EXHIBIT 10.1
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
USCI, INC.
and
EACH OF THE PURCHASERS NAMED IN SCHEDULE 1.
Dated as of July 29, 1998
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of July 29, 1998, between USCI, Inc., a
Delaware corporation (the "Company"), and each of the Purchasers
named in the attached Schedule 1 ( individually, a "Purchaser"
and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the
Purchasers and the Purchasers desire to purchase from the
Company, shares of the Company's 6% Series D Convertible
Preferred Stock, par value $.01 per share (the "Series D
Preferred" ).
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and Purchasers agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and
conditions set forth herein, the Company shall issue and sell to
the Purchasers, and the Purchasers shall purchase from the
Company: 500 shares of Series D Preferred (the "Series D
Shares").
(b) The Series D Preferred shall have the respective
rights, preferences and privileges set forth in Exhibit A
attached hereto (the "Series D Terms"), which shall be
incorporated into a Certificate of Designation to be approved by
the Purchasers and filed prior to the Series D Closing Date (as
defined below) by the Company with the Secretary of State of
Delaware (the "Series D Designation").
For purposes of this Agreement, "Conversion Price,"
"Original Issue Date," "Conversion Date," "Trading Day" and "Per
Share Market Value" shall have the meanings set forth in Exhibit
A; and "Market Price" as at any date shall mean the average Per
Share Market Value for the five (5) Trading Days immediately
preceding such date.
1.2 Purchase Price. The purchase price per Share shall be
$8,000.
1.3 The Closing.
(a) The Series D Closing. (i) The closing of the
purchase and sale of the Series D Shares (the "Series D Closing")
shall take place at The Law Offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.A., ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, immediately following
the execution hereof or such later date as the parties shall
agree. The date of the Series D Closing is hereinafter referred
to as the "Series D Closing Date."
(ii) At the Series D Closing, (a) the Company
shall deliver to the Purchasers (1) stock certificates
representing 500 Series D Shares registered in the names of the
Purchasers, (2) the legal opinion of the Law Offices of ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, P.A., outside counsel to the Company, substantially in
the form attached hereto as Exhibit D, (3) payment of the accrued
interest on the $4,000,000 principal amount of the Restated Notes
of the Company dated February 24, 1998, and (4) all other
documents, instruments and writings required to have been
delivered at or prior to the Series A Closing by the Company
pursuant to this Agreement and the Registration Rights Agreement,
dated the date hereof, by and between the Company and the
Purchasers, in the form of Exhibit C (the "Registration Rights
Agreement"); and (b) the Purchasers shall deliver to the Company
(1) $4,000,000 principal amount of the Restated Notes of the
Company each dated February 24, 1998, and (2) all documents,
instruments and writings required to have been delivered at or
prior to the Series D Closing by the Purchasers pursuant to this
Agreement and the Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the
Company. The Company hereby makes the following representations
and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the
requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set
forth in Schedule 2.1(a) (collectively the "Subsidiaries"). Each
of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the
full corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the
Securities (as defined below) or any of the Transaction Documents
(as defined below) in any material respect, (y) have or result in
a material adverse effect on the results of operations, assets,
prospects, or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole or (z) adversely impair
the Company's ability to perform fully on a timely basis its
obligations under any of this Agreement, the Certificate of
Designation, the Warrants or the Registration Rights Agreement
(collectively, the "Transaction Documents") (any of (x), (y) or
(z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of
the Transaction Documents, and otherwise to carry out its
obligations thereunder. The execution and delivery of each of
the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the
Company and no further action is required by the Company. Each
of the Transaction Documents has been duly executed by the
Company and when delivered in accordance with the terms hereof
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other
equitable principles of general application. Neither the Company
nor any Subsidiary is in violation of any of the provisions of
its respective certificate of incorporation, articles, by-laws or
other charter documents. Prior to the Series D Closing Date, the
Certificate of Designation shall have been filed with the
Secretary of State of the State of Delaware and will be in full
force and effect, enforceable against the Company in accordance
with the terms thereof.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company is set forth in Schedule
2.1(c). No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the
Transaction Documents. To the knowledge of the Company, except
as specifically disclosed in the SEC Documents (as defined below)
or Schedule 2.1(c), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) or has the right to acquire by agreement
with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. A "Person"
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Issuance of the Shares. The Shares are
duly authorized, and, when issued and paid for in accordance with
