UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
Strategic Solutions Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-12536 11-2964894
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
326 First Street, Suite 100, Annapolis, Maryland 21403
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (410) 263-7761
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Item 5. Other Events.
On October 31, 1997, pursuant to the Securities Purchase Agreement by
and between Strategic Solutions Group, Inc. (the "Registrant") and Supermex
Trading Co., Ltd. (the "Purchaser") in reliance upon the exemption from the
securities registration afforded under Regulation D as promulgated by the United
States Securities and Exchange Commission under the Securities Act of 1933, as
amended, and/or Section 4(2) of the 1933 Act, the Registrant sold 6% Convertible
Subordinated Debentures (the "Debentures") in the principal amount of
$1,600,000, which will be convertible into shares of Common Stock, $0.0001 par
value per share of the Company (the "Common Stock"), upon the terms of the
Debentures, together with Warrants to purchase 40,000 shares of Common Stock
(the "Warrant Shares") upon the terms of the Warrants.
Pursuant to the Form of Debenture, dated as of October 31, 1997, (the
"Issuance Date") by and between the Registrant and the Purchaser, the Purchaser
of the Debenture is entitled to convert at any time commencing the earlier of
(a) sixty (60) days after the Issuance Date of the Debentures, or (b) the
effective date of the Registration Statement filed pursuant to the Registration
Rights Agreement between the Registrant and the Purchaser. At that time, the
principal amount of the Debenture shall be converted into shares of Common Stock
of the Registrant at a "Conversion Price" for each share of Common Stock. The
Debentures are convertible up to two (2) years from the Issuance Date. In the
event that any Debentures remain outstanding on the second anniversary of the
Issuance Date, all remaining Debentures will be converted on such date.
The Conversion Price will be equal to the lower of (a) the average
Market Price on the five (5) trading days immediately preceding the Issuance
Date (the "Maximum Price"), and (b) 80% of the average Market Price on the five
(5) trading days immediately preceding the conversion date; provided, however,
that in no event shall the Conversion Price be less than the percentage of the
Maximum Price as indicated below:
If Conversion Date is Minimum Conversion Price as
Percentage of Maximum Price
Between Issuance Date and 30%
on or before 90th day
After 90th day and each thirty (30) Declining at a rate of 5%
day period thereafter per 30 day period until 0%
Furthermore, with respect to the Conversion Price, the Maximum Price is subject
to adjustment in the event that the Registrant spins off or otherwise divests
itself of a part of its business or disposes all or a part of its assets in a
transaction in which the Registrant does not receive compensation, but causes
securities of another entity to be issued to security holders of the
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Registrant. Such adjustment shall be made immediately after the consummation of
the spin off by multiplying the Maximum Price by a fraction, the numerator of
which is the average Market Price on the five (5) trading days immediately
following the fifth day after the spin off record date, and the denominator of
which is the average Market Price on the five (5) trading days immediately
preceding the fifth day prior to the spin off record date.
The Market Price is defined as the closing bid price of the Common
Stock as reported by the National Association of Securities Dealers if listed on
the SmallCap or National Market, or the closing bid price on the
over-the-counter market on such date or, in the event the Common Stock is listed
on a stock exchange, the closing price on the exchange on such date as reported
by the Wall Street Journal.
At any time prior to the conversion date, the Registrant has the right
to redeem all or any portion of the then outstanding principal amount of the
Debentures for a "Redemption Amount" equal to the sum of such outstanding
principal of the Debentures plus all accrued but unpaid interest thereon through
the date the Redemption Amount is paid, plus a "Redemption Premium". The
Redemption Premium is an amount equal to the excess, if any, of (a) an amount
equal to (I) the number of shares of Common Stock into which could have been
converted on the date of the notice of redemption, multiplied by (II) the
closing ask price of the Common Stock on the date of the notice of redemption,
over (b) the principal plus accrued interest of the Debentures so redeemed. The
Purchaser has the right to convert any Debentures for which a notice of
conversion is submitted to the Registrant within five (5) days of the
Purchaser's receipt of the notice of redemption.
If prior to the conversion date or the redemption date, the Registrant
consummates a spin off, then the Registrant shall cause to be reserved spin off
securities equal to the number thereof that would have been issued had all of
the Debentures outstanding on the spin off record date been converted as of the
close of business on the trading day immediately before the spin off record
date. Upon conversion, the Registrant shall cause to be issued to the Purchaser
a pro rata amount of reserved spin off shares.
The Debentures are subordinate to "Senior Indebtedness" as defined in
the Securities Purchase Agreement.
Pursuant to a Registration Rights Agreement, dated as of October 31,
1997, by and between the Registrant and the Purchaser, the Purchaser has been
granted certain registration rights with respect to shares of Common Stock
issuable upon conversion of the Debentures, pursuant to which the Registrant is
required to file a Registration Statement on Form S-3 no later than forty-five
(45) days form the initial issuance of the Debentures, subject to certain terms
and conditions.
