SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between STRATEGIC SOLUTIONS
GROUP, INC. (formerly known as Pacific Animated Imaging Corp.), a Delaware
corporation, with headquarters located at 000 Xxxxx Xx., Xxxxxxxxx, XX 00000
(the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded under Regulation D as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, 6% Convertible Subordinated
Debentures (the "Debentures"), of the Company, which will be convertible into
shares of Common Stock, $0.0001 par value per share of the Company (the "Common
Stock"), upon the terms and subject to the conditions of such Debentures,
together with the Warrants (as defined below) exercisable for the purchase of
shares of Common Stock (the "Warrant Shares"), and subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions. (i) The undersigned hereby
agrees to purchase from the Company the Debentures of the Company in the
principal amount of $1,600,000 and having the terms and conditions and being in
the form attached hereto as Annex I (the "Debentures") The purchase price for
the Debentures shall be $1,600,000 and shall be payable in United States
Dollars.
(ii) As used herein, the term "Securities" means the
Debentures, the Warrants and the Common Stock issuable upon conversion of the
Debentures or as interest on the Debentures or upon exercise of the Warrants.
b. Form of Payment. The Buyer shall pay the purchase price for
the Debentures by delivering immediately available funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") as
set forth below. Promptly following payment by the
Buyer to the Escrow Agent of the purchase price of the Debentures, the Company
shall deliver the Debentures duly executed on behalf of the Company to the
Escrow Agent. By signing this Agreement, the Buyer and the Company, and subject
to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. Method of Payment. Payment into escrow of the purchase
price for the Debentures shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No.: 637-0000000
Not later than 3:00 p.m., New York time, on the Closing Date, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for the Debentures,
in immediately available funds. Time is of the essence with respect to such
payment, and failure by the Buyer to make such payment, shall allow the Company
to cancel this Agreement and seek any other remedy available to Company at law
or equity.
d. Escrow Property. The purchase price and the
Debentures delivered to the Escrow Agent as contemplated by Sections 1(b) and
(c) hereof are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as defined below), the Buyer is
purchasing the Debentures and will be acquiring the shares of Common Stock
issuable upon conversion of the Debentures or as interest thereon (the
"Converted Shares") and the Warrant Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
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b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), and (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Debentures and
Common Stock representing the Converted Shares or Warrant Shares (such Common
Stock sometimes referred to as the "Shares") by the Buyer shall be made pursuant
to registration of the Shares under the 1933 Act or pursuant to an exemption
from registration.
d. The Buyer understands that the Debentures are being offered
and sold, and the Shares are being offered, to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Debentures and to receive an offer of the Shares.
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debentures and the
offer of the Shares which have been requested by the Buyer, including Annex III
hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the opportunity to obtain and to review the Company's (1)
Annual Report on Form 10- K for the fiscal year ended December 31, 1996 (the
"Form 10-K"), (2) Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997 and June 30, 1997, (3) Proxy Materials regarding the 1997 Annual
Meeting of Stockholders, and (4) Forms S-8 referred to in Exhibit 23 of the Form
10-K (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
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h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. Neither the Buyer nor any affiliate of Buyer has any
present intention of entering into any put option, short position, or other
similar position with respect to the Debentures or the Shares.
j. Notwithstanding the provisions hereof or of the Debentures,
in no event (except with respect to an Event of Mandatory Conversion upon the
maturity of the Debentures) shall the holder be entitled to convert any
Debentures to the extent after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Buyer and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debentures), and (2) the number of
shares of Common Stock issuable upon the conversion of the Debentures with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Buyer and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act") except as otherwise provided in clause (1) of such proviso.
k. The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the British Virgin Islands, and has the
requisite power to own its properties and to carry on its business as now being
conducted.
l. This Agreement and the Registration Rights Agreement
attached hereto as Annex IV (the "Registration Rights Agreement") and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Buyer; this Agreement and the Registration Rights Agreement,
when executed and delivered by the Buyer, will be valid and binding agreements
of the Buyer enforceable in accordance with their respective terms, subject as
to enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
m. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Buyer, and the consummation by the Buyer of
the transactions contemplated by this Agreement and the Registration Rights
Agreement, do not and will not conflict with or result in a breach by the Buyer
of any of the terms or provisions of, or constitute a default under (i) the
Memorandum of Association or Articles of Association of the Buyer, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument
4
to which the Buyer is a party or by which it or any of its properties or assets
are bound, (iii) any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Buyer or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
n. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Buyer is required to be obtained
by the Buyer for the purchase of the Securities from the Company as contemplated
by this Agreement, except such authorizations, approvals and consents that have
been obtained.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive
rights of any stockholder of the Company to acquire the Debentures or the
Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary other than those jurisdictions in which the failure to
so qualify would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of the
Company. The Company has registered its Common Stock pursuant to Section 12 of
the 1934 Act, and the Common Stock is listed and traded on the NASDAQ/SmallCap
Market. The Company has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for such listing, and the
Company has maintained all requirements for the continuation of such listing.