the terms hereof, shall have been validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and
rights of first refusal of any kind (collectively, "Liens"). The
Company has on the date hereof and will, at each Closing Date,
have, and at all times while the Shares are outstanding will
maintain an adequate reserve of duly authorized shares of Common
Stock, to enable it to perform its conversion, exercise and other
obligations under this Agreement, and the Certificate of
Designation with respect to the number of Shares issued at such
Closing Date, and in no circumstances shall such reserved and
available shares of Common Stock be less than the sum of (i) 200%
of the maximum number of shares of Common Stock which would be
issuable upon conversion in full of the Shares issued pursuant to
the terms hereof assuming such conversion were effected on the
Original Issue Date for such Shares, (ii) the number of shares of
Common Stock which would be issuable upon payment of dividends on
the Shares, assuming each Share is outstanding for three years
and all dividends are paid in shares of Common Stock. All such
authorized shares of Common Stock shall be duly reserved for such
issuance to the holders of such Shares. The shares of Common
Stock issuable upon conversion of the Shares, as payment of
dividends thereon, or upon exercise of the Warrants are
collectively referred to herein as the "Underlying Shares." The
Shares and Underlying Shares are, collectively, the "Securities".
When issued in accordance with the Certificate of Designation,
the Underlying Shares have been duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated
thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof) or
(ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the
Company is a party or by which any property or asset of the
Company is bound or affected, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which
the Company is subject (including Federal and state securities
laws and regulations), or by which any material property or asset
of the Company is bound or affected, except in the case of each
of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations as could not, individually or in the aggregate, have
or result in a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance
or regulation of any governmental authority, except for
violations which, individually or in the aggregate, would not
have a Material Adverse Effect.
(f) Consents and Approvals. Except as
specifically set forth in Schedule 2.1(f), neither the Company
nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other Federal, state, local or
other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings of the
Certificates of Designation with the Secretary of State of
Delaware, (ii) the filing of Underlying Shares Registration
Statement with the Securities and Exchange Commission (the
"Commission"), (iii) the application(s) or any letter(s)
acceptable to the Nasdaq National Market System (the "NASDAQ")
for the listing of the Underlying Shares with the NASDAQ (and
with any other national securities exchange or market on which
the Common Stock is then listed), and (iv) in all other cases
where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (together with the consents,
waivers, authorizations, orders, notices and filings referred to
in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as
specifically disclosed in the Disclosure Materials (as
hereinafter defined) there is no action, suit, notice of
violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could individually or in the aggregate,
have a Material Adverse Effect.
(h) No Default or Violation. Neither the
Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or
any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body applicable to it,
or (iii) is in violation of any statute, rule or regulation of
any governmental authority to which it is subject, except as
could not, in any such case (individually or in the aggregate)
have or result in a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement
furnished by or on behalf of the Company do not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(j) Private Offering. Neither the Company nor
any Person acting on its behalf has taken or will take any action
which might subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act").
(k) SEC Documents; Financial Statements; No
Adverse Change. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the three years preceding the date
hereof (or such shorter period as the Company was required by law
to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and,
together with the Schedules to this Agreement the "Disclosure
Materials") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Documents prior
to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. All material
agreements to which the Company is a party or to which the
property or assets of the Company are subject have been filed as
exhibits to the SEC Documents as required; neither the Company
nor any of its subsidiaries is in breach of any agreement where
such breach would have or result in a Material Adverse Effect.
The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved, except as may
be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. Since the date of the financial
statements included in the Company's last filed Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, there has
been no event, occurrence or development that has had or could
result in a Material Adverse Effect which has not been
specifically disclosed to the Purchaser by the Company. The
Company last filed audited financial statements with the
Commission on December 31, 1997, and has not received any
comments from the Commission in respect thereof.
(l) Seniority. No class of equity securities
of the Company is senior to the Preferred Stock in right of
payment, whether upon liquidation, dissolution or otherwise.