The Purchaser received Warrants to purchase 40,000 shares of Common
Stock with an exercise price equal to 110% of the average closing bid price of
the Common Stock for the
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five (5) trading days ending on the date of the issuance of the Warrants. Such
Warrants are exercisable immediately and thereafter for a period of five (5)
years, subject to certain terms and conditions of the Form of Common Stock
Purchase Warrant, dated as of October 31, 1997, by and between the Registrant
and the Purchaser. If prior to the exercise of the Warrant in full, the
Registrant consummates a spin off, then the Registrant shall reserve spin off
securities equal to the number of shares of Common Stock that would have been
issued to the Purchaser had all of the Purchaser's unexercised Warrants
outstanding on the spin off record date been exercised. Upon exercise, the
Registrant shall issue to the Purchaser a pro rata amount of the reserved spin
off shares.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired. Not applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits.
Exhibit 10.1 Securities Purchase Agreement, dated as of October 31, 1997,
by and between Strategic Solutions Group, Inc. and Supermex
Trading Co., Ltd.
Exhibit 10.2 Form of Debenture
Exhibit 10.3 Registration Rights Agreement, dated as of October 22, 1997,
by and between Strategic Solutions Group, Inc. and the Initial
Investor.
Exhibit 10.4 Form of Common Stock Purchase Warrant
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STRATEGIC SOLUTIONS GROUP, INC.
Date: November 17, 1997 By: /S/ JOHN J. CADIGAN, CEO
John J. Cadigan, CEO
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 326 First St., Annapolis, MD 21403
(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
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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
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No.: 637-1657450
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
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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.
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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.
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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
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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.
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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
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<PAGE>
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
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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 Ernest Palmarella, 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
Mr. Palmarella 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 Mr. Palmarella
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
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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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.
326 First St.
Annapolis, MD 21403
ATTN: John Cadigan
Telecopier No.: (410) 280-6013
Telephone No.: (410) 263-7761
with a copy to:
Palmarella & Sweeney, P.C.
993 Old Eagle School Road
Suite 415
Wayne, PA 19087
Attention: Ernest D. Palmarella, Esquire
and to:
Dyer Ellis & Joseph
600 New Hampshire Avenue N.W.
Watergate Suite 1000
Washington D.C. 20037
Attention: Michael Joseph
BUYER: At the address set forth on the signature page of
this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telecopier No. (212) 213-2077
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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<PAGE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE>
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: ________________________________
<PAGE>
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
ANNEX I
FORM OF DEBENTURE
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.
No. 97- US $
STRATEGIC SOLUTIONS GROUP, INC.
6% CONVERTIBLE SUBORDINATED DEBENTURE DUE OCTOBER 31, 1999
THIS DEBENTURE is one of a duly authorized issue up to $1,600,000 in
principal amount of Debentures of STRATEGIC SOLUTIONS GROUP, INC., a corporation
duly organized and existing under the laws of the State of Delaware (the
"Company") designated as its 6% Convertible Subordinated Debenture Due October
31, 1999.
FOR VALUE RECEIVED, the Company promises to pay to
_______________________, the registered holder hereof (the "Holder"), the
principal sum of ____________________ 00/100 (US $________________) Dollars on
October 31, 1999 (the "Maturity Date") and to pay interest on the principal sum
outstanding from time to time in arrears upon conversion as provided herein on
October 31, 1999 at the rate of 6% per annum accruing from the date of initial
issuance. Accrual of interest shall commence on the first business day to occur
after the date hereof until payment in full of the principal sum has been made
or duly provided for. Subject to the provisions of Section 4 below, the
principal of, and interest on, this Debenture are payable at the option of the
Company, in shares of Common Stock $0.0001 par value per share of the Company
("Common Stock"), or in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts,
at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Company will pay the
principal of and interest upon this Debenture on the Maturity Date, less any
amounts required by law to be deducted, to the registered holder of this
Debenture as of the tenth day prior to the Maturity Date and addressed to such
holder as the last address appearing on the Debenture Register. The forwarding
of a check shall constitute a payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such check plus any amounts so
deducted.
<PAGE>
SUBORDINATION
1. Subordination of Debenture to Senior Indebtedness. All indebtedness
evidenced by this Debenture shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all amounts due under the Senior Indebtedness
(as hereinafter defined). For the purposes of this Section, the term
"Senior Indebtedness" shall mean all indebtedness of the Company for
borrowed money, including any extension or renewal of such indebtedness,
all indebtedness and obligations of the Company under financing leases,
conditional sale and other title retention agreements and all obligations
issued or assumed as full or partial payment for property, whether or not
secured by a purchase money mortgage, whether outstanding on the date
hereof or hereafter created or incurred, which is not by its terms
subordinate and junior to or on a parity with this Debenture. The term
"Senior Indebtedness" shall include any obligation of the Company to any
trade creditor entered into in the ordinary course of business of the
Company or the assignee of any trade creditor provided that such assignment
was in the ordinary course of business of the Company.
2. No Payments on Debenture Unless Senior Indebtedness Provided for or During
Defaults on Senior Indebtedness. No payment under this Debenture shall be
made by the Company unless full payment of amounts then due under the
Senior Indebtedness has been made or duly provided for by the Company. No
payment under this Debenture shall be made by the Company if, at the time
of such payment or immediately after giving effect thereto, there shall
exist a default in the payment of any amounts due under any Senior
Indebtedness. Interest on this Debenture shall continue to accrue in the
event payment of this Debenture is not made pursuant to this subsection.
