-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q1FF9DSIjtwqsalOWz0f2po9AiohQIVPldyR8ULc9msf9tshJBdoDmvCfJHv2CYT 3SWkTL/yOvY+Q3nc/wzm9A== 0000912057-97-021601.txt : 19970624 0000912057-97-021601.hdr.sgml : 19970624 ACCESSION NUMBER: 0000912057-97-021601 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970613 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970623 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISUAL EDGE SYSTEMS INC CENTRAL INDEX KEY: 0001015172 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20995 FILM NUMBER: 97628360 BUSINESS ADDRESS: STREET 1: 7 W 51ST ST CITY: NEW YORK STATE: NY ZIP: 10019 MAIL ADDRESS: STREET 1: 7 WEST 51ST STREET STREET 2: 7 WEST 51ST STREET CITY: NEW YORK STATE: NY ZIP: 10019 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ FORM 8-K CURRENT REPORT Pursuant to Section l3 or l5(d) of the Securities Exchange Act of l934 Date of Report (Date of earliest event reported) June 13, 1997 --------------- VISUAL EDGE SYSTEMS INC. ------------------------ (Exact name of registrant as specified in its charter) Delaware 0-20995 13-377-8895 - ------------------------------------------------------------------------------ (State of other juris- Commission (I.R.S. Employer diction of incorporation) File Number) Identification No.) 2424 North Federal Highway, Suite 100, Boca Raton, FL 33431 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (561) 750-7559 -------------- (Registrant's telephone number, including area code) Item 5. Other Events. On June 13, 1997, Visual Edge Systems Inc. (the "Company") arranged a three year $7.5 million debt and convertible equity facility with a group of investment funds advised by an affiliate of Hunt Sports Group, a sports and entertainment management company controlled by the Lamar Hunt family of Dallas, Texas. The Company issued and sold to Infinity Investors Limited, Infinity Emerging Opportunities Limited, Sandera Partners, L.P. and Lion Capital Partners, L.P. (collectively, the "Funds") the following securities pursuant to the Bridge Securities Purchase Agreement, dated as of June 13, 1997 (the "Bridge Agreement"), among the Company and the Funds: (i) 8.25% unsecured convertible bridge notes in the aggregate principal amount of $7,500,000 with a maturity date of three years from the date of issuance (the "Bridge Notes"), which Bridge Notes are convertible into shares of Common Stock (the "Note Conversion Shares") at any time and from time to time commencing January 1, 1998 at the option of the holder thereof; (ii) 93,677 shares of Common Stock, par value $.01 per share (the "Grant Shares"); and (iii) five-year warrants (the "Warrants") to purchase 100,000 shares of Common Stock (the "Warrant Shares") with an exercise price equal to $10.675. Such Warrants are redeemable commencing October 1, 1998, based on a 20-day minimum closing bid price, at a redemption price equal to $.10 per share. The Funds payed an aggregate of $ 7,474,438 to the Company for the Bridge Notes, Grant Shares and Warrants. Pursuant to the Bridge Agreement, the Company will issue additional Grant Shares (the "Additional Grant Shares") to the Funds in the event that the closing bid price of the Common Stock for each trading day during any consecutive 10 trading days from June 13, 1997 (the "Closing Date") through December 31, 1997 does not equal at least $10.00 per share. In the event that any Additional Grant Shares are issued, the exercise price of the Warrants will be adjusted so that the value of the Warrants (using a Black -Scholes or similar model) equals the value of the Warrants as of the Closing Date. Interest payments on the Bridge Notes will, at the option of the Company, be payable in cash or in shares of Common Stock. Effective January 1, 1998, the aggregate outstanding principal amount of Bridge Notes exceeding $2,500,000 will be automatically exchanged for an number of shares of Convertible Preferred Stock with an aggregate liquidation preference equal to the principal amount of Bridge Notes so exchanged and with terms substantially identical to the Notes, which Preferred Stock is convertible into shares of Common Stock (the "Stock Conversion Shares"). In addition, if the Company elects to redeem its redeemable warrants issued on July 24, 1997 in connection with the Company's initial public offering of Common Stock, the Company must redeem at least $5,000,000 principal amount of the Bridge Notes with the net proceeds of such redemption. In connection with the sale of the Note Conversion Shares, Stock Conversion Shares, Grant Shares, Warrant Shares and Additional Grant Shares (collectively, the "Securities") to the Funds, the Company granted to the Funds registration rights covering the Securities. As soon as -2- practicable after July 24, 1997, the Company is obligated to file a registration statement covering the sale of the Grant Shares. In addition, on or before November 15, 1997, the Company is obligated to file a registration statement covering the sale of the Note Conversion Shares, Stock Conversion Shares, Warrant Shares and Additional Grant Shares. The Company also agreed, pursuant to the Bridge Agreement, that the proceeds from the issuance and sale of the Securities by the Company must be used, in part, to repay the remaining outstanding balance due and owing on the Company's $3,500,000 line of credit with Barnett Bank. Further, the Company agreed to certain covenants, including limitations on the amount of capital expenditures and minimum limits of net worth. The Company will also begin to explore potential business opportunities with Hunt Sports Group. -3- Item 7. Financial Statements and Exhibits. (c) Exhibits 99.1 Bridge Securities Purchase Agreement, dated as of June 13, 1997, among the Company and Infinity Investors Limited, Infinity Emerging Opportunities Limited, Sandera Partners, L.P. and Lion Capital Partners, L.P. (collectively, the "Funds") 99.2 Registration Rights Agreement, dated as of June 13, 1997, among the Company and the Funds 99.3 Transfer Agent Agreement, dated as of June 13, 1997, among the Company, the Funds and American Stock Transfer & Trust Company 99.4 Form of Common Stock Purchase Warrant 99.5 Form of Convertible Note -4- SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VISUAL EDGE SYSTEMS INC. ------------------------ (Registrant) By: ------------------------------ Earl T. Takefman Chief Executive Officer Date: June 23, 1997 -5- EXHIBIT INDEX No. ---- 99.1 Bridge Securities Purchase Agreement, dated as of June 13, 1997, among the Company and Infinity Investors Limited, Infinity Emerging Opportunities Limited, Sandera Partners, L.P. and Lion Capital Partners, L.P. (collectively, the "Funds") 99.2 Registration Rights Agreement, dated as of June 13, 1997, among the Company and the Funds 99.3 Transfer Agent Agreement, dated as of June 13, 1997, among the Company, the Funds and American Stock Transfer & Trust Company 99.4 Form of Common Stock Purchase Warrant 99.5 Form of Convertible Note EX-99.1 2 BRIDGE SECURITIES PURCHASE AGREEMENT 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% BRIDGE SECURITIES PURCHASE AGREEMENT - Page 1 (Visual Edge Systems Inc.) "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. "Barnett Bank Facility " means that certain Credit Agreement dated March 26, 1997 between the Company and Barnett 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 Moody's 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 Moody's Investors Service, Inc., BRIDGE SECURITIES PURCHASE AGREEMENT - Page 2 (Visual Edge Systems Inc.) 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 Earl Takefman and Alan Lubell 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 3 (Visual Edge Systems Inc.) "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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page4 (Visual Edge Systems Inc.) "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 (Visual Edge Systems Inc.) "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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 6 (Visual Edge Systems Inc.) 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 (Visual Edge Systems Inc.) (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 Greg Norman, Great White Shark Enterprises, Inc. and the Company dated as of March 1, 1996 (the "Norman 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 8 (Visual Edge Systems Inc.) "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 Barnett 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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 9 (Visual Edge Systems Inc.) 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). BRIDGE SECURITIES PURCHASE AGREEMENT - Page 10 (Visual Edge Systems Inc.) "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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 11 (Visual Edge Systems Inc.) 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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 12 (Visual Edge Systems Inc.) 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 13 (Visual Edge Systems Inc.) (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 14 (Visual Edge Systems Inc.) (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, Earl Takefman), 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 15 (Visual Edge Systems Inc.) (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 16 (Visual Edge Systems Inc.) (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 17 (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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 18 (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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 20 (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) BRIDGE SECURITIES PURCHASE AGREEMENT - Page 21 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 22 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 23 (Visual Edge Systems Inc.) 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 Morgan, Lewis & Bockius, 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 Bartnett 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) Barnett 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 27 (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 Earl Takefman 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 Barnett 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 Norman 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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 33 (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; BRIDGE SECURITIES PURCHASE AGREEMENT - Page 34 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 35 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 36 (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 Norman License Agreement. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 37 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 38 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 39 (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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 41 (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. BRIDGE SECURITIES PURCHASE AGREEMENT - Page 42 (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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 43 (Visual Edge Systems Inc.) 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 BRIDGE SECURITIES PURCHASE AGREEMENT - Page 44 (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, BRIDGE SECURITIES PURCHASE AGREEMENT - Page 45 (Visual Edge Systems Inc.) 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, BRIDGE SECURITIES PURCHASE AGREEMENT - Page 46 (Visual Edge Systems Inc.) 