicable state securities laws, or
pursuant to an applicable exemption from such registration requirements. The
Company may place a legend to that effect in the form of Exhibit B hereto on
all certificates evidencing Shares, Warrants or Conversion Shares, provided
that such legend will not be placed on any certificate which, when issued, are
no longer subject to the provisions of this Section 5 pursuant to the
provisions of the Securities Act.
SECTION 6. COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
6.1. Use of Proceeds.
The Company will use the proceeds realized from the sale of the
Units (i) to purchase vans, trailers and related computer and video equipment,
(ii) for advertising expenditures and (iii) to fund operating costs and for
general corporate purposes.
6.2. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other
franchises in full force and effect;
(b) maintain its tangible assets in good repair, working
order and condition (reasonable wear and tear excepted) to far as necessary or
advantageous to the proper carrying on of its business;
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(c) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands,
judgments, writs, injunctions and decrees, provided, that such compliance shall
not be necessary so long as (i) the applicability or validity of any such law,
order, rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate
proceedings and (ii) failure to comply will not have a material adverse effect
on the assets, properties, liabilities, business, results of operations or
condition of the Company;
(d) pay promptly when due all taxes, fees, assessments and
other government charges imposed upon its properties, assets or income and all
claims or indebtedness (including, without limitation, materialmen's, vendor's,
workmen's and like claims) which might become a lien upon such properties or
assets; provided, that payment of any such tax, fee, assessment, charge, claim
or indebtedness shall not be necessary so long as (i) the applicability or
validity thereof shall be contested in good faith by appropriate proceedings
and a reserve, if appropriate, shall have been established with respect thereto
and (ii) failure to make such payment will not have a material adverse effect
on the assets, properties, liabilities, business, results of operations or
condition of the Company; and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
6.3. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Share and Warrant Purchase Agreements or the Warrant Certificates. Without
limiting the generality of the foregoing, the Company (a) will not permit the
par value or the determined or stated value of any shares of the Common Stock
receivable upon the exercise of the Warrants to exceed the amount payable
therefor upon such exercise, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and non-assessable shares of the Common Stock free from all taxes, Liens
and charges with respect to the issue thereof, upon the exercise of the
Warrants from time to time outstanding and (c) will not take any action which
results in any adjustment of the current exercise price under the Warrant
Certificates if the total number of shares of the Common Stock (or other
securities) issuable after the action upon the exercise of all of the then
outstanding Warrants would exceed the total number of shares of the Common
Stock (or other securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issuance upon such exercise.
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6.4. Reservation of Shares.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock
a number of shares of Common Stock sufficient to provide for the exercise of
the Warrants and pursuant to the terms of the Warrant Certificates.
6.5. Private Placement Status.
Neither the Company nor any agent or any other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to
cause to be done) any act which act (or which omission) would result in
bringing the issuance or sale of the Units, the Shares, the Warrants or the
Conversion Shares within the provisions of Section 5 of the Securities Act or
the filing, notification or reporting requirements of any state securities law.
6.6. Application of Funds.
As long as the Letter of Credit is outstanding, the Company
will (i) use all existing funds that it currently has, or that it receives from
its business operations, prior to borrowing funds under the Line of Credit, and
(ii) apply any funds that it receives (net of expenses) from any financing,
including, without limitation, any (A) future public or private sale of equity
or debt securities, other than a potential financing in an amount of
approximately $2,000,000 that the Company is currently working on, (B) future
redemption of outstanding warrants or (C) the sale and leaseback of its
software to Canadian limited partnerships (collectively referred to as a "New
Financing"), prior to borrowing funds on the Line of Credit or to repay
outstanding borrowings under the Line of Credit. In the event that the Company
completes a New Financing on or before December 31, 1997, and receives net
proceeds of $3,500,000 or more, then the Company shall use its best efforts to
cancel the Letter of Credit and have the Cash Collateral returned to the
Investor.
6.7. Registration of Shares and Warrants.
Promptly after the Closing, the Company will use its best
efforts to effect the registration of the shares of Common Stock and the
Conversion Shares under the Securities Act.
SECTION 7. CONDITIONS TO INVESTOR'S OBLIGATIONS
The Investor's obligation to purchase Units hereunder and to
provide the Cash Collateral to the Bank is subject to satisfaction of the
following conditions at the Closing (any of which may be waived by the
Investor):
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7.1. Accuracy of Representations and Warranties.