3. Priority of Senior Indebtedness on Distribution of Assets. Upon (a) any
payment being required to be made by the Company under this Debenture upon
any declaration of acceleration of the principal amount hereof or (b) any
payment or distribution of assets of the company of any kind or character,
whether in money, property or securities, to creditors upon any dissolution
or winding up or total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon,
all Senior Indebtedness of the Company shall first be paid in full, or
payment thereof provided for in money, before any payment is made on this
Debenture; and upon any such declaration of acceleration or dissolution or
winding up or liquidation or reorganization, any distribution of assets of
the Company of any kind or character, whether in money, property or
2
<PAGE>
securities, to which the holder of this Debenture would be entitled except for
the provisions hereof shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making
such payment or distribution, or by the holder of this Debenture if
received by it directly, to the holders of Senior Indebtedness (pro rata to
each such holder on the basis of the respective amounts of such Senior
Indebtedness held by such holder), or its representatives, to the extent
necessary to pay all such Senior Indebtedness in full, in money, after
giving effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Indebtedness, before any payment or
distribution is made hereunder to holder of this Debenture.
4. Treatment of Mistaken Payments and Distributions. If any payment or
distribution of assets of the Company of any kind or character, whether in
money or property (other than payment of this Debenture in shares of Common
Stock of the Company upon conversion of this Debenture pursuant to
subsection 6 of this section), shall be received by the holder of this
Debenture before all Senior Indebtedness is paid in full or provision is
made for such payment in accordance with its terms, such payment or
distribution shall be held for the benefit of, and shall be paid over or
delivered to, the holders of such Senior Indebtedness, or their
representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Senior Indebtedness may
have been issued or under which such instruments are pledged or secured, as
their respective interests may appear, for application to the payment of
all Senior Indebtedness remaining unpaid to the extent necessary to pay all
such Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of
such Senior Indebtedness.
5. Subrogation. Subject to the payment in full of all Senior Indebtedness, the
holder of this Debenture shall be subrogated to the rights of the holders
of Senior Indebtedness to receive payment or distributions of assets of the
Company applicable to the Senior Indebtedness until this Debenture shall be
paid in full, and no such payment or distribution to the holders of Senior
Indebtedness shall, as among the Company, its creditors other than the
holders of Senor Indebtedness, and the holder of this Debenture, be deemed
to be a payment by the Company to or on account of this Debenture.
6. Conversion Right. The forgoing subordination provisions shall not be
construed so as to (i) limit the rights of the Holder of this Debenture to
receive shares of Common Stock of the Company upon conversion or (ii)
confer upon any holder of Senior Indebtedness any rights with respect to
proceeds received by the Holder of this Debenture upon the sale of such
shares.
3
<PAGE>
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand
Dollars (US $50,000) and integral multiples thereof. No service charge will be
made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including opinions that the issuance of the Debenture in such
other name does not and will not result in a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. Subject to the other provisions of this Section 4, the Holder of
this Debenture is entitled, at its option, to convert at any time commencing the
earlier of (a) sixty (60) days after date of issuance (the "Issuance Date") of
the Debentures, or (b) the effective date of the Registration Statement filed
pursuant to the Registration Rights Agreement between the Company and the
Holder, or the Holder's predecessor in interest (the "Registration Rights
Agreement"), the principal amount of this Debenture, provided that the principal
amount is at least US $50,000 (unless if at the time of such election to convert
the aggregate principal amount of all Debentures registered to the Holder is
less than Fifty Thousand Dollars (US $50,000), then the whole amount thereof)
into shares of Common Stock of the Company at a conversion price for each share
of Common Stock (the "Conversion Price") equal to the lesser of (a) the average
Market Price on the five (5) trading days immediately preceding the Issuance
Date (the "Maximum Price"), and (b) 80% of the average Market Price on the five
(5) trading days immediately preceding the Conversion Date (as defined below);
provided, however, that in no event shall the Conversion Price be less than the
percentage of the Maximum Price as indicated below:
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<PAGE>
Minimum Conversion Price as
If Conversion Date is Percentage of Maximum Price
Between Issuance Date and on or before 90th day 30%
After 90th day and on or before 120th day 25%
After 120th day and on or before 150th day 20%
After 150th day and on or before 180th day 15%
After 180th day and on or before 210th day 10%
After 210th day and on or before 240th day 5%
After 240th day 0%;
provided, further, that in the event that the Company spins off or otherwise
divests itself of a part of its business or operations or disposes all or of a
part of its assets in a transaction in which the Company does not receive
compensation for such business, operations or assets, but causes securities of
another entity (the "Spin Off Securities") to be issued to security holders of
the Company (a "Spin Off"), the Minimum Conversion Price shall calculated by
multiplying the otherwise applicable Minimum Conversion Price by a fraction the
numerator of which is the average Market Price on the five (5) trading days
immediately following the fifth day after the record date of the Spin Off (the
"Spin Off Record Date") and the denominator of which is the average Market Price
on the five (5) trading days immediately preceding the Spin Off Record Date.