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 Morgan, Lewis & Bockius LLP with offices at 101 Park Avenue, New York, New York 10178 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/ Alan Lubell --------------------------------- Name: Alan Lubell ------------------------------- Title: Chairman of the Board ------------------------------ Address: 2424 North Federal Highway Suite 100 Boca Raton, Florida 33431 Telephone: (514) 937-0787 Fax: (514) 937-0286 Attn: Earl Takefman With a copy to: David W. Pollak, Esq. Morgan, Lewis & Bockius, LLP 101 Park Avenue New York, New York 10178 Fax: (212) 309-6058 Attn: Earl Takefman INFINITY INVESTORS LIMITED By: /s/ J. A. Loughran --------------------------------- Name: J. A. Loughran ------------------------------- Title: Director ------------------------------ Address: 27 Wellington Road Cord, Ireland Telephone: 353-21-501-109 Fax: 353-21-501-255 Attn: J. A. Loughran With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman BRIDGE SECURITIES PURCHASE AGREEMENT - Page 53 (Visual Edge Systems Inc.) INFINITY EMERGING OPPORTUNITIES LIMITED By: /s/ J. A. Loughran --------------------------------- Name: J. A. Loughran ------------------------------- Title: Director ------------------------------ Address: 27 Wellington Road Cord, Ireland Telephone: 353-21-501-109 Fax: 353-21-501-255 Attn: J. A. Loughran With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman SANDERA PARTNERS, L.P. By: Sandera Capital Management, L.P., its General Partner By: Sandera Capital, L.L.C., its General Partner By: /s/ Clark K. Hunt ------------------------------- Name: Clark K. Hunt ----------------------------- Title: Managing Director ---------------------------- Address: 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman BRIDGE SECURITIES PURCHASE AGREEMENT - Page 54 (Visual Edge Systems Inc.) With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman LION CAPITAL PARTNERS, L.P. By: Mountain Capital Management, L.L.C., its General Partner By: /s/ Clark K. Hunt ------------------------------- Name: Clark K. Hunt ----------------------------- Title: Managing Director ---------------------------- Address: 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman 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 ======= ================================================================================ EX-99.2 3 REGISTRATION RIGHTS AGREEMENT Exhibit 99.2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 13, 1997, among VISUAL EDGE SYSTEMS, INC., a Delaware corporation (the "Company"), and the other undersigned parties hereto, (collectively, the "Funds"). 1. INTRODUCTION. The Company and the Funds have today executed that certain Bridge Securities Purchase Agreement (the "Note Purchase Agreement"), pursuant to which the Company has agreed, among other things, to issue an aggregate of $7.5 million (U.S.) principal amount of 8.25% Convertible Exchangable Bridge Notes of the Company (the "Notes") to the Funds or their successors, assigns or transferees (collectively, the "Holders"). The Notes are convertible into an indeterminable number of shares (the "Note Conversion Shares") of the Company's common stock, par value $.01 per share (the "Common Stock"), pursuant to the terms of the Notes. The Notes are also mandatorily exchangeable after January 1, 1998 into certain shares of the Company's convertible preferred stock (the "Preferred Stock"), which such shares of Preferred Stock shall be convertible into an indeterminable number of shares (the "Stock Conversion Shares") of the Company's Common Stock, pursuant to the terms of the applicable Certificate of Designation. In addition, pursuant to the terms of the Note Purchase Agreement and the transactions contemplated thereby, the Company has issued to the Funds (i) an aggregate of 93,677 shares of Common Stock (the "Grant Shares") and (ii) Common Stock Purchase Warrants exercisable for an aggregate 100,000 shares of Common Stock (the "Warrant Shares"). The Company has agreed to issue an indeterminable number of additional shares of Common Stock (the "Additional Grant Shares") on or before January 5, 1998, upon the occurrence of certain events specified in the Note Purchase Agreement. The number of Note Conversion Shares, Stock Conversion Shares, Grant Shares, Warrant Shares and Additional Grant Shares (collectively, the "Securities") is subject to adjustment upon the occurrence of stock splits, recapitalizations and similar events occurring after the date hereof. The Company represents and warrants that the Company's Common Stock is currently eligible for trading on the Nasdaq Stock Market's SmallCap Market ("SmallCap Market") under the symbol "EDGE". This Agreement shall become effective upon the issuance of the Notes to any of the Holders pursuant to the Note Purchase Agreement. Certain capitalized terms used in this Agreement are defined in Section 3 hereof; references to sections shall be to sections of this Agreement. 2. REGISTRATION UNDER SECURITIES ACT, ETC. 2.1 REGISTRATION ON REQUEST. (A) GRANT SHARE REGISTRATION. As soon as practicable after July 24, 1997, but in any event, prior to July 28, 1997, demand for which is hereby given and acknowledged, the Company shall prepare and file a registration statement to effect the registration under the Securities Act of all, but not less than all, of the Registrable Securities which relate to the Grant Shares; all to the extent requisite to permit the public resale of the Grant Shares to be so registered. The Company shall use its best efforts to cause the Registration Statement which is the subject of this Section 2.1(a) (the "Grant Share Registration Statement") to be declared effective by the Commission upon the earlier to occur of (i) fifty (50) days after the original REGISTRATION RIGHTS AGREEMENT-PAGE 1 (VISUAL EDGE) filing thereof and (2) five (5) days after receipt of a "no review" or similar letter from the Commission. (B) NOTE CONVERSION SHARE, STOCK CONVERSION SHARE, WARRANT SHARE AND ADDITIONAL GRANT SHARE REGISTRATION. On or before November 15, 1997, demand for which is hereby given and acknowledged, the Company shall effect the registration under the Securities Act of all, but not less than all, of the Registrable Securities which relate (or, because of the indeterminable number thereof, which could reasonably be deemed to relate) to the Note Conversion Shares, Stock Conversion Shares, Warrant Shares or Additional Grant Shares (the "Other Shares"); all to the extent requisite to permit the public disposition of such Registrable Securities so to be registered. The Company shall use its best efforts to cause the Registration Statement which is the subject of this Section 2.1(b) (the "Second Registration Statement") to be declared effective by the Commission upon the earlier to occur of (i) January 12, 1998 and (ii) five (5) days after receipt of a "no review" or similar letter from the Commission. Nothing contained herein shall be deemed to limit the number of Other Shares to be registered by the Company hereunder. As a result, should the Second Registration Statement not relate to the maximum number of Other Shares acquired by (or potentially acquirable by) the holders thereof upon conversion of the Note, conversion of the Preferred Stock, exercise of the Warrant or in connection with the issuance of Additional Grant Shares, the Company shall be required to file a separate registration statement (utilizing Rule 462 promulgated under the Exchange Act, where applicable) relating to such Other Shares which then remain unregistered (provided at least 25,000 Other Shares remain unregistered). The provisions of this Agreement shall relate to such separate registration statement as if it were an amendment to the Second Registration Statement. (C) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1 shall be on such appropriate registration form of the Commission (i) as shall be reasonably selected by the Company and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in the Funds' request for such registration. (D) EXPENSES. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this Section 2.1. (E) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective within the time period specified herein, provided that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed of any holder of Registrable Securities (other than a refusal to proceed based upon the advice of counsel relating to a disclosure matter unrelated to such holder) shall be deemed to have been effected by the Company unless the holders of the Registrable Securities shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes subject to any stop order, injunction or other order or extraordinary requirement of the Commission or other governmental agency or court for any reason, (iii) if, after it has become effective, such registration ceases to be effective or useful to the sellers of the REGISTRATION RIGHTS AGREEMENT-PAGE 2 (VISUAL EDGE) Registrable Securities for more than an aggregate of ninety (90) days or (iv) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by the Holders. (F) SELECTION OF UNDERWRITERS. The offerings requested may be, at the option of a majority (by number of Securities ) of the holders of the Registrable Securities so included, an underwritten offering and the underwriter or underwriters thereof shall be selected by the holders of at least a majority (by number of Securities) of the Registrable Securities as to which registration has been requested and shall be acceptable to the Company. (G) PRIORITY IN REQUESTED REGISTRATIONS. If a registration pursuant to this Section 2.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registrable Securities) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, Registrable Securities, pro rata among such holders on the basis of the number of such securities held (or then acquirable upon conversion of the Securities) by such holders. In connection with any registration in which any Registrable Securities requested for inclusion are excluded, no securities other than Registrable Securities shall be covered by such registration. 2.2 INCIDENTAL REGISTRATION. (A) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time after January 1, 1998 but before the fifth anniversary of the date hereof the Company proposes to register any of its securities under the Securities Act (other than by a registration in connection with an acquisition in a manner which would not permit registration of Registrable Securities for sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or any successor form thereto and other than pursuant to Section 2.1), on an underwritten basis (either best-efforts or firm-commitment) it will each such time give prompt written notice to all Holders of its intention to do so and of such Holders' rights under this Section 2.2. Upon the written request of any such Holder made within twenty (20) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will, subject to the terms of this Agreement, effect the registration under the Securities Act of up to that number of Registrable Securities equal to that number of Note Conversion Shares acquirable upon conversion of up to 75% of the original principal amount of the Notes which the Company has been so requested to register by the Holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of such Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register, provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give REGISTRATION RIGHTS AGREEMENT-PAGE 3 (VISUAL EDGE) written notice of such determination to each Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under Section 2.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this Section 2.2 shall relieve the Company of its obligation to effect any registration upon request under Section 2.1, nor shall any such registration hereunder be deemed to have been effected pursuant to Section 2.1. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 2.2. The right provided the Holders of the Registrable Securities pursuant to this Section shall be exercisable at their sole discretion and will in no way limit any of the Company's obligations to pay the Securities according to their terms. (B) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing underwriter of the underwritten offering contemplated by this Section 2.2 shall inform the Company and holders of the Registrable Securities requesting such registration by letter of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in (or during the time of) such offering, (i) first securities proposed by the Company to be sold for its own account, and (ii) second Registrable Securities and securities of other selling security holders requested to be included in such registration pro rata on the basis of the number of shares of such securities so proposed to be sold and so requested to be included; provided, however, the holders of Registrable Securities shall have priority to all shares sought to be included by officers and directors of the Company as well as holders of ten percent (10%) or more of the Company's Common Stock. 2.3 REGISTRATION PROCEDURES. If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 2.1 and 2.2, the Company shall, as expeditiously as possible: (i) prepare and file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its best efforts to cause such registration statement to be declared effective by the Commission, as soon as practicable, but in any event no later than the First Required Effectiveness Date or Second Required Effectiveness Date, as applicable, provided, however, that the Company may discontinue any registration of its securities which are not Registrable Securities (and, under the circumstances specified in Section 2.2, its securities which are Registrable Securities) at any time prior to the effective date of the registration statement relating thereto, provided further that before filing such registration statement or any amendments thereto, the Company will furnish to the counsel selected REGISTRATION RIGHTS AGREEMENT-PAGE 4 (VISUAL EDGE) by the holders of Registrable Securities which are to be included in such registration, copies of all such documents proposed to be filed; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until the earlier to occur of (I) (A) with respect to the Grant Share Registration Statement, two (2) years after the date of this Agreement, (B) with respect to the Second Registration Statement, five (5) years after the date of this Agreement, and (C) with respect to a registration statement described in Section 2.2 above, the time period determined by the Company and (II) such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or otherwise; (iii) furnish to each seller of Registrable Securities covered by such registration statement and each underwriter, if any, of the Registrable Securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller; (iv) use its best efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under such other securities laws or blue sky laws as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; REGISTRATION RIGHTS AGREEMENT-PAGE 5 (VISUAL EDGE) (vi) furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller, and the underwriters, if any, of (except for the Grant Share Registration Statement and Second Registration Statement): (x) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter (or, in the case of any such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter of like kind dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedures" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller (or the underwriters, if any) may reasonably request; (vii) notify the holders of Registrable Securities, their counsel and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter: (v) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; (w) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (x) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; REGISTRATION RIGHTS AGREEMENT-PAGE 6 (VISUAL EDGE) (y) if at any time the representations and warranties of the Company made as contemplated by Section 2.4 below cease to be true and correct in all material respects; (z) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (viii) notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (ix) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earning statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (xi) except for a registration statement described in Section 2.2 above, enter into such agreements and take such other actions as sellers of such Registrable Securities holding 51% of the shares so to be sold shall reasonably request in writing (at the expense of such Sellers) in order to expedite or facilitate the disposition of such Registrable Securities; and (xii) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the Registrable Securities are then listed. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and REGISTRATION RIGHTS AGREEMENT-PAGE 7 (VISUAL EDGE) the distribution of such securities as the Company may from time to time reasonably request in writing. The Company will not file any registration statement or amendment thereto or any prospectus or any supplement thereto (including such documents incorporated by reference and proposed to be filed after the initial filing of the registration statement) to which the holders of at least a majority of the Registrable Securities covered by such registration statement or the underwriter or underwriters, if any, shall reasonably object, provided that the Company may file such document in a form required by law or upon the advice of its counsel. The Company represents and warrants to each holder of Registrable Securities that it has obtained all necessary waivers, consents and authorizations necessary to execute this Agreement and consummate the transactions contemplated hereby. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (viii) of this Section 2.3, such holder will forthwith discontinue such holder's disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (viii) of this Section 2.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. If any such registration statement refers to any Holder of Registrable Securities by name or otherwise as the holder of any securities of the Company, then such holder shall have the right to require (a) the insertion therein of language, in form and substance satisfactory to such holder, to the effect that the holding by such holder of such securities is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, or (b) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder. 2.4 UNDERWRITTEN OFFERINGS. (A) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under Section 2.1, the Company will enter into an underwriting agreement with such underwriters for such offering, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in Section 2.7. The holders of the Registrable Securities will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, provided that nothing herein contained shall diminish the REGISTRATION RIGHTS AGREEMENT-PAGE 8 (VISUAL EDGE) foregoing obligations of the Company. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registrable Securities. Any such holder of Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in such registration statement or representations, warranties and agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. (B) [INTENTIONALLY LEFT BLANK]. (C) HOLDBACK AGREEMENTS. (i) Subject to such other reasonable requirements as may be imposed by the underwriter as a condition of inclusion of a holder's Registrable Securities in the registration statement, each holder of Registrable Securities agrees by acquisition of such Registrable Securities, if so required by the managing underwriter, not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of, except as part of such underwritten registration, any equity securities of the Company, during such reasonable period of time requested by the underwriter; provided however, such period shall not exceed the 120 day period commencing 30 days prior to the commencement of such underwritten offering and ending 90 days following the completion of such underwritten offering. (D) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registrable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registrable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in the related registration statement or representations, warranties or agreements regarding such holder, such holder's Registrable Securities and such holder's intended method of distribution and any other representation required by law. 2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company will give the holders of Registrable Securities registered under such registration REGISTRATION RIGHTS AGREEMENT-PAGE 9 (VISUAL EDGE) statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 2.6 [INTENTIONALLY LEFT BLANK] 2.7 INDEMNIFICATION. (A) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does agree to, indemnify and hold harmless the holder of any Registrable Securities covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such holder or underwriter stating that it is for use in the preparation thereof and, provided further that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or to any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the Securities Act to the Person asserting the existence of an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such REGISTRATION RIGHTS AGREEMENT-PAGE 10 (VISUAL EDGE) Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (B) INDEMNIFICATION BY THE SELLERS. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to this Agreement, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such Registrable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 2.7) the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (C) NOTICES OF CLAIMS. ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 2.7, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 2.7, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment REGISTRATION RIGHTS AGREEMENT-PAGE 11 (VISUAL EDGE) or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party. (D) OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding subdivisions of this Section 2.7 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities (but only if and to the extent required pursuant to the terms of 2.7(b)) with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (E) INDEMNIFICATION PAYMENTS. The indemnification required by this Section 2.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (F) CONTRIBUTION. If the indemnification provided for in the preceding subdivisions of this Section 2.7 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder or underwriter, as the case may be, on the other from the distribution of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the holder or underwriter, as the case may be, on the other in connection with the distribution of the Registrable Securities shall be deemed to be in the same proportion as the total net proceeds received by the Company from the initial sale of the Registrable Securities by the Company to the purchasers pursuant to the Note Purchase Agreement and the Warrants bear to the gain, if any, realized by the selling holder or the underwriting discounts and commissions received by the underwriter, as the case may be. The relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, provided that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained in the first sentence of subdivision (a) of this Section 2.7, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (f) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (b) of this Section 2.7 had been available under the circumstances. REGISTRATION RIGHTS AGREEMENT-PAGE 12 (VISUAL EDGE) The Company and the holders of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this subdivision (f) were determined by pro rata allocation (even if the holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subdivision (c) of this Section 2.7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (f), no holder of Registrable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue 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. 3. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: 'COMMISSION": The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "COMMON STOCK": As defined in Section 1. "COMPANY": As defined in the introductory paragraph of this Agreement. "CONVERSION SHARES": As defined in Section 1. "EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "NOTES": As defined in Section 1, such term to include any securities issued in substitution of or in addition to such Notes. "NOTE PURCHASE AGREEMENT": As defined in Section 1. "PERSON": A corporation, association, partnership, organization, business, individual, governmental or political subdivision thereof or a governmental agency. REGISTRATION RIGHTS AGREEMENT-PAGE 13 (VISUAL EDGE) "PREFERRED STOCK": As defined in Section 1, such term to include any securities issued in substitution of or in addition to such Preferred Stock. "REGISTRABLE SECURITIES": The Securities and any securities issued or issuable with respect to such Securities by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Once issued such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, (d) they shall have ceased to be outstanding, or (e) on the fifth anniversary of this Agreement. "REGISTRATION EXPENSES": All expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all registration, filing and NASD fees, all stock exchange and SmallCap Market listing fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, the reasonable fees and disbursements of not more than one law firm (not to exceed $25,000) retained by the holder or holders of more than 50% of the Registrable Securities, premiums and other costs of policies of insurance of the Company against liabilities arising out of the public offering of the Registrable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any, provided that, in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event. "SECURITIES ACT": The Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. 4. RULE 144. The Company shall timely file the reports required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, will, upon the request of any holder of Registrable Securities, make publicly available other information) and REGISTRATION RIGHTS AGREEMENT-PAGE 14 (VISUAL EDGE) will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with the requirements of this Section 4. 5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the holder or holders of the sum of the 51% or more of the shares of (i) Registrable Securities issued at such time, plus (ii) Registrable Securities issuable upon exercise or conversion of the Securities then constituting derivative securities (if such Securities were not fully exchanged or converted in full as of the date such consent is sought). Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 5, whether or not such Registrable Securities shall have been marked to indicate such consent. 6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any holder or holders of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. 7. NOTICES. Except as otherwise provided in this Agreement, all notices, requests and other communications to any Person provided for hereunder shall be in writing and shall be given to such Person (a) in the case of a party hereto other than the Company, addressed to such party in the manner set forth in the Note Purchase Agreement or at such other address as such party shall have furnished to the Company in writing, or (b) in the case of any other holder of Registrable Securities, at the address that such holder shall have furnished to the Company in writing, or, until any such other holder so furnishes to the Company an address, then to and at the address of the last holder of such Registrable Securities who has furnished an address to the Company, or (c) in the case of the Company, at the address set forth on the signature page hereto, to the attention of its President, or at such other address, or to the attention of such other officer, as the Company shall have furnished to each holder of Registrable Securities at the time outstanding. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (ii) if given by any other means (including, without limitation, by fax or air courier), when delivered at the address specified above, provided that any such notice, request or communication shall not be effective until received. REGISTRATION RIGHTS AGREEMENT-PAGE 15 (VISUAL EDGE) 8. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent holder of any Registrable Securities, subject to the provisions respecting the minimum numbers or percentages of shares of Registrable Securities required in order to be entitled to certain rights, or take certain actions. contained herein. 9. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. 10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS. 11. COUNTERPARTS. This Agreement may be executed by facsimile and may be signed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. 12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the Company and each other party hereto relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. 14. SEVERABILITY. If any provision of this Agreement, or the application of such provisions to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. [SIGNATURE PAGE FOLLOWS] REGISTRATION RIGHTS AGREEMENT-PAGE 16 (VISUAL EDGE) IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. VISUAL EDGE SYSTEMS INC. By: /s/ Alan Lubell ------------------------------------------ Name: Alan Lubell ---------------------------------------- Title: Chairman of the Board --------------------------------------- Address: 2424 North Federal Highway Suite 100 Boca Raton, Florida 33431 Telephone: (514) 937-0787 Fax: (514) 937-0286 Attn: Earl Takefman With a copy to: David W. Pollak, Esq. Morgan, Lewis & Bockius, LLP 101 Park Avenue New York, New York 10178 Fax: (212) 309-6058 Attn: Earl Takefman INFINITY INVESTORS LIMITED By: /s/ J. A. Loughran ------------------------------------------ Name: J. A. Loughran ---------------------------------------- Title: Director --------------------------------------- Address: 27 Wellington Road Cork, Ireland Telephone: 353-21-501-109 Fax: 353-21-501-255 Attn: J. A. Loughran With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman REGISTRATION RIGHTS AGREEMENT-PAGE 17 (VISUAL EDGE) INFINITY EMERGING OPPORTUNITIES LIMITED By: /s/ J. A. Loughran ------------------------------------------ Name: J. A. Loughran ---------------------------------------- Title: Director --------------------------------------- Address: 27 Wellington Road Cork, Ireland Telephone: 353-21-501-109 Fax: 353-21-501-255 Attn: J. A. Loughran With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman SANDERA PARTNERS, L.P. By: Sandera Capital Management, L.P., its General Partner By: Sandera Capital, L.L.C., its General Partner By: /s/ Clark K. Hunt -------------------------------- Name: Clark K. Hunt ------------------------------ Title: Managing Director ----------------------------- Address: 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman REGISTRATION RIGHTS AGREEMENT-PAGE 18 (VISUAL EDGE) With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman LION CAPITAL PARTNERS, L.P. By: Mountain Capital Management, L.L.C., its General Partner By: /s/ Clark K. Hunt ------------------------------------- Name: Clark K. Hunt ----------------------------------- Title: Managing Director ---------------------------------- Address: 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: (214) 720-1600 Fax: (214) 720-1662 Attn.: Barrett Wissman REGISTRATION RIGHTS AGREEMENT-PAGE 19 (VISUAL EDGE) EX-99.3 4 TRANSFER AGENT AGREEMENT Exhibit 99.3 TRANSFER AGENT AGREEMENT THIS TRANSFER AGENT AGREEMENT (this "Agreement"), dated as of June 13, 1997, among VISUAL EDGE SYSTEMS INC. a Delaware corporation (the "Company"), INFINITY INVESTORS LIMITED, a Nevis West Indies corporation ("Infinity"), INFINITY EMERGING OPPORTUNITIES LIMITED, a Nevis West Indies corporation ("IEOL"), SANDERA PARTNERS, L.P. (Sandera"), a Texas limited partnership, and LION CAPITAL PARTNERS, L.P. ("Lion"), a Texas limited partnership, being collectively being referred to as the "Holders") and AMERICAN STOCK TRANSFER & TRUST COMPANY (the "Transfer Agent"). R E C I T A L S: WHEREAS, pursuant to that certain Bridge Securities Purchase Agreement dated the date hereof (the "Purchase Agreement") by and among the Company and the Holders, the Company agreed to issue to the Holders $7,500,000 aggregate principal amount of convertible notes (the "Convertible Notes"), which are (i) at any time after January 1, 1998, convertible, at the option of the Holders, into shares of common stock, $.01 par value per share, of the Company (the "Common Stock") and (ii) under certain circumstances described in the Purchase Agreement exchangeable for shares of Series A Convertible Preferred Stock of the Company (the "Preferred Shares") which, at the option of the Holders, are convertible into shares of Common Stock (such shares issuable upon such conversion of the Convertible Notes and/or Preferred Shares being referred to as the "Shares"); and WHEREAS, the Company and the Holders have agreed to enter into this Agreement with the Transfer Agent to (i) facilitate the closing of the Purchase Agreement (the "Closing"), (ii) provide for a system of accounting for the Convertible Notes and Preferred Shares (the "Convertible Instruments") and (iii) facilitate the conversion of the Convertible Instruments and issuance of the Shares associated therewith. NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree as follows: 1. CLOSINGS. The Transfer Agent hereby agrees to act as an escrow agent to facilitate the Closing as follows: (a) On the date hereof, the Holders shall wire transfer to an account designated by the Transfer Agent $7,500,000 in the aggregate (the "Purchase Price"), and the Company shall deliver to the Transfer Agent (i) the Convertible Notes, (ii) the Grant Shares (as defined in the Purchase Agreement) and (iii) the Warrants (as defined in the Purchase TRANSFER AGENT AGREEMENT-PAGE 1 (VISUAL EDGE SYSTEMS INC.) Agreement), in the names of the Holders and in the amounts as set forth on Schedule 1 hereto. The Transfer Agent may, at its discretion, confirm the authenticity of the Convertible Notes, Grant Shares and Warrants by transmitting a copy of the same in the form received from the Company to Infinity, on behalf of the Holders, or its counsel, for written or oral verification as to the form thereof. (b) Immediately following such deliveries, together with a delivery from the Company to the Transfer Agent of a fully executed copy of the Purchase Agreement, the Transfer Agent shall wire transfer to the Company the Purchase Price less $26,500 (I) (the "Expense Reimbursement Fee"), (II) $187,500 (the "Alpine Fee") and (III) the sum specified by the Company (the "Bank Payoff Amount") necessary to repay in full the Barnett Bank Facility (as such term is defined in the Purchase Agreement), pursuant to wire transaction or other instructions as provided by the Company. The Transfer Agent shall also wire transfer (I) the Expense Reimbursement Fee to the Holders, care of HW Partners L.P., pursuant to wire transfer or other instructions provided by HW Partners, L.P., (II) the Alpine Fee to Alpine Capital Partners, Inc. pursuant to wire transfer or other instructions provided by Alpine Capital Partners, Inc., and (III) the Bank Payoff Amount to the bank specified by the Company, pursuant to wire transfer or other