(m) Investment Company. The Company is not,
and is not controlled by or under common control with an
affiliate (an "Affiliate") of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(n) Certain Fees. No fees or commissions will
be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, or bank
with respect to the transactions contemplated by this Agreement.
The Purchaser shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this
Agreement. The Company shall indemnify and hold harmless the
Purchaser, its employees, officers, directors, agents, and
partners, and their respective Affiliates (as such term is
defined under Rule 405 promulgated under the Securities Act),
from and against all claims, losses, damages, costs (including
the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees, as such
fees and expenses are incurred.
(o) Solicitation Materials. The Company has
not (i) distributed any offering materials in connection with the
offering and sale of the Securities, other than the Disclosure
Materials and any amendments and supplements thereto or (ii)
solicited any offer to buy or sell the Securities by means of any
form of general solicitation or advertising. None of the
Disclosure Materials or any other information provided to the
Purchaser by or on behalf of the Company contain any untrue
statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading
(p) Form S-3 Eligibility. The Company is, and
at each Closing Date will be, eligible to register securities for
resale with the Commission under Form S-3 promulgated under the
Securities Act.
(q) Listing and Maintenance Requirements
Compliance. The Company has not in the two years preceding the
date hereof received notice (written or oral) from the NASDAQ or
any other stock exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it has been
quoted) to the effect that the Company is not in compliance with
the listing or maintenance requirements of such exchange or
market. The Company is in compliance with all such maintenance
requirements.
(r) Patents and Trademarks. The Company has,
or has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and rights (collectively, the "Intellectual
Property Rights") which are necessary for use in connection with
its business, as currently conducted and as described in the SEC
Documents, and which the failure to so have would have a Material
Adverse Effect. To the best knowledge of the Company, there is
no existing infringement by another Person of any of the
Intellectual Property Rights which are necessary for use in
connection with the Company's business.
(s) Acknowledgement of Dilution. The Company
acknowledges that the issuance of the Underlying Shares upon (i)
conversion of the Shares and payment of dividends thereon in
accordance with the Certificate of Designation may result in
dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Shares and payment
of dividends thereon in accordance with the Certificate of
Designation is unconditional and absolute, subject to the
limitations set forth herein in the Certificate of Designation,
regardless of the effect of any such dilution.
(t) Title. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property
and personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free
and clear of all Liens, except for liens, claims or encumbrances
as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries. Any real property
and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(u) Regulatory Permits. The Company and its
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate Federal, state or foreign regulatory
authorities necessary to conduct their respective businesses as
described in the SEC Documents except where the failure to
possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
2.2 Representations and Warranties of the
Purchaser. The Purchasers hereby represent and warrant to the
Company as follows:
(a) Organization; Authority. The Purchasers
have the requisite power and authority, corporate or otherwise,
to enter into and to consummate the transactions contemplated
hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The purchase
by the Purchasers of the Securities hereunder has been duly
authorized by all necessary action on the part of the Purchasers.
Each of this Agreement and the Registration Rights Agreement has
been duly executed and delivered by the Purchasers and
constitutes the valid and legally binding obligation of the
Purchasers, enforceable against the Purchasers, in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. The Purchasers are
acquiring the Securities for its own account for investment
purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchasers' right,
subject to the provisions of this Agreement and the Registration
Rights Agreement, at all times to sell or otherwise dispose of
all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from
such registration.
(c) Purchaser Status. At the time the
Purchasers were offered the Shares, it was, and at the date
hereof, it is, and at each Closing Date, it will be, an
"accredited investor" as defined in Rule 501(a) under the
Securities Act.
(d) Experience of the Purchaser. The
Purchasers either alone or together with its representatives,
have such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment.
(e) Ability of the Purchasers to Bear Risk of
Investment. The Purchasers are able to bear the economic risk of
an investment in the Securities and, at the present time, are
able to afford a complete loss of such investment.