For purposes of this Section 4, the Market Price shall be the closing bid price
of the Common Stock as reported by the National Association of Securities
Dealers if listed on the SmallCap or National Market, or the closing bid price
on the over-the-counter market on such date or, in the event the Common Stock is
listed on a stock exchange, the Market Price shall be the closing price on the
exchange on such date, as reported in the Wall Street Journal. Conversion shall
be effectuated by surrendering the Debentures to be converted to the Company
with the form of conversion notice attached hereto as Exhibit A, executed by the
Holder of the Debenture evidencing such Holder's intention to convert this
Debenture or a specified portion (as above provided) hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank. Interest accrued
or accruing from the date of issuance to the date of conversion shall, at the
option of the Company, be paid in cash or Common Stock (based on the same
Conversion Price) upon conversion at the Conversion Date. No fractional shares
or scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company or, the date set forth in such
facsimile delivery of the notice of conversion if the Debenture is received by
the Company within three (3) business days therefrom. Facsimile delivery of the
conversion notice shall be accepted by the Company at telephone number (410)
263-776, ATTN: Suzanne Brown. Certificates representing Common Stock upon
conversion will be delivered within three (3)
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<PAGE>
business days from the date the notice of conversion with the original Debenture
is delivered to the Company.
B. If, for any reason, prior to the Conversion Date or the
Redemption Payment Date (as defined below), the Company consummates a Spin Off,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof that would have been issued had all of the Debentures outstanding
on the Spin Off Record Date (the "Outstanding Debentures") been converted as of
the close of business on the trading day immediately before the Spin Off Record
Date (the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on
the conversion of all or any of the Holder's Outstanding Debentures, such amount
of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares
multiplied by (y) a fraction, of which (I) the numerator is the principal amount
of the Outstanding Debentures then being converted by the Holder, and (II) the
denominator is the principal amount of the Outstanding Debentures.
C. (i) Notwithstanding any other provision hereof to the
contrary, at any time prior to the Conversion Date, the Company shall have the
right to redeem all or any portion of the then outstanding principal amount of
the Debentures then held by the Holder for an amount (the "Redemption Amount")
equal to the sum of (a) such outstanding principal of the Debentures plus all
accrued but unpaid interest thereon through the date the Redemption Amount is
paid to the Holder (the "Redemption Payment Date"), plus (b) the Redemption
Premium (as defined below). The Company shall give written notice of such
redemption to the Holder (the "Notice of Redemption").
(ii) The "Redemption Premium" shall be an amount
equal to the excess,
if any, of (a) an amount equal to (I) the number of shares of Common Stock into
which the Holder could have converted the Debentures (including interest) being
redeemed had the Holder effected such conversion on the date the Company gave
the Notice of Redemption (the "Redemption Notice Date"), multiplied by (II) the
closing ask price of the Common Stock on the Redemption Notice Date, over (b)
the principal plus accrued interest of the Debentures so redeemed.
(iii) Anything in the preceding subparagraph (ii) hereof
to the contrary
notwithstanding, the Redemption Amount shall be paid to the Holder within ten
(10) days from the date of the Notice of Redemption, except that, the Holder
hereof shall have a right to convert any Debentures for which a notice of
conversion is submitted to the Company within five (5) trading days of the
Holder's receipt of the Notice of Redemption. Furthermore, in the event such
Redemption Amount is not timely paid, any rights of the Company to redeem
outstanding Debentures shall terminate, and the Notice of Redemption shall be
null and void.
D. The Company shall have the right to require, by written
notice to the Holder of this Debenture at least ten (10) days prior to the
Maturity Date, that the Holder of this
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Debenture exercise its right of conversion with respect to all or any portion of
the principal amount and interest outstanding on the Maturity Date.
5. The terms of the Securities Purchase Agreement, dated October 22,
1997 (the "Securities Purchase Agreement"), between the Company and the Holder
(or the Holder's predecessor in interest) are incorporated herein by reference.
Except as provided above, no provision of this Debenture shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
7. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a notice of conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture, less all amounts required by
law to be deducted, upon which tender of payment following such notice, the
right of conversion shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
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<PAGE>
9. This Debenture shall be governed by and construed in accordance with
the laws of the State of Delaware for contracts to be wholly performed in such
state and without regard 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 coveniens, to the bringing of any such proceeding in such jurisdictions.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest on this
Debenture and such default shall remain unremedied for five (5) business
days after the Company has been notified of the default in writing by a
Holder; or
b. Any of the representations or warranties made by the Company herein, in the
Securities Purchase Agreement or the Registration Rights Agreement, or in
any certificate or financial or other written statements furnished by the
Company in connection with the execution and delivery of this Debenture,
the Securities Purchase Agreement or the Registration Rights Agreement
shall be false or misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder or to cause
its Transfer Agent to issue shares of Common Stock upon exercise by the
Holder of the conversion rights of the Holder in accordance with the terms
of this Debenture, fails to transfer or to cause its Transfer Agent to
transfer any certificate for shares of Common Stock issued to the Holder
upon conversion of this Debenture and when required by this Debenture or
the Registration Rights Agreement, or fails to remove any restrictive
legend or to cause its Transfer Agent to transfer on any certificate or any
shares of Common Stock issued to the Holder upon conversion of this
Debenture as and when required by this Debenture, the Securities Purchase
Agreement or the Registration Rights Agreement and any such failure shall
continue uncured for five (5) business days after the Company has been
notified of such failure in writing by Holder; or
d. The Company shall fail to perform or observe, in any material respect, any
other covenant, term, provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall continue uncured for
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<PAGE>
a period of sixty (60) days after written notice from the Holder of such
failure; or
e. The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or
for a substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within sixty (60) days thereafter; or
h. Any unappealable money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in the
aggregate shall be entered or filed against the Company or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of sixty (60) days or in any event later than five
(5) days prior to the date of any proposed sale thereunder;
i. Bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60) days after
such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or delisted from an
exchange or the over-the-counter market from trading for in excess of two
trading days;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment,
9
<PAGE>
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
11. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: October 22, 1997
STRATEGIC SOLUTIONS GROUP, INC.