instructions provided by the Company. All interest (if any) earned on the funds placed in escrow and prior to their distribution as set forth herein shall be for the account of the Holders. (c) Contemporaneous with the transfer of funds as described in Subsection (b) above, the Transfer Agent shall (i) deliver the Grant Shares and the Warrants to the Holders at the addresses set forth herein and (ii) hold the Convertible Notes for the benefit of the Holders, as hereafter described. (d) Notwithstanding the foregoing, by joint written agreement, the Holders and the Company may agree to effect the Closing without using the services of the Transfer Agent. In such event, the Holders shall (i) wire transfer the Purchase Price, less the Expense Reimbursement Fee, Alpine Fee and Bank Payoff Amount to the Company against counter-delivery by the Company of the original Convertible Notes, Grant Shares and Warrants to the Holders or their designee, (ii) wire transfer the Expense Reimbursement Fee to HW Partners, L.P., (iii) wire transfer the Alpine Fee to Alpine Capital Partners, Inc., (iv) wire transfer the Bank Payoff Amount in a mutually agreeable manner and (v) thereafter deliver the Convertible Notes to the Transfer Agent to be held for the benefit of the Holders pursuant to the terms of this Agreement. (e) As contemplated by Section 3.8 of the Purchase Agreement, upon a Recapitalization Event (as defined therein), the Company shall promptly deliver the Preferred Shares, together with the letter specified by Section 3.8 of the Purchase Agreement, to the Transfer Agent, with a copy thereof to the Holders. Thereafter, the Transfer Agent shall account for the Convertible Notes and Preferred Shares in accordance with the terms hereof, including reduction in the Accounting Ledger (as hereafter defined) of the principal balance of TRANSFER AGENT AGREEMENT-PAGE 2 (VISUAL EDGE SYSTEMS INC.) the Convertible Notes by the principal amount (liquidation value) of the Preferred Shares received upon consummation of a Recapitalization Event. 2. OWNERSHIP OF CONVERTIBLE NOTES. Record and beneficial ownership of the Convertible Instruments shall remain in the name of the Holders (unless and until transferred pursuant to the terms thereof, with written notice thereof to the Transfer Agent). Any transfer or purported transfer of the Convertible Instruments (a) not made pursuant to the terms of the Convertible Instruments and (b) not properly noticed to the Transfer Agent shall be null and void AB INITIO and shall not be given effect thereto by the Transfer Agent. The Transfer Agent shall not be required to acknowledge any transfer of the Convertible Instruments unless accompanied by written confirmation thereof from the Holders. 3. PAYING AGENT. The Transfer Agent shall act as paying agent for the Convertible Instruments. Accordingly, all payments of interest, dividends, redemption and/or principal amounts required of the Company related to the Convertible Instruments shall be made to the Transfer Agent for the account and benefit of the holders of such Convertible Instruments as registered on the books of the Transfer Agent (each, a "Registered Holder"). Upon the receipt of any such payment of interest or principal amounts, in cash, the Transfer Agent shall promptly wire transfer such sum to the account of the Registered Holders as reflected on the books of the Transfer Agent. The wire transfer account of each Holder is as set forth on Schedule 2 attached hereto. The address of each Holder is as set forth in Section 8 hereof. In the event the Company exercises its option to pay interest or dividends on the Convertible Instruments in shares of Common Stock, the Company shall so advise the Transfer Agent at least two (2) Business Days prior to the applicable interest or dividend payment date, and shall irrevocably direct the Transfer Agent to issue the appropriate number of shares of Common Stock representing interest or dividends, as applicable, to the Registered Holder on the applicable interest or dividend payment date. 4. ACCOUNTING AGENT. The Transfer Agent shall act as the accounting agent of the Company and the Registered Holders and shall establish and maintain an accounting ledger for the Convertible Instruments (the "Accounting Ledger"). The Transfer Agent shall credit (reduce) the outstanding balance of liquidation preference of the Convertible Instruments by all (i) payments of principal, interest or dividends made by the Company to the Transfer Agent as paying agent as required pursuant to Section 3 above and (ii) by the appropriate amount upon delivery of Shares to the applicable Registered Holder following receipt of a Notice of Conversion (as defined in Section 5 below). At such time as the balance of the Convertible Notes and liquidation preference of the Preferred Shares, as applicable, as reflected on the Accounting Ledger is zero following the procedures described in this Agreement, the Transfer Agent shall return such Convertible Notes and/or Preferred Shares to the Company marked "paid in full" or "cancelled", respectively. 5. ISSUANCE OF CONVERTED SHARES. TRANSFER AGENT AGREEMENT-PAGE 3 (VISUAL EDGE SYSTEMS INC.) (a) Consistent with the terms of the Certificate of Designation and each Convertible Note, in order to convert all or a portion of a Convertible Instrument into Shares, a Registered Holder shall deliver written notice (each, a "Notice of Conversion"), in the form annexed to the Purchase Agreement, to the Transfer Agent for the portion of the Convertible Instrument that it elects to so convert and a calculation of the number of Shares to be issued upon such conversion. Upon receipt by the Transfer Agent of any such Notice of Conversion (including receipt via facsimile) from any Registered Holder, the Transfer Agent shall immediately deliver a copy thereof to the Company, via facsimile, requesting the Company to confirm the number of Shares to be issued to such Registered Holder in connection therewith. The Company shall, upon receipt thereof, promptly confirm or dispute the number of Shares to be issued to the Registered Holder, providing written notice thereof via facsimile to the Transfer Agent and the Registered Holder (the "Company Notice"). In the event the Company confirms the number of Shares to be so issued, it shall, as part of the Company Notice, direct the Transfer Agent to issue such Shares to the Registered Holder. In the event the Company disputes the number of Shares to be so issued, the Company and the Registered Holder shall immediately, in good faith, seek to resolve such dispute. (b) The Transfer Agent shall not be required to issue any Shares unless and until receipt (including via facsimile) of (i) written notice from either (x) the Company, confirming the number of Shares to be issued or (y) the Registered Holder and the Company, setting forth the number of Shares to be issued, or (ii) a final nonappealable order of a court of competent jurisdiction directing the Transfer Agent to issue a specified number of Shares. Notwithstanding the foregoing, each Holder expressly reserves all rights and remedies against the Company for the failure of the Company to confirm to the Transfer Agent in any applicable Company Notice the number of Shares issuable as set forth in a properly completed and accurate Notice of Conversion. (c) Reference is hereby made to that certain Registration Rights Agreement appended to the Purchase Agreement. At such time as a Second Registration Statement as contemplated therein has been declared effective by the Securities and Exchange Commission covering the resale of the Shares, the Company shall cause its legal counsel to deliver to the Transfer Agent an opinion certifying that Shares may be sold by the Registered Holder pursuant to such registration statement with the purchaser thereof receiving share certificates, without restrictive legend, which opinion shall remain effective so long as such Second Registration Statement remains in full force and effect. In the event that, at any time, the Second Registration Statement ceases to be effective, the Company or its legal counsel shall immediately deliver written notice thereof to the Transfer Agent and the Registered Holders stating that the opinion of the Company's legal counsel may no longer be relied upon by the Transfer Agent (unless and until an additional or amended, as applicable, Second Registration Statement is so declared effective with an accompanying opinion to that effect from the Company's legal counsel). Upon the receipt of any Notice of Conversion while a Second Registration Statement is effective, the share certificates representing the Shares described above shall be with a restrictive legend unless the Registered Holder, either in connection with the delivery of the Notice of Conversion or TRANSFER AGENT AGREEMENT-PAGE 4 (VISUAL EDGE SYSTEMS INC.) thereafter, delivers written notice to the Transfer Agent and the Company (including notice via telecopy) that the Shares have been sold by the Registered Holder pursuant to such registration statement, whereupon the Transfer Agent shall issue share certificates to the purchaser thereof without restrictive legend. 6. TERMINATION. This Agreement shall terminate promptly upon the earlier to occur of (i) written demand by the Company and all Registered Holders or (ii) no unpaid balance or liquidation preference remains with respect to any of the Convertible Instruments. Notwithstanding the foregoing, the Transfer Agent may terminate its obligations under this Agreement at such time as the Transfer Agent no longer serves as the Transfer Agent for the Company's Common Stock, by delivery of written notice thereof to the Registered Holders and the Company. Upon delivery of such notice, the Transfer Agent shall deliver the original Convertible Instruments to Infinity on behalf of all Registered Holders, together with a copy of the Accounting Ledger (with corresponding copies delivered to the Company). Immediately thereafter, Infinity and the Company shall, in good faith, attempt to establish an agreement similar to this Agreement with the Company's new stock transfer agent. 7. FEES. The Company hereby agrees to pay the Transfer Agent for reasonable fees charged for all services rendered hereunder. 8. NOTICES. Any notice or demand to be given or that may be given under this Agreement shall be in writing and shall be (a) delivered by hand, (b) delivered through or by expedited mail or package service, or (c) transmitted by telecopy, in each case with personal delivery acknowledged, addressed to the parties as follows. Each such notice or demand shall be effective (i) if given by telecopy, when such telecopy is transmitted to telecopier number specified in this Agreement, (ii) if given by any other means, when delivered at the addressed as specified herein. As to the Company Visual Edge Systems Inc. 2424 North Federal Highway, Ste. 100 Boca Raton, Florida 33431 Telephone: (514) 937-0787 Fax: (514) 937-0286 With a copy to: David W. Pollak Morgan, Lewis & Bockius, LLP 101 Park Avenue New York, York 10178 Fax: (212) 309-6058 As to: Infinity Investors Limited and Infinity Emerging Opportunities Limited 27 Wellington Road TRANSFER AGENT AGREEMENT-PAGE 5 (VISUAL EDGE SYSTEMS INC.) Cork, Ireland Telephone: 353-21-501-109 Fax: 353-21-501-255 Attn: J. A. Loughran With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: 214/720-1600 Fax: 214/720-1662 Attn.: Barrett Wissman As to: Sandera Partners, L.P. and Lion Capital Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: 214/720-1600 Fax: 214/720-1662 Attn: Barrett Wissman With a copy to: HW Partners, L.P. 1601 Elm Street 4000 Thanksgiving Tower Dallas, Texas 75201 Telephone: 214/720-1600 Fax: 214/720-1662 Attn: Barrett Wissman As to any other As set forth on the books of Registered Holder: the Transfer Agent. As to the Transfer Agent American Stock Transfer & Trust Company 2601 15th Avenue Brooklyn, New York 11219 Fax: (718) 331-1852 Telephone: (718) 331-1852 9. NONCONTRAVENTION. The Company agrees that it will not at any time take any action or undertake any activity that would in any material way impede, restrict or limit the right TRANSFER AGENT AGREEMENT-PAGE 6 (VISUAL EDGE SYSTEMS INC.) and ability of the Registered Holders to convert the Convertible Instruments and receive Shares pursuant to the terms and provisions of this Agreement. 10. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the Transfer Agent, each officer, director, employee and agent of the Transfer Agent, and each person, if any, who controls the Transfer Agent within the meaning of the Securities Act of 1933, as amended (the "Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any losses, claims, damages, or liabilities, joint or several, to which it, they or any of them, or such controlling person, may become subject, under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the performance by the Transfer Agent of its duties pursuant to the Agreement; and will reimburse the Transfer Agent, and each officer, director, employee and agent of the Transfer Agent, and each such controlling person for any reasonable legal or other expenses reasonably incurred by it or any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any case if such loss, claim, damage or liability arises out of or is based upon any action not taken in good faith, or any action or omission that constitutes gross negligence or willful misconduct. Promptly after receipt by an indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the Company under this Section, notify in writing the Company of the commencement thereof, and failure so to notify the Company will relieve the Company from any liability under this Section as to the particular item for which indemnification is then being sought but not from any other liability which it may have to any indemnified party. Failure by the Transfer Agent to notify the Company shall not relieve the Company from its indemnification obligations hereunder, unless such failure materially prejudices the Company. In case any such action is brought against any indemnified party, and it notifies the Company of the commencement thereof, the Company will be entitled to assume the defense thereof, with counsel who shall be to the reasonable satisfaction of such indemnified party. The Company shall not be liable to any such indemnified party on account of any settlement of any claim of action effected without the consent of the Company. 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except where the Delaware General Corporation Law would apply, without giving effect to conflicts of law rules of such jurisdiction. Any action brought to enforce, or otherwise arising out of, this Agreement, shall be heard and determined in either a federal or state court sitting in the State of New York. 12. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, constitutes the full and entire understanding of the parties with respect to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged, or terminated other than TRANSFER AGENT AGREEMENT-PAGE 7 (VISUAL EDGE SYSTEMS INC.) by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts and by facsimile signature. [SIGNATURE PAGE FOLLOWS] TRANSFER AGENT AGREEMENT-PAGE 8 (VISUAL EDGE SYSTEMS INC.) IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date first above written. VISUAL EDGE SYSTEMS INC. By: /s/ Alan Lubell ----------------------------------------------- Title: Chairman of the Board -------------------------------------------- INFINITY INVESTORS LIMITED By: /s/ J. A. Loughran ----------------------------------------------- Title: Director -------------------------------------------- INFINITY EMERGING OPPORTUNITIES LIMITED By: /s/ J. A. Loughran ----------------------------------------------- Title: Director -------------------------------------------- SANDERA PARTNERS, L.P. By: Sandera Capital Management, L.P., its General Partner By: Sandera Capital, L.L.C., its General Partner By: /s/ Clark K. Hunt ------------------------------------- Title: Managing Director ---------------------------------- LION CAPITAL PARTNERS, L.P. By: Mountain Capital Management, L.L.C., its General Partner By: /s/ Clark K. Hunt ------------------------------------------- Title: Managing Director ---------------------------------------- TRANSFER AGENT AGREEMENT-PAGE 9 (VISUAL EDGE SYSTEMS INC.) AMERICAN STOCK TRANSFER & TRUST COMPANY By: /s/ Herbert J. Lemmer ----------------------------------------------- Title: Vice President -------------------------------------------- TRANSFER AGENT AGREEMENT-PAGE 10 (VISUAL EDGE SYSTEMS INC.) EX-99.4 5 FORM OF STOCK PURCHASE WARRANT Exhibit 99.4 THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"); OR UNDER ANY APPLICABLE LAW OR REGULATION OF ANY STATE. THIS COMMON STOCK WARRANT MAY NOT BE SOLD, OFFERED, ASSIGNED OR TRANSFERRED UNLESS THE WARRANT IS REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES, ASSIGNMENTS AND TRANSFERS ARE MADE PURSUANT TO THE AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THESE SECURITIES ARE SUBJECT TO CERTAIN LIMITATIONS ON CONVERSION AS DESCRIBED IN THAT CERTAIN BRIDGE SECURITIES PURCHASE AGREEMENT DATED THE DATE HEREOF (THE "PURCHASE AGREEMENT") BETWEEN, AMONG OTHERS, THE COMPANY AND THE INITIAL HOLDER HEREOF. THIS COMMON STOCK PURCHASE WARRANT CERTIFICATE REFERS TO AND IS SPECIFICALLY GOVERNED BY CERTAIN PROVISIONS CONTAINED IN THE PURCHASE AGREEMENT, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. VISUAL EDGE SYSTEMS INC. COMMON STOCK PURCHASE WARRANT DATED: June 13, 1997 No. 1 Number of Common Shares: 60,000 Holder: Infinity Investors Limited Purchase Price: $10.675 27 Wellington Road Expiration Date: June 13, 2002 Cork, Ireland For identification only. The governing terms of this Warrant are set forth below. Visual Edge Systems Inc., a Delaware corporation (the "COMPANY"), hereby certifies that, for value received, Infinity Investors Limited or assigns (each a "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time after the date hereof and prior to the fifth anniversary hereof (the "EXERCISE PERIOD"), at the Purchase Price hereinafter set forth, sixty thousand (60,000) fully paid and nonassessable shares of Common Stock (as hereinafter defined) of the Company. The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. This Warrant (this "Warrant"; such term to include any warrants issued in substitution therefor) is one of a series of Common Stock Purchase Warrants issued in connection with that certain Bridge Securities Purchase Agreement (the "Purchase Agreement") dated of even date herewith between, among others, the initial Holder hereof and the Company. COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 1 (VISUAL EDGE SYSTEMS INC.) The purchase price per share of Common Stock issuable upon exercise of this Warrant (the "PURCHASE PRICE") shall initially be $10.675; PROVIDED, HOWEVER, that the Purchase Price shall be adjusted from time to time as provided herein. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "COMPANY" shall include Visual Edge Systems Inc. and any entity that shall succeed or assume the obligations of such corporation hereunder. (b) The term "COMMON STOCK" includes (a) the Company's common stock, $.01 par value per share, (b) any other capital stock of any class or classes (however designated) of the Company, authorized on or after such date, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference, and the holders of which shall ordinarily, in the absence of contingencies, be entitled to vote for the election of a majority of directors of the Company (even though the right so to vote has been suspended by the happening of such a contingency) and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. (c) The term "OTHER SECURITIES" refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) that the holder of this Warrant at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or that at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise. 1. EXERCISE OF WARRANT. 1.1. METHOD OF EXERCISE. This Warrant may be exercised in whole or in part (but not as to a fractional share of Common Stock), at any time and from time to time during the Exercise Period, by the Holder hereof by delivery of a notice of exercise (a "Notice of Exercise") substantially in the form attached hereto as EXHIBIT A via facsimile to the Company. Promptly thereafter the Holder shall surrender this Warrant to the Company at its principal office, accompanied by payment of the Purchase Price multiplied by the number of shares of Common Stock for which this Warrant is being exercised (the "EXERCISE PRICE"). Payment of the Exercise Price shall be made by check or bank draft payable to the order of the Company or by wire transfer to the account of the Company. If the amount of the payment received by the Company is less than the Exercise Price, the Holder will be notified of the deficiency and shall make payment in COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 2 (VISUAL EDGE SYSTEMS INC.) that amount within five (5) business days. In the event the payment exceeds the Exercise Price, the Company will promptly refund the excess to the Holder. Upon exercise, the Holder shall be entitled to receive, promptly after payment in full, one or more certificates, issued in the Holder's name or in such name or names as the Holder may direct, subject to the limitations on transfer contained herein, for the number of shares of Common Stock so purchased. The shares so purchased shall be deemed to be issued as of the close of business on the date on which the Company shall have received from the Holder payment of the Exercise Price (the "EXERCISE DATE"). 1.2. REGULATION D RESTRICTIONS. The Holder hereof represents and warrants to the Company that it has acquired this Warrant and anticipates acquiring the shares of Common Stock issuable upon exercise of the Warrant solely for its own account for investment purposes and not with a view to or for distributing such securities unless such distribution has been registered with the Securities and Exchange Commission or an applicable exemption is available therefor. At the time this Warrant is exercised, the Company may require the Holder to state in the Notice of Exercise such representations concerning the Holder as are necessary or appropriate to assure compliance by the Holder with the Securities Act. 1.3. COMPANY ACKNOWLEDGMENT. The Company will, at the time of the exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder any rights to which the Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to the Holder any such rights. 1.4. LIMITATION ON EXERCISE. Notwithstanding the rights of the Holder to exercise all or a portion of this Warrant as described herein, such exercise rights shall be limited solely in the manner set forth in the Purchase Agreement as if such provisions were specifically set forth herein. 