c. Authorized Shares. The Company has authorized 5,000,000
shares and issued and outstanding 1,768,739 shares and has reserved for various
stock plans, warrants, and earn-outs 556,982 shares. The Company has sufficient
remaining authorized, unissued and unreserved shares as may be reasonably
necessary as of the Closing Date to effect the conversion of the Debentures or
to issue the Warrant Shares. The Shares have been duly authorized and, when
issued upon conversion of, or as interest on, the Debentures or upon the
exercise of the Warrants, will, in the absence of fraud, be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
5
d. Securities Purchase Agreement; Registration Rights
Agreement. This Agreement and the Registration Rights Agreement, and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company; this Agreement and the Registration Rights Agreement,
when executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement and the Registration Rights Agreement do not and
will not conflict with or result in a breach by the Company of any of the terms
or provisions of, or constitute a default under (i) the certificate of
incorporation or by-laws of the Company, each as currently in effect, (ii) any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock except as herein
set forth, (iii) any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company's listing agreement for its Common Stock, except such conflict, breach
or default which would not have a material adverse effect on the transactions
contemplated herein.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained or that may be needed to increase the
authorized shares of Company.
g. SEC Filings. None of the Company's SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since August 1, 1996, the Company has timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since June 30, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of operations
of the Company, except as disclosed in Annex III or in the Company's SEC
Documents.
6
i. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally, and other
than facts disclosed in Annex III or in the Company's SEC Documents) that has
not been disclosed in writing to the Buyer that (i) would reasonably be expected
to have a material adverse effect on the condition (financial or otherwise),
earnings, business affairs, properties or assets of the Company or (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or the other
agreements and instruments contemplated hereby (collectively, including this
Agreement, the "Transaction Agreements").
j. Absence of Litigation. Except as set forth in Annex III
hereto, and in the Company's SEC Documents, which the Buyer has reviewed, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company or any of its
subsidiaries, wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the properties, business, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries taken as a whole or the transactions contemplated by any of the
Transaction Agreements or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, any of the Transaction Agreements
k. Absence of Events of Default. Except as set forth in Annex
III hereto, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. No Default. Except as set forth in Annex III hereto, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound.
m. Prior Issues. During the twelve (12) months preceding
the date hereof, the Company has not issued any convertible securities. There
are presently no convertible securities outstanding.
n. Dilution. The number of Shares issuable upon conversion of
the Debentures may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion. The Company's executive
officers and directors have studied and fully understand the nature of other
securities being sold hereby and recognize that they have a
7
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. Absent a material breach of Buyer's representations, warranties
and/or covenants herein contained, the Company specifically acknowledges that
its obligation to issue the Shares upon conversion of the Debentures to the
extent of the authorized, unissued and unreserved shares of Company Common Stock
is binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that
the Debentures, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with an effective registration statement ("Registration
Statement"), the Shares issued to the Buyer upon conversion of the Debentures
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Debentures and such
Shares):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
8
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement in substantially the form attached
hereto as Annex IV, on or before the Closing Date (as defined below).
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Debentures to the Buyer
under any United States federal, state and local laws and regulations, or by any
domestic securities exchange or trading market, and to provide a copy thereof to
the Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns
any of the Debentures, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. The Company will take all action under its control to
continue the listing and trading of its Common Stock on The NASDAQ Stock Market
and will comply in all respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the National Association of Securities
Dealers, Inc. or The NASDAQ Stock Market.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures (excluding amounts paid by the Company for legal fees and
finder's fees in connection with the sale of the Debentures) for internal
working capital purposes, for acquisitions, joint ventures and strategic
alliances and shall not, directly or indirectly, use such proceeds for any loan
to or investment in any other corporation, partnership enterprise or other
person except as provided above.
g. Certain Agreements. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, which consent
shall not be unreasonably withheld, enter into any subsequent or further offer
or sale of Common Stock or securities convertible into Common Stock with any
third party until the expiration of sixty (60) days after the date that the
registration statement required to be filed under the Registration Rights
Agreement shall have become effective.