By:_______________________________________
(Print Name)
(Title)
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. ___ into shares of Common
Stock of STRATEGIC SOLUTIONS GROUP, INC. (the "Company") according to the
conditions hereof, as of the date written below. In converting the Debenture No.
______________, the undersigned hereby confirms and acknowledges that the shares
of Common Stock are being acquired solely for the account of the undersigned and
not a nominee for any other party, and that the undersigned will not offer, sell
or otherwise dispose of any such shares of Common Stock, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended.
Date of Conversion* _____________________________________________________
Applicable Conversion Price ____________________________________________
Signature _______________________________________________________________
[Name]
Address: ________________________________________________________________
---------------------------------------------------------------
* This original Debenture and Notice of Conversion must be received by the
Company by the third business date following the Date of Conversion.
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ANNEX IV
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October 22,
1997 (this "Agreement"), is made by and between STRATEGIC SOLUTIONS GROUP, INC.,
a Delaware corporation (the "Company"), and the entity named on the signature
page hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of October 22, 1997, between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor one or more 6% Convertible
Subordinated Debentures of the Company, in an aggregate principal amount of
$1,600,000 (the "Debentures"), and warrants to purchase 40,000 shares of Common
Stock (the "Warrants"); and
WHEREAS, the Debentures are convertible into shares (the
"Conversion Shares") of the Common Stock, par value $0.001 per share, of the
Company (the "Common Stock") upon the terms and subject to the conditions of the
Debentures (as defined in the Securities Purchase Agreement) and the Warrants
may be exercised for the purchase of shares of Common Stock (the "Warrant
Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares; and
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 Company and the
Initial Investor hereby agrees as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "Potential Material Event" means any of the following: (a) the possession
by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
registration statement at such time, which determination shall be
accompanied by a good faith
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determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the
inclusion of such information.
(iii)"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on a
continuous basis, and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion Shares and the Warrant
Shares.
(v) "Registration Statement" means a registration statement of the Company
under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the SEC, no
later than forty-five (45) days following the Closing Date under the
Securities Purchase Agreement, either a Registration Statement on Form S-3
registering for resale by the Investor a sufficient number of shares of
Common Stock for the Initial Investor (or such lesser number as may be
required by the SEC, but in no event less than the number of shares into
which the Debentures would be convertible and the Warrants exercisable at
the time of filing of the Form S-3, or an amendment to any pending Company
Registration Statement on Form S-3, and such Registration Statement or
amended Registration Statement shall state that, in accordance with Rule
416 and 457 under the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Debentures and the exercise of the Warrants resulting
from adjustment in the Conversion Price, or to prevent dilution resulting
from stock splits or stock dividends). The Company shall use its best
efforts to cause the Registration Statement to be declared effective no
later than 90 days after the Closing Date. If at any time the number of
shares of Common Stock into which the Debentures may be converted and which
would be issued upon exercise of the
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Warrants exceeds the aggregate number of shares of Common Stock then registered,
the Company shall, within ten (10) business days after receipt of a written
notice from any Investor, either (i) amend the Registration Statement filed
by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to
register all shares of Common Stock into which the Debentures may be
converted and which would be issued upon exercise of the Warrants, or (ii)
if such Registration Statement has been declared effective by the SEC at
that time, file with the SEC an additional Registration Statement on Form
S-3 to register the shares of Common Stock into which the Debentures may be
converted and which would be issued upon exercise of the Warrants that
exceed the aggregate number of shares of Common Stock already registered.
Notwithstanding the other provisions of this Agreement, the number of
shares that the Company shall be obligated to register hereunder at any
time shall be limited to the number of authorized shares that it has
available for issuance.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities is not
filed in proper form with the SEC within forty-five (45) days after the
Closing Date (the "Required Filing Date"), the Company will make payment to
the Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable Securities is not
effective within the earlier of (a) five (5) days after notice by the SEC
that it may be declared effective or (b) ninety (90) days following the
Closing Date or the end of any Permitted Suspension Period (as defined in
this Agreement) (the "Required Effective Date"), then the Company will make
payments to the Initial Investor in such amounts and at such times as shall
be determined pursuant to this Section 2(b).