The representations and warranties of the Company in the Share
and Warrant Purchase Agreements or in any certificate or document delivered
pursuant hereto or thereto shall be correct and complete in all material
respects on and as of the Closing Date with the same effect as though made on
and as of the Closing Date (after giving effect to the transactions
contemplated by this Agreement).
7.2. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Share
and Warrant Purchase Agreements and any other document contemplated hereby
which are required to be performed or complied with by the Company on or before
the Closing Date.
7.3. Officers' Certificates.
The Investor shall have received a certificate dated the
Closing Date and signed by the Chief Executive Officer and by the Secretary of
the Company, to the effect that the conditions in Sections 7.1, 7.2 and 7.5
have been satisfied.
7.4. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Share and Warrant Purchase Agreements, and all
documents incident thereto, shall be in form and substance satisfactory to the
Investor and the Investor shall have received all such originals or certified
or other copies of such documents as the Investor may reasonably request.
7.5. No Material Adverse Change.
There shall have been no material adverse change in the assets,
properties, liabilities, business, results of operations or condition of the
Company since December 31, 1996.
SECTION 8. THE LETTER OF CREDIT
8.1. No Drawing on Letter of Credit. In the event that the
Letter of Credit is not drawn upon on or before December 31, 1997, then the
Bank shall return promptly the amount of Cash Collateral, and any interest
earned thereon, to the Investor. Upon receipt of such Cash Collateral, and
interest earned thereon by the Investor, this Agreement shall terminate and be
of no further force or effect.
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8.2. Drawing on Letter of Credit. In the event that there
are one or more drawings on the Letter of Credit, in part or in whole, on or
before December 31, 1997 (the "Letter of Credit Drawing"), then on December 31,
1997 the Bank shall return promptly the remaining portion of the Cash
Collateral to the Investor (the portion drawn down or not returned being
referred to as the "Unreturned Cash Collateral").
8.3. Delivery of Shares. In the event of a Letter of Credit
Drawing, the Company shall, after December 31, 1997, promptly deliver to the
Investor a number of shares of Common Stock equal to (x) the Unreturned Cash
Collateral divided by (y) $7.50, provided that the average of the closing bid
prices of the Common Stock on the NASDAQ Small Cap Market on each of the twenty
(20) consecutive trading days immediately prior to December 31, 1997 is greater
than $11.00; or, if the average of the closing bid prices of the Common Stock
on the NASDAQ Small Cap Market on each of the twenty (20) consecutive trading
days immediately prior to December 31, 1997 is less than $11.00, clause (y) of
this Section 8.3 will be the average of the closing bid prices of the Common
Stock on the NASDAQ Small Cap Market on each of the twenty (20) consecutive
trading days immediately prior to December 31, 1997 divided by two.
8.4. Character of Shares. All shares of Common Stock issued
by the Company to the Investor pursuant to this Section 8 shall be duly
authorized, validly issued, fully paid and non-assessable.
8.5. Termination. Upon receipt by the Investor of the
remaining portion of the Cash Collateral and the delivery of shares of Common
Stock referred to in Section 8.3, this Agreement shall terminate and be of no
further force or effect, except that provisions of Sections 8 and 9 hereof
shall continue in full force and effect.
SECTION 9. REGISTRATION RIGHTS
9.1. Initial Registration; Potential Registration After the
Transaction Date. (a) Promptly after the date hereof, the Company will use
its best efforts to effect the registration of the shares of Common Stock and
the Conversion Shares under the Securities Act.
(b) Promptly after December 31, 1997, in the event that
additional shares of Common Stock are delivered to the Investor pursuant to
Section 8.3, the Company will use its best efforts to effect the registration
of the shares of Common Stock under the Securities Act.
9.2. Company's Fees and Expenses. All expenses incident to
the Company's performance of or compliance with Section 9 of this Agreement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and expenses for listing or quoting the
Shares on each securities exchange or The NASDAQ Stock Market on which similar
securities
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issued by the Company are then listed or quoted, and fees and disbursements of
counsel for the Company, any transfer agent and all independent certified public
accountants, underwriters (excluding discounts and selling commissions) and
other Persons retained by the Company in connection with any registration (all
such expenses being herein called "Registration Expenses"), will be paid by the
Company.
SECTION 10. DEFINITIONS
For purposes of this Agreement, the following definitions shall
apply:
"Agreement" means this Share and Warrant Purchase Agreement
(together with exhibits and schedules) as from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Board" or "Board of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board of
directors or other group, however, designated, which is charged with
legal responsibility for the management of such Person, or any committee
of such board of directors or group, however designated, which is
authorized to exercise the power of such board or group in respect of
the matter in question.
"Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Common Stock" means the Company's Common Stock, par value $.01
per share, and any stock into which such Common Stock may hereafter be
changed or for which such Common Stock may be exchanged after giving
effect to the terms of such change or exchange (by way of
reorganization, recapitalization, merger, consolidation or otherwise).
"Company" means Visual Edge Systems Inc., a Delaware
corporation, its successors and assigns.
"Conversion Share" or "Conversion Shares" means the shares of
Common Stock obtained or obtainable upon exercise of Warrants and shall
also include any capital stock or other securities into which Conversion
Shares are changed and any capital stock or other securities resulting
from or comprising
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a reclassification, combination or subdivision of, or a stock dividend
on, any Conversion Shares. In the event that any Conversion Shares are
sold either in a public offering pursuant to a registration statement
under the Securities Act or pursuant to a Rule 144 Transaction, then
the transferees of such Conversion Shares shall not be entitled to any
benefits under this Agreement with respect to such Conversion Shares and
such Conversion Shares shall no longer be considered to be "Conversion
Shares" for purposes of the definition of Majority Shareholders or for
purposes of any consent or waiver provision of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules, regulations and interpretations thereunder.
"Investor" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Investor") on the execution page of this Agreement, together with its
successors and assigns.
"Investors" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security interest of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the
same effect as any of the foregoing, any assignment or other conveyance
of any right to receive income and any assignment of receivables with
recourse against the assignor), any filing of a financing statement as
debtor under the Uniform Commercial Code or any similar statute and any
agreement to give or make any of the foregoing.
"Majority Shareholders" means the holder or holders, at the
time, of at least fifty-one percent (51%) of the shares represented by
(i) the shares issued under the Share and Warrant Purchase Agreements
and (ii) the Conversion Shares, including the Conversion Shares then
outstanding and the Conversion Shares then obtainable under outstanding
Warrants.
"Person" or "person" means an individual, corporation,
partnership, firm, association, joint venture, trust, unincorporated
organization, government, governmental body, agency, political
subdivision or other entity.
"Registrable Securities" means (i) any shares of Common Stock
issued or issuable upon exercise of the Warrants purchased by the
Investors pursuant to the Purchase Agreement, (ii) any securities issued
or issuable with respect to the
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Common Stock referred to in clause (i) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have (x) been effectively registered
under the Securities Act and disposed of in accordance with the
registration statement covering them or (y) been transferred pursuant to
Rule 144 (or any similar rule then in force) under the Securities Act.
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (B) occurring at a time when
Conversion Shares are registered pursuant to Section 12 of the Exchange
Act.
"SEC" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"SEC Reports" has the meaning set forth in Section 3.9 hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Share and Warrant Purchase Agreements" has the meaning set
forth in Section 1(c) hereof.
"Shares" has the meaning set forth in Section 1(a) hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is, at the time as of which any
determination is being made, owned or controlled, directly or
indirectly, by such Person or one or more of its Subsidiaries, or both.
The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
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"Units" has the meaning set forth in Section 1(a) hereof.
"Warrant Certificate" has the meaning set forth in Section 1(a)
hereof.
"Warrants" has the meaning set forth in Section 1(a) hereof.
SECTION 11. BROKERS
Except for certain fees payable to certain brokers or agents
(all of which fees will be paid by the Company), the Company, on the one hand,
and the Investor, on the other hand, each represents and warrants to the other
that there is no liability for any fees or expenses (or claims therefor) of any
investment banker, finder or broker in connection with any Share and Warrant
Purchase Agreements or any of the transactions contemplated hereby. The Company
will indemnify the Investor against all such fees or expenses payable to the
persons named in the preceding sentence and against any other such fees,
expenses or claims of any person, unless such person was engaged by the Investor
in connection with this Agreement or any of the transactions contemplated
hereby. The Investor will indemnify the Company against any such fees, expenses
or claims of any person engaged by the Investor in connection with this
Agreement or any of the transactions contemplated hereby.
SECTION 12. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company will pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Share and Warrant Purchase
Agreements, the Warrant Certificates and the issuance of the Units, the Shares,
the Warrants and the Conversion Shares, (ii) the fees and expenses of the
Investors in connection with the Share and Warrant Purchase Agreements, the
Warrant Certificates, or in connection with any other agreements between the
Investors and the Company, and (iii) the fees and expenses incurred in
connection with the obtaining of the Letter of Credit and the agreements
relating to the Cash Collateral.