(f) Access to Information. The Purchasers
acknowledge receipt of the Disclosure Materials and further
acknowledge that they have been afforded (i) the opportunity to
ask such questions as they have deemed necessary of, and to
receive answers from, representatives of the Company concerning
the terms and conditions of the offering of the Securities and
the merits and risks of investing in the Securities; (ii) access
to information about the Company and the Company's financial
condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and
to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(g) Reliance. The Purchasers understand and
acknowledge that (i) the Securities are being offered and sold to
it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the
Securities Act under Section 4(2) of the Securities Act or
Regulation D promulgated thereunder and (ii) the availability of
such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such
reliance.
(h) Organization. The Purchasers represent and
warrant that they have not been organized or recapitalized
specifically for the purpose of purchasing the Securities.
The Company acknowledges and agrees that the Purchasers make
no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) The Purchasers
may only dispose of the Securities held by them, pursuant to an
effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from the
registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an
effective registration statement or to the Company, except as
otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company a written opinion of
counsel experienced in the area of United States securities laws
selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to counsel to the
Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register any transfer of Securities by
Purchasers to an Affiliate of the Purchasers, or any transfer
among any such Affiliates, provided that transferee certifies to
the Company that it is an "accredited investor" as defined in
Rule 501(a) under the Securities Act. Any such transferee shall
agree in writing to be bound by the terms of this Agreement and
shall have the rights of the Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long
as is required by this Section 3.1(b), of the following legend on
the Securities:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE] [THE SECURITIES
REPRESENTED HEREBY HAVE NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
CONVERSION SET FORTH IN A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT, DATED AS OF JULY 8, 1998, EXECUTED BY
THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF USCI, INC.
The Underlying Shares issuable upon conversion of the Shares
or as payment of dividends thereon shall not contain the legend
set forth above nor any other legend if the conversion of such
Shares or the payment of such dividends thereon or exercise of
the Warrants occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or
in the event there is not an effective Underlying Shares
Registration Statement at such time, if in the written opinion of
counsel to the Company experienced in the area of United States
securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that it will provide the
Purchasers, upon request, with a certificate or certificates
representing Underlying Shares, free from such legend at such
time as such legend is no longer required hereunder.
3.2 Stop Transfer Instruction. The Company may not make
any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer
set forth in Section 3.1.
3.3 Furnishing of Information. As long as the Purchasers
own Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company
after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act and to promptly furnish the Purchasers with true and
complete copies of all such filings. As long as the Purchasers
own Securities, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will
prepare and furnish to the Purchaser and make publicly available
in accordance with Rule 144(c) promulgated under the Securities
Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action
as any holder of the Shares may reasonably request, all to the
extent required from time to time to enable such Person to sell
Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion
referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has
complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration
Rights Agreement, the Company shall qualify or exempt the
issuance and sale of the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchasers may
request and shall continue such qualification or exemption at all
times through the third anniversary of the Closing Date;
provided, however, that neither the Company nor its Subsidiaries
shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified or to take any
action that would subject the Company to general service of
process in any such jurisdiction where it is not then so subject
or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
3.5 Integration. The Company shall not sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities
in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
3.6 Certain Agreements. As long as the Purchasers own
Shares, the Company shall not and shall cause the Subsidiaries
not to, without the consent of the holders of all of the Shares
then outstanding, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any
rights of any Purchaser; (ii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common
Stock except as permitted under the Certificate of Designation
and as would not adversely affect the rights of any Purchasers
hereunder or under such Certificate of Designation; (iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock in any manner; or (iv) enter into any
agreement with respect to any of the foregoing.
3.7 Listing and Reservation of Underlying Shares (a) The
Company shall (i) not later than the fifth Business Day following
the applicable Closing Date prepare and file with the NASDAQ (as
well as any other national securities exchange or market or
trading or quotation facility on which the Common Stock is then
listed) an additional shares listing application or a letter
acceptable to the NASDAQ covering and listing a number of shares
of Common Stock which is at least equal to the number of shares
required to be reserved pursuant to Section 2.1(d), (ii) take all
steps necessary to cause the such shares to be approved for
listing in the NASDAQ (as well as on any other national
securities exchange or market or trading or quotation facility on
which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchaser evidence of such
listing, and the Company shall maintain the listing of its Common
Stock thereon. In the event that the number of Underlying Shares
as are issuable upon conversion in full of the then number of
outstanding Shares, as payment or dividends thereon, exceeds 185%
of the number of Underlying Shares previously listed on account
thereof with NASDAQ (and other required exchanges) the Company
shall take the necessary actions to immediately list a number of
Underlying Shares as equal to 200% of the number of Underlying
Shares then issuable upon conversion of the Shares and as payment
of dividends.