(iii)The amount (the "Periodic Amount") to be paid by the Company to the
Initial Investor shall be determined as of each Computation Date (as
defined below) and such amount shall be equal to (A) one percent (1%) of
the purchase price paid by the Initial Investor (the "Purchase Price") for
all Debentures then purchased and outstanding pursuant to the Securities
Purchase Agreement for the period from the date following the Required
Filing Date or the Required Effective Date, as the case may be, to the
first relevant Computation Date, and (B) three percent (3%) to each
Computation Date thereafter. By way of illustration and not in limitation
of the foregoing, if the Registration Statement is timely filed but is not
declared effective until one hundred and seventy (170) days after the
Closing Date, the Periodic Amount will aggregate seven percent (7%) of the
Purchase Price of the Debentures (1% for days 91-120, plus 3% for days
121-150, plus 3% for days 151-170).
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(iv) Each Periodic Amount will be payable by the Company in cash or other
immediately available funds to the Investor upon demand of the Investor at
any time following 120 days following the Closing Date.
(v) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement has not been declared effective by
the Required Registration Date may be difficult to ascertain. Therefore,
the parties agree that the Periodic Amount represents a reasonable estimate
on the part of the parties, as of the date of this Agreement, of the amount
of such damages and that the payment by Company of the Periodic Amount
shall be deemed in complete and total satisfaction of all claims of
Investor against Company for failure of Company to comply with this Section
2(b).
(vi) Notwithstanding the foregoing, the amounts payable by the Company pursuant
to this provision shall not be payable to the extent any delay in the
filing or effectiveness of the Registration Statement occurs because of an
act of, or a failure to act or to act timely by the Initial Investor or its
counsel, or in the event all of the Registrable Securities may be sold
pursuant to Rule 144 under the Securities Act ("Rule 144") or another
available exemption under the Securities Act.
(vii)"Computation Date" means (i) the date which is the earlier of (A) thirty
(30) days after the Required Filing Date or the Required Effective Date, as
the case may be, or (B) the date after the Required Filing Date or the
Required Registration Date on which the Registration Statement is filed
(with respect to payments due as contemplated by Section 2(b)(i) hereof) or
declared effective (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (ii) each date which is the
earlier of (A) thirty (30) days after the previous Computation Date or (B)
the date after the previous Computation Date on which the Registration
Statement is filed (with respect to payments due as contemplated by Section
2(b)(i) hereof) or declared effective (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be.
(viii) Anything in the preceding provisions of this Section 2(b) to the contrary
notwithstanding, if, but only if, the Registration Statement is declared
effective within one hundred twenty (120) days following the Closing Date,
the provisions of this Section 2(b) shall not apply and the Company will
not have any obligation to pay any Periodic Amount to the Initial Investor
with respect thereto.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC by forty- five (45) days after the
initial Closing Date, a Registration Statement with respect to not less
than the number of Registrable Securities provided in Section 2(a), above,
and thereafter use its reasonable best efforts to cause each Registration
Statement relating to Registrable Securities to become effective the
earlier of (a) five (5) days after notice by the SEC that it may be
declared effective or (b) ninety (90) days following the Closing Date, and
keep the
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Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two years after the Closing
Date, (ii) the date when the Investors may sell all Registrable Securities
under Rule 144 or (iii) the date the Investors no longer own any of the
Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any 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, in light of the circumstances in which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until 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 as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated by the Initial
Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel
reasonably objects;
(d) Furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, and
all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Investor;
(e) As promptly as practicable after becoming aware of such event, notify each
Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify each
Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing
9/29/97
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underwriters) of the issuance by the SEC of a Notice of Effectiveness
or any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(g) Notwithstanding the foregoing, if at any time or from time to time after
the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Shares, or
engage in any other transaction involving or relating to the Registrable
Shares, from the time of the giving of notice with respect to a Potential
Material Event until the Investors receive written notice from the Company
that such Potential Material Event either has been disclosed to the public
or no longer constitutes a Potential Material Event (a "Resumption of
Trading Notice"); provided, however, that the Company may not suspend the
Investors' ability to trade the Registrable Shares (i) for more than an
aggregate of forty (40) days (but in no event for more than thirty (30)
consecutive days) during any 12-month period during the period the
Registration Statement is required to be in effect, or (ii) for a period of
at least ten (10) days following any date the Company has issued a
Resumption of Trading Notice. A period during which the Company is
permitted to suspend trading as provided in this section is referred to as
a "Permitted Suspension Period" in this Agreement.
(h) Use its reasonable efforts to secure designation of all the Registrable
Securities covered by the Registration Statement the quotation of the
Registrable Securities on The NASDAQ SmallCap Market, or if, despite the
Company's reasonable efforts to satisfy the preceding clause, the Company
is unsuccessful in doing so, to secure NASDAQ/OTC Bulletin Board
authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities
Dealers, Inc. as such with respect to such Registrable Securities;
(i) Provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of the
Registration Statement;
(j) Cooperate with the Investors who hold Registrable Securities being offered
to facilitate the timely preparation and delivery of certificates for the
Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may
reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(k) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
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(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the
Registrable Securities held by it, as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute
such documents in connection with such registration as the Company may
reasonably request. At least five (5) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor
(the "Requested Information") if such Investor elects to have any of such
Investor's Registrable Securities included in the Registration Statement.