2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as practicable after the exercise of this Warrant, and in any event within the time periods specified in the Purchase Agreement, the Company at its expense (including the payment by it of any applicable issue, stamp or transfer taxes upon issuance to the Holder) will cause to be issued in the name of and delivered to the Holder thereof, or, to the extent permissible hereunder, to such other person as the Holder may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock (or Other Securities) to which the Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash equal to such fraction multiplied by the then applicable Purchase Price, together with any other stock or other securities and property (including cash, where applicable) to which the Holder is entitled upon such exercise pursuant to Section 1 or otherwise. COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 3 (VISUAL EDGE SYSTEMS INC.) 3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK PROPERTY, ETC., RECLASSIFICATION, ETC. In case at any time or from time to time the holders of Common Stock (or Other Securities) shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) by way of dividend or any cash (excluding cash dividends payable solely out of earnings or earned surplus of the Company), or other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement other than additional shares of Common Stock (or Other Securities) issued as a stock dividend or in a stock split (adjustments in respect of which are provided for in Section 5), then and in each such event, the Holder of this Warrant, on the exercise hereof as provided in Section 1 shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 3) that the Holder would have been entitled to receive on the effective date of such event if the Holder had so exercised this Warrant immediately prior thereto, giving effect to all adjustments called for during such period by Sections 4 and 5. 4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. 4.1. REORGANIZATION, ETC. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the Holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which the Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if the Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided herein. 4.2. DISSOLUTION. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Warrant after the effective date of such dissolution pursuant to this Section 4 to a bank or trust company, as trustee for the Holder or Holders of this Warrant. 4.3. CONTINUATION OF TERMS. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 4 (VISUAL EDGE SYSTEMS INC.) Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 8. 5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. The Purchase Price to be paid by the Holder upon exercise of this Warrant shall be adjusted in case at any time or from time to time the Company should (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 shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock as a dividend to all or substantially all holders of shares of Common Stock or (iv) issue by reclassification of shares of Common Stock, any shares of capital stock of the Company, in each event pursuant to Article XI of the Purchase Agreement as if such provisions were specifically set forth herein. 6. EXERCISE PRICE RESET. If the Company is obligated to issue any Additional Grant Shares (as defined in the Purchase Agreement), the Purchase Price shall thereupon become immediately adjusted in the manner set forth on SCHEDULE 1 attached hereto. 7. REDEMPTION. 7.1. VOLUNTARY REDEMPTION. The Company may, at any time commencing October 1, 1998 (but not prior thereto), at its option and following at least thirty (30) days prior written notice to the Holder, redeem (each, a "Redemption") for cash from funds legally available therefor, all or any portion of this Warrant for a redemption price per share (the "Redemption Price") equal to $.10 per share of Common Stock (or Other Securities) issuable upon exercise of this Warrant (the "Warrant Shares") on the Redemption Date (as hereinafter defined); PROVIDED, HOWEVER, that if (1) the Threshold Price (as hereinafter defined) on the Reference Date (as hereinafter defined) is equal to or in excess of $17.50 and the Redemption Date is between October 1, 1998 and March 31, 1999, then the Company may redeem up to (but not more than) 33-1/3% of the total number of Warrant Shares underlying this Warrant; (2) the Threshold Price on the Reference Date is equal to or in excess of $20.00 and the Redemption Date is between April 1, 1999 and September 30, 1999, then the Company may redeem up to (but not more than) 66-2/3% of the total number of Warrant Shares underlying this Warrant; and (3) the Threshold Price on the Reference Date is equal to or in excess of $22.50 and the Redemption Date is after October 1, 1999, then the Company may redeem up to 100% of the total number of Warrant Shares underlying this Warrant. As used herein "Threshold Price" shall mean the lowest closing bid price for the Common Stock (as specified by Bloomberg, L.P.) during the [20] trading days ending three days prior to the date on which the Company delivers the Redemption Notice and "Reference Date" shall mean COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 5 (VISUAL EDGE SYSTEMS INC.) such third (3rd) day preceding the date on which the Redemption Notice is delivered to the Holders. 7.2. NOTICE OF REDEMPTION. If the Company elects to redeem any or all of this Warrant pursuant to the terms hereof, the Company shall (i) give not less than thirty (30) days prior written notice of such Redemption (the "Redemption Notice") to the Holder (together with each of the other holders of the warrants of the same class hereof) at such Holder's address as it appears on the books and records of the Company by facsimile transmission (if such Holder shall have provided a facsimile number), and (ii) set aside, apart from its other funds, or provide written evidence reasonably satisfactory to each Holder of the Company's ability to fund the Redemption Price in the amount equal to the Redemption Price subject to Redemption at that time for the benefit of all Holders subject to Redemption; and the Warrant Shares then subject to Redemption and not otherwise converted prior to the Redemption Date shall, on the date which is thirty (30) days after the deposit of Redemption Notice in accordance with clause (i) of this sentence (the "Redemption Date"), cease to be outstanding and the rights of the Holders and owners thereof shall be limited to payment of the Redemption Price thereof. The Company shall deliver the Redemption Price to the Holders in cash or by wire transfer as indicated by the Holder within two (2) business days of the Redemption Date. Should any Holder not receive payment of any amounts due on Redemption of its Warrant Shares by reason of the Company's failure to make payment at the times described above for any reason (other than as a result of any action by Holder in breach of this Warrant or the Purchase 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 sixteen percent (16%), compounding 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. The Redemption Price shall (in the reasonable discretion of the Board of Directors of the Company) be adjusted to take into account any stock split or other similar event. 7.3. SELECTION OF WARRANT SHARES. The Company shall select the Warrants to be redeemed in a Redemption in which not all Warrants of this class are to be redeemed so that the Warrant Shares of each Holder selected for Redemption shall bear the same proportion to the total Warrant Shares owned by that Holder that the proportion of all Warrant Shares selected for Redemption bears to the total number of Warrant Shares. Should any Warrant Shares required to be redeemed under the terms hereof not be redeemed solely by reason of limitations imposed by law, the applicable Warrant Shares shall be redeemed on the earliest possible date that the applicable Warrant Shares may be redeemed to the maximum extent permitted by law. Except as set forth above, the Board of Directors shall prescribe the manner in which any Redemption shall be effected. 8. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 6 (VISUAL EDGE SYSTEMS INC.) observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefor on 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 nonassessable shares of stock on the exercise of this Warrant and (c) will not transfer all or substantially all of its properties and assets to any other person (corporate or otherwise), or consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company (if the Company is not the surviving person), unless such other person shall expressly assume in writing and will be bound by all the terms of this Warrant. 9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) or the Purchase Price issuable on the exercise of this Warrant, the Company at its expense will cause independent certified public accountants of national standing selected by the Company (which may be the Company's auditors) to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding and (c) the Purchase Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such issue or sale and as adjusted and readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder of this Warrant, and will, on the written request at any time of the Holder of this Warrant, furnish to the Holder a like certificate setting forth the Purchase Price at the time in effect and showing how it was calculated. Notwithstanding the foregoing, the Company shall not be required to cause its independent certified public accountants to deliver more than one (1) such certificate in each calendar quarter. 10. NOTICES OF RECORD DATE, ETC. In the event of (a) any taking by the Company of a record of the holders of any class or securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to, or consolidation or merger of the Company with or into, any other person, or COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 7 (VISUAL EDGE SYSTEMS INC.) (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such event, the Company will mail or cause to be mailed to the Holder of this Warrant a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any action is to be taken. 11. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, all shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant. 12. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant, properly endorsed, to the Company, the Company at its expense will issue and deliver to or on the order of the holder thereof a new Warrant of like tenor, in the name of such Holder or as such Holder (on payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face of the Warrant so surrendered. 13. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 14. REMEDIES. The Company stipulates that the remedies at law of the Holder of this Warrant in the event of any default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to all of which each Holder or owner hereof by the taking hereof consents and agrees: COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 8 (VISUAL EDGE SYSTEMS INC.) (a) title to this Warrant may be transferred by endorsement (by the Holder hereof executing the form of assignment at the end hereof) and delivery in the same manner as in the case of a negotiable instrument transferable by endorsement and delivery; (b) any person in possession of this Warrant properly endorsed is authorized to represent himself as absolute owner hereof and is empowered to transfer absolute title hereto by endorsement and delivery hereof to a BONA FIDE purchaser hereof for value; each prior taker or owner waives and renounces all of his equities or rights in this Warrant in favor of each such BONA FIDE purchaser, and each such BONA FIDE purchaser shall acquire absolute title hereto and to all rights represented hereby; (c) until this Warrant is transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary; and (d) notwithstanding the foregoing, this Warrant may not be sold, transferred or assigned except pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Act"), or, pursuant to an applicable exemption therefrom (including in accordance with Regulation D promulgated under the Act). 16. REGISTRATION RIGHTS. The Company is obligated to register the shares of Common Stock issuable upon exercise of this Warrant in accordance with the terms of a Registration Rights Agreement between the Company and the Holder dated the date hereof. 