(b) The Company shall reserve for issuance upon conversion
of the Shares and for payment of dividends thereupon in shares of
Common Stock pursuant to the terms of the Certificate of
Designation in accordance with their terms, as many shares as may
be required to fulfill such conversion, dividend and exercise
obligations, but in no event less than the number of shares to be
listed on the NASDAQ (and such other national securities exchange
or market or trading or quotation facility on which the Common
Stock is then listed, traded or quoted) as set forth in Section
3.7(a).
3.8 Purchaser Ownership of Common Stock. The Purchasers
agree not to convert Shares to the extent such conversion or
exercise would result in the Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act
and the rules thereunder) in excess of 4.999% of the then issued
and outstanding shares of Common Stock, including shares issuable
upon conversion of the Shares held by such Purchasers after
application of this Section. To the extent that the limitation
contained in this Section applies, the determination of whether
Shares are convertible (in relation to other securities owned by
a Purchaser) and of which Shares are convertible shall be in the
sole discretion of the Purchaser, and the submission of Shares
for conversion shall be deemed to be such Purchaser's
determination of whether such Shares are convertible (in relation
to other securities owned by a Purchaser) and of which portion of
such Shares are convertible, in each case subject to such
aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to
restrict the right of the Purchaser to convert Shares at such
time as such conversion will not violate the provisions of this
Section. The provisions of this Section will not apply to any
conversion pursuant to Section 5(a)(ii) of the Certificate of
Designation, and may be waived by the Purchaser upon not less
than 75 days prior notice to the Company, and the provisions of
this Section shall continue to apply until such 75th day (or
later, if stated in the notice of waiver).
3.9 No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of
the Shares or Underlying Shares otherwise required under this
Agreement or the Registration Rights Agreement would be
prohibited by the relevant provisions of the Delaware General
Corporation Law, such redemption shall be effected as soon as it
is permitted under such law; provided, however, that from the 5th
day after such redemption notice until such redemption price is
paid in full, interest on any such unpaid amount shall accrue at
the rate of 15% per annum.
(a) Notice of Breaches.(a) Each of the Company and the
Purchasers shall give prompt written notice to the other of any
breach of any representation, warranty or other agreement
contained in this Agreement or in the Registration Rights
Agreement, as well as any events or occurrences arising after the
date hereof which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as
the case may be, contained herein to be incorrect or breached as
of such Closing Date. However, no disclosure by either party
pursuant to this Section 3.9 shall be deemed to cure any breach
of any representation, warranty or other agreement contained
herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.9(a), the
Company shall promptly notify the Purchasers of any notice or
claim (written or oral) that it receives from any lender of the
Company to the effect that the consummation of the transactions
contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall
promptly furnish by facsimile to the holders of the Shares a copy
of any written statement in support of or relating to such claim
or notice.
3.11 Conversion and Exercise Obligations of the Company.
The Company covenants to convert the Shares and to deliver
Underlying Shares in accordance with the terms and conditions and
time period set forth in the Certificate of Designation .
3.12 Reimbursement . In the event that the Purchasers,
other than by reason of its gross negligence or willful
misconduct, becomes involved in any capacity in any action,
proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a
result of the consummation of the transactions contemplated
pursuant to the Transaction Documents, the Company will reimburse
the Purchasers for its reasonable legal and other expenses
(including the cost of any investigation and preparation)
incurred in connection therewith. In addition, other than with
respect to any matter in which the Purchasers are named party,
the Company will pay the Purchasers the charges, as reasonably
determined by the Purchasers, for the time of any officers or
employees of the Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to
inquiries, hearings, trials, and other proceedings relating to
the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliate
of the Purchasers and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any
such Affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have
any liability to the Company or any person asserting claims on
behalf of or in right of the Company in connection with or as a
result of the consummation of the Transaction Documents except to
the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence
or willful misconduct of the Purchasers or entity in connection
with the transactions contemplated by this Agreement. The
Purchasers shall not, without the prior written consent of the
Company, effect any settlement of any action in respect of which
the Company is a party.