If at least two (2) business days prior to the filing date the Company has
not received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company
in connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(e) or 3(f),
above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of
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destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions and selling expenses (including stock transfer
taxes incurred in connection with registrations, filings or qualifications
pursuant to Section 3), including all registration, listing, and
qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company, and a fee for a single counsel
for the Investor not exceeding $3,500, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (each, an "Indemnified Person" or "Indemnified
Party"), against any losses, claims, damages, liabilities or expenses
(joint or several) incurred (collectively, "Claims") to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration
Statement, or any post- effective amendment thereof, or any prospectus
included therein: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light
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of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state securities law or any rule
or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
(II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor
will indemnify the Company and its officers, directors and agents against
any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to
such limitations and conditions as are applicable to the Indemnification
provided by the Company to this Section 6. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action (including any
governmental action),
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such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the
reasonable fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other person represented by such counsel in such
proceeding. In such event, the indemnifying party shall pay for only one
separate legal counsel for the Indemnified Party or Indemnified Person;
such legal counsel to be selected by the Indemnified Person or Indemnified
Party, (I) subject to the consent of the indemnifying party (which consent
shall not be unreasonably withheld or delayed), and (II) if the Indemnified
Parties or Indemnified Persons are Investors, by the Investors holding a
majority in interests of the Registrable Securities included in the
Registration Statement to which the Claim relates. Except as provided in
the immediately preceding sentences, in case any such action is brought
against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of the
indemnifying person's election so to assume (alone or with other
indemnifying persons) the defense thereof, the indemnifying party will not
be liable to such Indemnified Person or Indemnified Party under this
Section 6 for legal or other out-of-pocket expenses subsequently incurred
by such Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation,
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<PAGE>
unless the indemnifying party shall not defend such action to its
final conclusion. The Indemnified Person or Indemnified Party shall have
the right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Person or Indemnified Party. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (a) no contribution shall be made under --------
------- circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6; (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation; and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of
the Company to the public without registration, the Company agrees to:
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<PAGE>
(a) make and keep public information available, as those terms are understood
and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule
144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the
Registrable Securities (or all or any portion of any Debenture of the
Company which is convertible into such securities) only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee and (ii)
the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state
securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein and the Securities Purchase Agreement of even
date herewith. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall
not be liable for any damages arising from such delay, or the payments set
forth in Section 2(b) hereof.
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<PAGE>
10. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investors who hold an eighty (80%)
percent interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities.
If the Company receives conflicting instructions, notices or elections from
two or more persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered (by
hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to
the Company, STRATEGIC SOLUTIONS GROUP, INC., 326 First St., Annapolis, MD
21403, ATTN: John Cadigan, Telecopier No.: (410) 280-6013; with a copy to
Palmarella & Sweeney, P.C., 993 Old Eagle School Road, Suite 415, Wayne, PA
19087, ATTN: Ernest D. Palmarella, Esq., Telecopier No.: (610) 687-8830;
(ii) if to the Initial Investor, at the address set forth under its name in
the Securities Purchase Agreement, with a copy to Samuel Krieger, Esq.,
Krieger & Prager, 319 Fifth Avenue, Third Floor, New York, NY 10016,
Telecopier No.: (212) 213-2077; and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or
at such other address as each such party furnishes by notice given in
accordance with this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by registered or certified mail,
four (4) calendar days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or remedy, shall
not operate as a waiver thereof.
(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
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<PAGE>
maximum extent permitted by law, any objection, including any objection based on
forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.
(b) 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.
(c) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(d) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(e) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering
this Agreement.
(j) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
(k) Neither party shall be liable for consequential damages.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
STRATEGIC SOLUTIONS GROUP, INC.
By:
Name:
Title:
------------------------------------------
By:
Name:
Title:
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ANNEX V
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
STRATEGIC SOLUTIONS GROUP, INC.
FORM OF COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable
consideration, the receipt of which is hereby acknowledged by STRATEGIC
SOLUTIONS GROUP, INC., a Delaware corporation (the "Company"), or registered
assigns (the "Holder") is hereby granted the right to purchase at any time until
5:00 P.M., New York City time, on ________________ (the "Expiration Date"),
___________________________ (__________) fully paid and nonassessable shares of
the Company's Common Stock, par value $0.0001 per share (the "Common Stock") at
an initial exercise price of $____ per share (the "Exercise Price"), subject to
further adjustment as set forth in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable in whole
or in part at the Exercise Price per share of Common Stock payable hereunder,
payable in cash or by certified or official bank check, or by "cashless
exercise", by means of tendering this Warrant Certificate to the Company to
receive a number of shares of Common Stock equal in Market Value to the
difference between the Market Value of the shares of Common Stock issuable upon
exercise of this Warrant and the total cash exercise price thereof. Upon
surrender of this Warrant Certificate with the annexed Notice of Exercise Form
duly executed, together with payment of the Exercise Price for the shares of
Common Stock purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. For the purposes of
this Section 2, "Market Value" shall be an amount equal to the average closing
bid price of a share of Common Stock for the ten (10) days preceding the
Company's receipt of the Notice of Exercise Form duly executed, via delivery or
facsimile, multiplied by the number of shares of Common Stock to be issued upon
surrender of this Warrant Certificate.