17. NOTICES, ETC. All notices and other communications from the Company to the holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by the Holder or, until any the Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 18. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of New York, except where the Delaware General Corporation Law applies. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. [SIGNATURE PAGE FOLLOWS] COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 9 (VISUAL EDGE SYSTEMS INC.) DATED as of June 13, 1997. VISUAL EDGE SYSTEMS INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ [Corporate Seal] Attest: By:______________________ Secretary COMMON STOCK PURCHASE WARRANT NO. 1-PAGE 10 (VISUAL EDGE SYSTEMS INC.) EXHIBIT A FORM OF NOTICE OF EXERCISE -------------------------- (To be executed only upon exercise or conversion of the Warrant in whole or in part) To Visual Edge Systems Inc. The undersigned registered holder of the accompanying Warrant hereby exercises such Warrant or portion thereof for, and purchases thereunder, ______________(1) shares of Common Stock (as defined in such Warrant) and herewith makes payment therefor of $__________. The undersigned requests that the certificates for such shares of Common Stock be issued in the name of, and delivered to, _________________________________ whose address is ______________ ________________________________________________________. Dated: ____________________ (Name must conform to name of holder as specified on the face of the Warrant) By:_____________________________________ Name:________________________________ Title:_______________________________ Address of holder: ________________________________________ ________________________________________ ________________________________________ 1 Insert the number of shares of Common Stock as to which the accompanying Warrant is being exercised. In the case of a partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of the accompanying Warrant, to the holder surrendering the same. EX-99.5 6 FORM OF CONVERTIBLE NOTE THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A BRIDGE SECURITIES PURCHASE AGREEMENT DATED AS OF JUNE 13, 1997, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION RIGHTS AND OBLIGATIONS, (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING HEREWITH MAY BE ACCELERATED AND (D) SPECIFY CIRCUMSTANCES IN WHICH A PORTION OF THIS CONVERTIBLE NOTE MAY BE AUTOMATICALLY EXCHANGED FOR SHARES OF SERIES A PREFERRED STOCK OF THE COMPANY. No. 1 $4,500,000 VISUAL EDGE SYSTEMS INC. CONVERTIBLE NOTE VISUAL EDGE SYSTEMS INC., a Delaware corporation (together with its successors, the "Company"), for value received hereby promises to pay to INFINITY INVESTORS LIMITED (the "Holder") and registered assigns the principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000) on the Maturity Date by wire transfer of immediately available funds to the Holder in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, quarterly in arrears, on (i) the last day of March, June, September and December of each year until the Maturity Date, commencing September 30, 1997 (unless such day is not a Business Day, in which event on the next succeeding Business Day) (each an "Interest Payment Date"), (ii) the Maturity Date, (iii) each Conversion Date, as hereafter defined, and (iv) the date the principal amount of the Convertible Notes shall be declared to be or shall automatically become due and payable, on the principal sum hereof outstanding in like coin or currency, at the rates per annum set forth below, from the most recent Interest Payment Date to which interest has been paid on CONVERTIBLE NOTE NO. 1 - PAGE 1 (Visual Edge Systems Inc.) this Convertible Note, or if no interest has been paid on this Convertible Note, from the date of this Convertible Note until payment in full of the principal sum hereof has been made. The interest rate shall be (i) 8.25 percent per annum until the occurrence of an Event of Default and (ii) 18 percent per annum after the occurrence of an Event of Default (the "Interest Rate") or, in any case, if less, the maximum rate permitted by applicable law. Past due amounts (including interest, to the extent permitted by law) will also accrue interest at the Interest Rate and will be payable on demand. Interest on this Convertible Note will be calculated on the basis of a 360-day year of twelve 30 day months. Interest on this Convertible Note will, at the option of the Company, be payable in cash or in shares of Common Stock. If the Company elects to pay interest in shares of Common Stock, the number of shares of Common Stock issued as interest shall be determined by dividing the dollar amount of interest owed on each applicable date interest is payable pursuant to the terms hereof by the (x) Market Price, if the relevant interest payment date occurs during the Bridge Period, or (y) the Conversion Price then in effect, if the relevant interest payment date occurs after the expiration of the Bridge Period. The Company shall notify the Holder of its election to pay interest in Common Stock or cash at least two (2) Business Days prior to the applicable date interest is payable pursuant to the terms hereof. All payments of principal and interest hereunder shall be made for the benefit of the Holder pursuant to the terms of the Transfer Agent Agreement. This Convertible Note is one of a duly authorized issuance of $7,500,000 aggregate principal amount of Convertible Notes of the Company (the "Convertible Note") referred to in the Bridge Securities Purchase Agreement dated as of June 13, 1997 between the Company, Infinity Investors Limited, Infinity Emerging Opportunities Limited, Sandera Partners, L.P. and Lion Capital Partners, L.P. (as the same may be amended from time to time in accordance with its terms, the "Agreement"). The Agreement contains certain additional agreements among the parties with respect to the terms of this Convertible Note, including, without limitation, provisions which (i) limit the conversion rights of the Holder, (ii) specify voluntary and mandatory repayment, prepayment and redemption rights and obligations, (iii) specify Events of Default following which the remaining balance due and owing hereunder may be accelerated and (iv) specify circumstances in which a portion of this Convertible Note shall be automatically exchanged for shares of Series A Preferred Stock of the Company. All such provisions are an integral part of this Convertible Note and are incorporated herein by reference. This Convertible Note is transferable and assignable to one or more purchasers (in minimum denominations of $1,000 or larger multiples of $1,000), in accordance with the limitations set forth in the Agreement. The Company shall keep through the Transfer Agent a register (the "Register") in which shall be entered the names and addresses of the registered holder of this Convertible Note and particulars of this Convertible Note held by such holder and of all transfers of this Convertible Note. References to the Holder or "Holders" shall mean the Person listed in the Register as the CONVERTIBLE NOTE NO. 1 - PAGE 2 (Visual Edge Systems Inc.) registered holder of such Convertible Notes. The ownership of this Convertible Note shall be proven by the Register. l. CERTAIN TERMS DEFINED. All terms defined in the Agreement and not otherwise defined herein shall have for purposes hereof the meanings provided for therein. 2. COVENANTS. Unless the Majority Holders otherwise consent in writing, the Company covenants and agrees to observe and perform each of its obligations and undertakings contained in the Agreement, which obligations and undertakings are expressly assumed herein by the Company and made for the benefit of the Holders. 3. PREPAYMENT OF CONVERTIBLE NOTE . The Company may, and shall be obligated to, prepay all or a portion of this Convertible Note on the terms and conditions specified in the Agreement. 4. CONVERSION OF CONVERTIBLE NOTE. Section 4.1 RIGHT TO CONVERT. (a) The Holder shall have the right, at its option, at any time after the Bridge Period to convert the principal amount of this Convertible Note, or any portion of such principal amount that is $1,000 or an integral multiple thereof, into that number of fully paid and nonassessable shares of Common Stock (as such shares shall then be constituted) obtained by dividing the aggregate principal amount of this Convertible Note or portion thereof subject to conversion by the applicable Conversion Price. The Holder is not entitled to any rights of a holder of Common Stock until such holder has converted its Convertible Note to Common Stock and only to the extent such Note is deemed to have been converted to Common Stock under this Article 4. (b) Notwithstanding the foregoing, the conversion rights of the Holder set forth above shall be limited to the extent set forth in Section 10.5 of the Agreement. Section 4.2 WHEN CONVERSION EFFECTIVE. The conversion of this Convertible Note shall be deemed to have been effected at 8:00 a.m. on the Business Day (the "Conversion Date") on which the Holder of this Convertible Note shall have delivered prior to 4:00 p.m., Dallas, Texas time, to the Transfer Agent, with a copy to the Company (including delivery via facsimile), of a written notice of conversion substantially in the form annexed to the Agreement (each a "Notice of Conversion"). At such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record thereof. Section 4.3 DELIVERY OF STOCK CERTIFICATES. ETC. As soon as practicable after conversion of this Convertible Note, in whole or in part, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder CONVERTIBLE NOTE NO. 1 - PAGE 3 (Visual Edge Systems Inc.) hereof or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which such holder shall be entitled upon such conversion plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Closing Bid Price per share on the Business Day next preceding the Conversion. 5. MODIFICATION OF CONVERTIBLE NOTE. This Convertible Note may be modified without prior notice to any Holder but with the written consent of the Majority Holders and the Company. However, without the consent of each Holder affected, an amendment, supplement or waiver may not (1) reduce the principal amount of Convertible Notes whose Holders must consent to an amendment, supplement or waiver, (2) reduce the rate or extend the time for payment of interest on any Convertible Note, (3) reduce the principal amount of or extend the fixed maturity of any Convertible Note or alter the redemption or conversion provisions with respect thereto or (4) make any Convertible Note payable in money or property other than as stated in the Convertible Note. 6. MISCELLANEOUS. This Convertible Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be governed by and construed in accordance with the laws of said State. The parties hereto, including all guarantors or endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Convertible Note, except as specifically provided herein, and assent to extensions of the time of payment, or forbearance or other indulgence without notice. The Company 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 Convertible Note. The Company 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. The Company hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Convertible Note. The Holder of this Convertible Note by acceptance of this Convertible Note agrees to be bound by the provisions of this Convertible Note which are expressly binding on such Holder. [SIGNATURE PAGE FOLLOWS] CONVERTIBLE NOTE NO. 1 - PAGE 4 (Visual Edge Systems Inc.) IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: June 13, 1997 VISUAL EDGE SYSTEMS INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- CONVERTIBLE NOTE NO. 1 - PAGE 5 (Visual Edge Systems Inc.) -----END PRIVACY-ENHANCED MESSAGE-----