(ii) The provisions of subparagraph (g)(i) will not apply to
(w) the issuance of securities (other than for cash) in connection with a
merger, consolidation, sale of assets, disposition or acquisition of a business,
product or license by the Company, strategic alliance, bank loan or other credit
facility agreement, (x) the exercise of options, or (y) the exchange of capital
stock of the Company for assets, stock or other joint venture interests. Any
issuance of securities under this subsection is subject to the condition that
registration rights, if any, in connection with such issuance shall not require
the filing of a registration statement covering Common Stock prior to the
expiration of sixty (60) days after the date that the registration
9
statement required to be filed under the Registration Rights Agreement shall
have become effective.
h. Available Shares. Subject to the number of shares currently
authorized, issued and reserved as set forth below, the Company shall have at
all times authorized and reserved for issuance, free from preemptive rights,
shares of Common Stock reasonably necessary to yield the number of shares of
Common Stock issuable (i) at conversion as may be required to satisfy the
conversion rights of the Buyer pursuant to the terms and conditions of the
Debentures and (ii) upon exercises as may be required to satisfy the exercise
rights of the Buyer pursuant to and the terms and conditions of the Warrants.
Buyer acknowledges, based upon representations made by the Company, that the
Company has 5,000,000 shares of Common Stock authorized, 1,768,739 shares of
Common Stock issued and outstanding and 556,982 shares of Common Stock reserved
for issuance under various stock plans and earn out arrangements. Buyer further
acknowledges that Company cannot provide for additional authorized shares
without the approval of the holders of a majority of the shares of the Company's
outstanding Common Stock.
i. Warrants. The Company agrees to issue to the Buyer on the
Closing Date transferable, divisible warrants with cashless exercise rights (the
"Warrants") for the purchase of 40,000 shares of Common Stock. Such Warrants
shall bear an exercise price per share of Common Stock equal to 110% of the
average closing bid price of the Common Stock for the five (5) trading days
ending on the day prior to the Closing Date, shall be exercisable immediately
and thereafter for a period of five (5) years from the date of issuance, and
shall be in the form annexed hereto as Annex V, together with registration
rights as provided in the Registration Rights Agreement.
j. Spin Off. The Company will not consummate a Spin Off (as
such term is defined in the form of Debenture attached hereto as Annex I) if it
appears immediately prior to consummation of the Spin Off that the Spin Off
would cause the Company to be delisted from the NASDAQ SmallCap Market.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Debentures in accordance with Section 1(b)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Debentures or upon exercise of
the Warrant in such amounts as specified from time to time by the Company to the
transfer agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Buyer in connection with each conversion of the Debentures. The Company
covenants and agrees that no instruction other
10
than instructions referred to in this Section 5 and stop transfer instructions
to give effect to Section 4(a) hereof prior to registration and sale of the
Shares under the 1933 Act will be given by the Company to the transfer agent and
that the Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement, the Registration
Rights Agreement, and applicable law. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with this Agreement and
all agreements attached hereto and with all applicable securities laws upon
resale of the Securities. If the Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration for resale by
the Buyer of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
(without legend, if appropriate) in such name and in such denominations as
specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right
to convert the Debentures by telecopying an executed and completed Notice of
Conversion to the Company ("Notice of Conversion") and delivering within three
(3) business days thereafter, the original Notice of Conversion and the
Debentures representing the Shares to the Company by express courier, with a
copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect
to any conversion
elected by the holder of the Debentures, the date specified in the Notice of
Conversion, provided the copy of the Notice of Conversion is faxed (or delivered
by other means) to the Company before 11:59 PM, New York time, on such specified
date. The Conversion Date for the mandatory conversion at maturity shall be the
Maturity Date of the Debenture (as defined in the Debenture).
(iii) The Company will transmit the certificates
representing the Shares
issuable upon conversion of any Debentures (together with the Debentures not
being so converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three (3) business days after acknowledgment by the chief
financial officer of the Company or by Xxxxxx Xxxxxxxxxx, Esquire, the Company's
counsel, of the Company's receipt of the original Notice of Conversion and the
Debentures being converted (the "Delivery Date"). The chief financial officer or
Xx. Xxxxxxxxxx shall acknowledge by telephone the Company's receipt of the
Notice of Conversion and Debentures within one day of (i) the Company having
received such documents and (ii) the chief financial officer and Xx. Xxxxxxxxxx
having been informed either personally, by telephone, via voice mail, or by
telecopy of the delivery of such documents.