3. Reservation of Shares. Subject to the number of shares
authorized, issued and reserved at the time of exercise of this Warrant, and the
restrictions on authorization of additional shares, as set forth below, the
Company agrees that at all times during the term of this Warrant there shall be
reserved for issuance upon exercise of this Warrant such number of shares of
Common Stock reasonably necessary to yield the number of shares of Common Stock
issuable upon exercise of this Warrant (the "Warrant Shares"). As of the date of
issuance of this Warrant, the Company has 5,000,000 shares of Common Stock
authorized, 1,768,739 shares of Common
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Stock issued and outstanding and 556,982 shares of Common Stock reserved for
issuance under various stock plans and earn out arrangements. The Company cannot
provide for additional authorized shares without the approval of the
shareholders by majority vote of the shares of its outstanding Common Stock.
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution. The number of shares of Common
Stock purchasable upon exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time as follows:
6.1 Adjustment for Subdivision. If the Company at
any time subdivides
(by any stock split, stock dividend, recapitalization or otherwise) the
outstanding shares of Common Stock into a greater number of shares, the number
of shares purchasable upon exercise of this Warrant shall be proportionately
increased and the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) the outstanding shares of Common Stock into a
smaller number of shares, the number of shares purchasable upon exercise of this
Warrant shall be proportionately decreased and the Exercise Price in effect
immediately prior to such combination and the number of shares of Common Stock
to be received by the Holder pursuant to this Warrant shall be proportionately
increased.
6.2. Adjustment for Reorganization. Any capital
reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the Company's assets with or into another person or entity which is effected in
such a manner that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock shall be referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the Company
shall make appropriate provisions to insure that the Holder shall thereafter
have the right to acquire and receive upon exercise of this Warrant, in lieu of
or in addition to Common Stock immediately theretofore acquirable and receivable
upon the exercise of this Warrant, such shares of stock, securities or assets as
the Holder would have received in connection with such Organic Change if the
Holder had exercised the Warrant immediately prior to such Organic Change.
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<PAGE>
6.3 Adjustment for Spin Off. If, for any
reason, prior to the exercise of
this Warrant in full, the Company spins off or otherwise divests itself of a
part of its business or operations or disposes of all or of a part of its assets
in a transaction in which the Company does not receive compensation for such
business, operations or assets, but causes securities of another entity (the
"Spin Off Securities") to be issued to security holders of the Company (the
"Spin Off"), then
(a) the Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would have been issued had all of
the Warrants outstanding (the "Outstanding Warrants") on the Spin Off record
date (the "Record Date") been exercised as of the close of business on the
trading day immediately before the Record Date (the "Reserved Spin Off Shares"),
and (ii) to be issued to the Holder on the exercise of all or any of the
Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x)
the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the amount of the Outstanding Warrants then being exercised, and
(II) the denominator is the amount of the Outstanding Warrants; and
(b) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by multiplying the
Exercise Price by a fraction (if, but only if, such fraction is less than 1.0),
the numerator of which is the average Market Price (which, for all purposes of
this Section 6.3(b), shall have the meaning ascribed to it in the Registration
Rights Agreement referred to below rather than the definition provided in
Section 2 hereof) on the five (5) trading days immediately following the fifth
day after the Record Date, and the denominator of which is the average Market
Price on the five (5) trading days immediately preceding the Record Date; and
such adjusted Exercise Price shall be deemed to be the Exercise Price with
respect to the Outstanding Warrants as of the date after the Record Date.
7. Transfer to Comply with the Securities Act; Registration
Rights.
(a) This Warrant has not been registered under the Securities
Act of 1933, as amended, (the "Act") and has been issued to the Holder for
investment and not with a view to the distribution of either the Warrant or the
Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement under the Act relating to such security or an opinion of counsel
satisfactory to the Company that registration is not required under the Act.
Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration statement, which
shall include the Warrant Shares, on Form S-3 or another available form (the
"Registration Statement"), pursuant to the Registration Rights Agreement between
the Company and Holder dated October 22, 1997.
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<PAGE>
8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage pre-paid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit in the United
States mails, as follows:
(i) if to the Company, to:
Strategic Solutions Group, Inc.
326 First Street
Suite 100
Annapolis, MD 21403
Tel: (410) 263-7761
Fax: (410) 280-6013
Attn: John Cadigan
With a copy to:
Ernest D. Palmarella, Esquire
Palmarella & Sweeney, P.C.
2 Radnor Corporate Center
Suite 310
100 Matsonford Road
Radnor, Pennsylvania 19087
Tel: 610-687-1100
Fax: 610-687-8830
(ii) if to the Holder, to:
with a copy to:
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<PAGE>
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section.
9. Supplements and Amendments; Whole Agreement. This Warrant
may be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant of even date herewith contain the full
understanding of the parties hereto with respect to the subject matter hereof
and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 22ND day of October, 1997.
STRATEGIC SOLUTIONS GROUP, INC.
By:_________________________________
------------------------------
Its ___________________________
Attest:
- ------------------------
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<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ______________, to purchase
__________shares of the Common Stock, par value $0.0001 per share, of
___________________ and either (i) tenders herewith payment in accordance with
Section 1 of said Common Stock Purchase Warrant or (ii) elects a "cashless
exercise" in accordance with Paragraph 2 of the Warrant Certificate, as
indicated below.
Please deliver the stock certificate to:
Dated:______________________
By:_________________________
|_| CASH: $ _______________________
|_| CASHLESS EXERCISE
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