(b) The obligations of the Company under this Section 12
shall survive the Closing hereunder and any termination of the Share and
Warrant Purchase Agreements.
SECTION 13. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be
amended, waived, modified or terminated only with the written consent of the
Majority Shareholders; provided, however, that no such amendment, waiver,
modification or termination shall change the definition of Majority
Shareholders or this Section 13(a) without the written consent of the holders
of all the Shares, Warrants and Conversion Shares then outstanding.
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(b) The Company agrees that all holders of Shares, Warrants
and Conversion Shares shall be notified by the Company in advance of any
proposed amendment, waiver, modification or termination, but failure to give
such notice shall not in any way affect the validity of any such amendment,
waiver, modification or termination. In addition, promptly after obtaining the
written consent of the holders as herein provided, the Company shall transmit a
copy of any amendment, waiver, modification or termination which has been
adopted to all holders of Shares, Warrants and Conversions Shares then
outstanding, but failure to transmit copies shall not in any way affect the
validity of any such amendment, waiver, modification or termination.
SECTION 14. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT
(a) At any time at the request of any holder of Shares or
Warrants to the Company at its address provided under Section 15 hereof, the
Company at its expense (except for any transfer tax arising out of the
exchange) will issue and deliver to or upon the order of the holder in exchange
therefor a new certificate or certificates in such amount or amounts as such
holder may request in the aggregate representing the number of Shares or
Warrants represented by such surrendered certificates, and registered in the
name of such holder or as such holder may direct.
(b) Any Warrant Certificate which is converted into
Conversion Shares in whole or in part shall be canceled by the Company, and no
new Share certificates or Warrant Certificates shall be issued in lieu of any
Shares or Warrants which have been converted into Conversion Shares. The
Company shall issue a new certificate with respect to any Warrants which were
not exercised into Conversion Shares and were represented by a certificate
which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Share certificate or Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company (if
requested by the Company and unsecured in the case of the Investor or an
institutional holder), or in the case of any such mutilation, upon surrender of
such Share certificate or Warrant Certificate (which surrendered Share
certificate or Warrant Certificate shall be canceled by the Company), the
Company will issue a new Share certificate or Warrant Certificate, of like
tenor in lieu of such lost, stolen, destroyed or mutilated Share certificate or
Warrant Certificate as if the lost, stolen, destroyed or mutilated Share
certificate or Warrant Certificate were then surrendered for exchange.
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SECTION 15. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Visual Edge Systems Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer, with a copy to
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., or (ii) if to the Purchaser, at the address
indicated on Schedule 1 hereto, or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 16. MISCELLANEOUS
(a) The Share and Warrant Purchase Agreements and, upon the
closing hereunder, the Warrant Certificates together with any further
agreements entered into by the Investor and the Company at the closing
hereunder, contain the entire agreement between the Investor and the Company,
and supersede any prior oral or written agreements, commitments, terms or
understandings, regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which may render any provision hereof prohibited or unenforceable in any
respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not.
(d) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
(e) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
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(f) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
VISUAL EDGE SYSTEMS INC.
By
------------------------------
Name:
Title:
Accepted and Agreed to as of the
date first above written by the
undersigned Investor:
-------------------------------------
[NAME OF INVESTOR]
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Schedule 1
to the Share and
Warrant Purchase Agreement
Name of Number of
Investor Units Shares Warrants Cash Collateral
-------- --------- ------ -------- ---------------
Address:
--------
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EXHIBIT B
SHARE LEGEND
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), or the securities laws of
certain states and are being offered and sold in reliance on exemptions from
the registration requirements of the Act and such laws. The securities may not
be transferred unless (i) registration under such Act or such applicable state
securities laws shall have become effective with regard thereto or (ii)
registration under such Act or such applicable state laws is not required in
connection with such proposed transfer.
THE TRANSFER OF THE STOCK REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TRANSFER RESTRICTIONS, OBLIGATIONS AND CONDITIONS SPECIFIED IN THE SHARE AND
WARRANT PURCHASE AGREEMENT DATED AS OF FEBRUARY 27, 1997, AMONG VISUAL EDGE
SYSTEMS INC. AND THE HOLDERS OF THIS CERTIFICATE. A COPY OF SUCH AGREEMENT
WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.