c. The Company understands that a delay in the issuance
of the Shares of Common Stock beyond the Delivery Date could result in economic
loss to the Buyer. As
11
compensation to the Buyer for such loss, the Company agrees to pay late payments
to the Buyer for late issuance of Shares upon conversion (for any reason
whatsoever) in accordance with the following schedule (where "No. Business Days
Late" is defined as the number of business days beyond five (5) business days
from the Delivery Date:
Late Payment For Each
$10,000 of Debenture
No. Business Days Late Principal Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each
Business Day Late beyond 10
days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five (5) business days after the
Delivery Date, the Buyer will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company, whereupon the
Company and the Buyer shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of the Debentures
and after such Delivery Date, the holder of the Debentures being converted (a
"Converting Holder") purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder (the "Sold
Shares"), which delivery such Converting Holder anticipated to make using the
Shares to be issued upon such conversion (a "Buy-In"), the Company shall pay to
the Converting Holder, the Buy-In Adjustment Amount (as defined below). The
"Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including
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brokerage commissions, if any) for the Covering Shares over (y) the net proceeds
(after brokerage commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Converting Holder in immediately available funds immediately upon demand by
the Converting Holder. By way of illustration and not in limitation of the
foregoing, if the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to shares of Common Stock it sold for net proceeds of
$10,000, the Buy-In Adjustment Amount which Company will be required to pay to
the Converting Holder will be $1,000.
f. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
6. DELIVERY INSTRUCTIONS.
The Debentures shall be delivered by the Company to the Escrow
Agent pursuant to Section 1(b) hereof, on a delivery against payment basis, on
the Closing Date.
7. CLOSING DATE.
The date and time of the issuance and sale of theDebentures
(the "Closing Date") shall be as mutually agreed upon by the Company and the
Buyer. The closing of the purchase and issuance of Debentures shall occur on the
Closing Date at the offices of the Escrow Agent.
Notwithstanding anything to the contrary contained herein, the Escrow Agent
will be authorized to release the Escrow Property only upon satisfaction of the
conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Debentures to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
a. The receipt and acceptance by the Company of this
Agreement (such acceptance to be evidenced by the Company's execution and
delivery of this Agreement) for the
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sale of One Million Six Hundred Thousand ($1,600,000.00) Dollars in Debentures
(or such lesser amount as the Company, in its sole discretion, shall determine);
b. Delivery by the Buyer to the Escrow Agent of immediately
available funds as payment in full of an amount equal to the purchase price for
the Debentures in accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
Closing Date, and the performance by the Buyer on or before such Closing Date of
all covenants and agreements of the Buyer required to be performed on or before
such Closing Date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Debentures on the Closing Date is conditioned upon:
a. The receipt and acceptance by the Buyer of this
Agreement (to be evidenced by the Buyer's execution and delivery of this
Agreement) for the purchase of the Debentures;
b. Delivery by the Company to the Escrow Agent of the
Debentures in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such Closing Date, and the performance by the
Company on or before such Closing Date of all covenants and agreements of the
Company required to be performed on or before such Closing Date; and
d. On the Closing Date, the Buyer shall have received (i) an
opinion of counsel for the Company, dated the relevant Closing Date, in form,
scope and substance reasonably satisfactory to the Buyer, to the effect set
forth in Annex VI attached hereto, and (ii) the Registration Rights Agreement
duly executed and delivered by the Company.
10. GOVERNING LAW: MISCELLANEOUS.
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a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of
Wilmington or the state courts of the State of Delaware sitting in the City of
Wilmington in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
h. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
11. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified
mail, or
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(iii) the third business day after mailing by international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: STRATEGIC SOLUTIONS GROUP, INC.
000 Xxxxx Xx.
Xxxxxxxxx, XX 00000
ATTN: Xxxx Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Palmarella & Xxxxxxx, P.C.
000 Xxx Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esquire
and to:
Xxxx Xxxxx & Xxxxxx
000 Xxx Xxxxxxxxx Xxxxxx X.X.
Watergate Suite 1000
Washington D.C. 20037
Attention: Xxxxxxx Xxxxxx
BUYER: At the address set forth on the signature page of
this Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Debentures and the Purchase
Price, and shall inure to the benefit of the Buyer and its successors and
assigns.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
AGGREGATE INITIAL PURCHASE PRICE OF SUCH DEBENTURES: $1,600,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, each of the undersigned represents that the
foregoing statements are true and correct and that it has caused this Securities
Purchase Agreement to be duly executed on its behalf this 22nd day of October,
1997.
Address Printed Name of Subscriber
By: _______________________________
Telecopier No. ________________ (Signature of Authorized Person)
-------------------------------
Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
STRATEGIC SOLUTIONS GROUP, INC.
By:
Title: ________________________________
Date: ________________________________
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III COMPANY DISCLOSURE MATERIALS
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V FORM OF WARRANT
ANNEX VI OPINION OF COUNSEL
