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) MARCH 27, 1998
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VISUAL EDGE SYSTEMS INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-20995 13-3778895
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
2424 NORTH FEDERAL HIGHWAY, SUITE 100, BOCA RATON, FL 33431
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(Address of principal executive offices) (Zip Code)
(561) 750-7559
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(Registrant's telephone number, including area code)
Item 5. OTHER EVENTS
On March 27, 1998, the Company entered into a Purchase Agreement (the
"Marion Agreement") with Marion Interglobal, Ltd., an investment group
("Marion"). The Marion Agreement calls for the Company to receive up to
$11,000,000 from Marion in exchange for shares of the Company's common stock,
par value $.01 per share (the "Common Stock"), as explained herein. Pursuant to
the Marion Agreement, the purchase of Common Stock is to occur in three tranches
as follows: (i) on March 27, 1998 the Company sold to Marion 1,200,000 shares of
Common Stock for an aggregate consideration of $3,000,000; $1,500,000 of the
$3,000,000 has been funded, with the remaining $1,500,000 to be funded on the
business day after the Company's shelf registration statement with respect to
the shares sold to Marion has been declared effective by the Securities and
Exchange Commission; (ii) sixty days following the registration of all the
underlying shares of Common Stock under the Marion Agreement, the Company will
sell to Marion 800,000 shares of Common Stock for an aggregate consideration of
$2,000,000; and (iii) on or prior to September 30, 1998 the Company shall sell a
number of shares of Common Stock (to be determined by when the closing occurs,
which would range from 2,666,667 shares to 3,200,000 shares) for an aggregate
consideration of $6,000,000. The third tranche is contingent on Marion's
satisfaction that the Company has met or exceeded the financial targets expected
by Marion, in its sole discretion. The Company has agreed to use the $6,000,000
in proceeds from the third tranche to redeem the Company's outstanding
Convertible Notes (the "Notes") and Series A Preferred Stock ("Preferred Stock")
issued in the financing consummated by the Company in June 1997. The issuance
and sale of 1,400,000 shares of Common Stock in the first tranche and all of the
shares to be issued in the second tranche to Marion, is subject to approval by
the Company's stockholders. The Company will pay transaction fees to Marion
upon completion of each tranche as follows: (i) 1,200,000 shares of Common Stock
for the first $3,000,000 tranche; (ii) 800,000 shares of Common Stock for the
second $2,000,000 tranche; and (iii) no additional fee for the completion of the
third tranche.
Further, upon the consummation of the second tranche of the Marion
Agreement, Mr. Alan Lubell, Chairman of the Board of the Company, has agreed to
transfer to Marion 250,000 shares of Common Stock, which shares are required to
be registered under the Securities Act of 1933, as amended.
In addition, if the third tranche of the aforementioned financing is
completed, then until March 30, 2001, the Company is required to obtain the
prior written consent of Marion before the consummation of any additional
financing transaction except for any credit facilities or lines of credit with
lenders or equipment financing arrangements. Further, the Company may not
redeem the warrants issued in its initial public offering without the prior
written consent of Marion.
As a condition to the consummation of this equity financing, the Company
renegotiated the terms of its outstanding Notes and Preferred Stock with certain
investment funds (the "Funds") who hold all of the outstanding Notes and
Preferred Stock. Specifically, the Company entered into the Agreement and
Second Amendment to Bridge Securities Purchase Agreement
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and Related Documents (the "Second Amendment"), among the Company and the Funds.
Pursuant to the Second Amendment, the Funds agreed that they would not convert,
prior to December 31, 1998, any shares of Preferred Stock or any principal
amount of the Notes into shares of Common Stock, unless a "Material Transaction"
(defined as a change of control of the Company, a transfer of all or
substantially all of the Company's assets or a merger of the Company into
another entity) has occurred. Further, the Funds agreed that they would not,
prior to March 31, 1999, publicly sell any shares of Common Stock owned or
acquired by the Funds, unless a Material Transaction has occurred; the Funds are
permitted, after June 30, 1998 and subject to the Company's right of first
refusal, to privately sell any shares of Common Stock that they own or acquire,
provided the purchaser agrees in writing to be bound by the same resale
restrictions.
The Funds have granted to the Company an option to redeem the Preferred
Stock and the Notes owned by the Funds as follows: (i) up to $2,500,000 may be
redeemed on or before April 30, 1998; (ii) an additional $2,500,000 may be
redeemed on or before May 31, 1998; and (iii) an additional $2,500,000 may be
redeemed from and after June 1, 1998. If the date that the Company redeems such
Preferred Stock and Notes is on or before June 30, 1998, the redemption price
will be 80% of the principal amount outstanding of the Notes being redeemed or
80% of the liquidation preference of the Preferred Stock being redeemed, plus
accrued interest and dividends in the event that all of the Preferred Stock and
Notes owned by the Funds are not redeemed by June 30, 1998. If the redemption
of the Notes and Preferred Stock is after June 30, 1998 but on or before
December 31, 1998, the 80% referred to in the preceding sentence shall increase
by 2% per month, up to 90% in December 1998. If the redemption of the Notes and
Preferred Stock occurs after December 31, 1998, the redemption price shall be as
provided in the original agreement between the Company and the Funds. The
Company is required to redeem all of the Preferred Stock outstanding prior to
redemption of any of the Notes. In addition, the Funds have granted to the
Company and to Marion an option to acquire, on or before March 31, 1999, all of
the shares of Common Stock owned by the Funds.
In connection with the Second Amendment, the Funds received 100,000 shares
of Common Stock, as well as the right to receive 200,000 additional shares of
Common Stock in the event that all of the Preferred Stock and Notes owned by the
Funds have not been redeemed by the Company by June 30, 1998. Further, the
exercise price of 100,000 warrants (each to purchase one share of the Company's
Common Stock) owned by the Funds has been reduced from $10.675 per share to
$3.25 per share and the exercise price of 200,000 additional warrants (each to
purchase one share of the Company's Common Stock) owned by the Funds has been
reduced from $4.00 per share to $3.25 per share. The Company has agreed to
register all of such shares of Common Stock (including the shares underlying
warrants) under the Securities Act of 1933, as amended.
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(c) Exhibits
99.1 Purchase Agreement, dated as of March 27, 1998, among the Company and
Marion Interglobal, Ltd.
99.2 Registration Rights Agreement, dated as of March 27, 1998, among the
Company and Marion Interglobal, Ltd.
99.3 Second Amendment to Bridge Securities Purchase Agreement and Related
Documents, dated as of March 27, 1998, among the Company, Infinity
Investors Limited, Infinity Emerging Opportunities Limited, Summit
Capital Limited (as the transferee of Sandera Partners, L.P.) and
Glacier Capital Limited (as the transferee of Lion Capital Partners,
L.P.)
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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.
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(Registrant)
By: /s/ Earl Takefman
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Earl Takefman
Chief Executive Officer
Date: April 6, 1998
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EXHIBIT INDEX
NO.
99.1 Purchase Agreement, dated as of March 27, 1998, among the Company and
Marion Interglobal, Ltd.
99.2 Registration Rights Agreement, dated as of March 27, 1998, among the
Company and Marion Interglobal, Ltd.
99.3 Second Amendment to Bridge Securities Purchase Agreement and Related
Documents, dated as of March 27, 1998, among the Company, Infinity
Investors Limited, Infinity Emerging Opportunities Limited, Summit
Capital Limited (as the transferee of Sandera Partners, L.P.) and
Glacier Capital Limited (as the transferee of Lion Capital Partners,
L.P.)
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