ARTICLE IV
MISCELLANEOUS
5.1 Entire Agreement; Amendments. This Agreement,
together with the Exhibits and Schedules hereto, the Registration
Rights Agreement and the Certificate of Designation, contain the
entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
5.2 Notices. Any notice or other communication required
or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy
or facsimile (with transmission confirmation report) at the
address or number designated below (if delivered on a business
day during normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered on a business day after during normal business hours
where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The
addresses for such communications shall as set forth below each
parties name on Schedule 1, and if to the Company with copies to
the Law Offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, P.A., ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (fax: ▇▇▇-▇▇▇-▇▇▇▇) Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., or such other address as may be
designated in writing hereafter, in the same manner, by such
Person.
5.3 Amendments; Waivers. No provision of this Agreement
may be waived or amended except in a written instrument signed,
in the case of an amendment, by both the Company and the
Purchasers; or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either
party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Shares outstanding.
5.4 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
5.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of the Purchasers. No Purchaser may assign
this Agreement (other than to an Affiliate of the Purchaser) or
any rights or obligations hereunder without the prior written
consent of the Company, except that any Purchaser may assign its
rights hereunder and under the Transaction Documents without the
consent of the Company as long as such assignee demonstrates to
the reasonable satisfaction of the Company its satisfaction of
the representations and warranties set forth in Section 2.2.
This provision shall not limit the Purchasers' right to transfer
securities or transfer or assign rights hereunder or under the
Registration Rights Agreement.
5.6 No Third-Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any
other person.
5.7 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws
of the State of New York without regard to the principles of
conflicts of law thereof. Each party hereby irrevocably submits
to the non-exclusive jurisdiction of the state and Federal courts
sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law.
5.8 Survival. The representations, warranties, agreements
and covenants contained herein shall survive each Closing and the
delivery and conversion of the Shares.
5.9 Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to
the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature page were an
original thereof.
5.10 Publicity. The Company and the Purchasers shall
consult with each other in issuing any press releases or
otherwise making public statements with respect to the
transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public
statement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except
that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public
statement. The Company shall not publicly or otherwise disclose
the name of the Purchasers without the Purchaser's prior written
consent.
5.11 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be
affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
5.12 Remedies. In addition to being entitled to exercise
all rights provided herein or granted by law, including recovery
of damages, the Purchasers will be entitled to specific
performance of the obligations of the Company under the
Transaction Documents. Each of the Company and the Purchasers
(severally and not jointly) agree that monetary damages may not
be adequate compensation for any loss incurred by reason of any
breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.
5.13 No Reliance. Each party acknowledges that (i) it has
such knowledge in business and financial matters as to be fully
capable of evaluating this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby,
(ii) it is not relying on any advice or representation of the
other party in connection with entering into this Agreement, the
other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction
Documents), (iii) it has not received from such party any
assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this
Agreement or the other Transaction Documents or the performance
of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the extent that
it has deemed necessary, and has entered into this Agreement and
the other Transaction Documents based on its own independent
judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral)
expressed by such party.
IN WITNESS WHEREOF, the parties hereto have caused
this Convertible Preferred Stock Purchase Agreement to be duly
executed by their respective authorized signatories as of the
date first indicated above.
USCI, INC.
By:_____________________________
________
Name:
Title:
________________________________
________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
HUBERFELD ▇▇▇▇▇▇ FAMILY
FOUNDATION, INC.
By:
______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
PARTNERSHIP
By:
______________________________________
Schedule 1
List of Purchasers
Name and Address Number of Shares of Aggregate Purchase
Series D Preferred Price of Purchased
Stock to be Purchased Securities
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 125 $1,000,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 125 $1,000,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
HUBERFELD ▇▇▇▇▇▇ FAMILY 93.75 $ 750,000
FOUNDATION, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇ 156.25 $1,250,000
PARTNERSHIP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
